Buildings are a significant source of energy consumption and greenhouse gas (GHG) emissions in Canada. In fact, Canada's homes and buildings account for 13% of national GHG emissions. Introducing more energy efficiency when developing new or retrofitting buildings can help address climate change in a meaningful way – plus, increased energy efficiency can provide other advantages for builders, owners and tenants.
What does energy efficiency really mean?
Energy efficiency is the use of less energy to perform the same task or produce the same result. When it comes to buildings, energy efficient structures will use less energy to heat, cool and run systems, appliances and electronics. Consider the need to keep a unit warm in the cold weather. An inefficient space will let cool air in through poorly insulated walls, doors and windows. An energy efficient unit, meanwhile, will retain warm air inside through high-performance insulation and better ventilation, thereby reducing the amount of energy necessary to heat the space and the amount of money required in heating costs.
Benefits of an energy efficient building
More and more, investors are considering non-financial factors in their portfolios, which include commercial real estate. As such, there are both practical and environmental reasons for borrowers to build with energy efficiency in mind.
Practical benefits
- Environmentally certified buildings tend to have increased occupancy rates, higher propensity for lease renewal and reduced costs for future renovations
- Energy- and water-efficient buildings cost less to heat, cool and operate
- Investors have a growing appetite for sustainable projects– there is therefore a greater tendency to invest in projects that prioritize energy efficiency
- Buildings that meet sustainability standards and include up-to-date infrastructure and equipment benefit from higher resale value
- Borrowers may benefit from an increase in financing opportunities such as the CMHC MLI Select Program. This program uses a points system designed to offer different financing options to landlords based on the strength of the social outcomes of the property, offering a range of insurance benefits based on a property’s affordability, efficiency, and accessibility criteria
Canada’s National Energy Building Code for Buildings (NECB)
The National Energy Code of Canada for Buildings (NECB) is a National Model Construction Code developed by the Canadian Commission on Building and Fire Codes with an aim of improving the energy efficiency of Canadian buildings and reduction of greenhouse gas emissions. As of 2024, the NECB applies to all Canadian provinces and territories and ensures that buildings are efficiently designed. It serves as an important baseline when it comes to available insurance incentives, such as the MLI Select Program.
How to qualify for the CMHC MLI Select Program
MLI Select is an innovative multi-unit mortgage loan insurance product that focuses on affordability, accessibility and environmental factors. It offers builders access to reduced premiums and longer amortization periods based on their level of commitment to positive social and/or climate outcomes – for both new construction and retrofit buildings. Using a points system, the MLI Select Program provides better incentives based on your level of commitment.
For builders looking to take advantage of the MLI Select Program incentives based on their energy efficiency actions, here’s what you need to know.
For new construction:
- You’re awarded 20 points if your energy efficiency/GHG reductions are 20% above the NECB
- You’re awarded 35 points if your energy efficiency/GHG reductions are 25% above the NECB
- You’re awarded 50 points if your energy efficiency/GHG reductions are 40% above the NECB
For existing properties:
- You’re awarded 20 points if your property produces a 15% energy efficiency/GHG reduction compared to current performance
- You’re awarded 35 points if your property produces a 25% energy efficiency/GHG reduction compared to current performance
- You’re awarded 50 points if your property produces a 40% energy efficiency/GHG reduction compared to current performance
Depending on the points earned, builders can benefit from various product flexibilities, including amortization periods up to 50 years, LTV up to 95% and the rental achievement holdback waived. Learn more about the MLI Select Program, including all applicable criteria and benefits.
The cost to develop a purpose-built apartment can range greatly across the country – anywhere from $85 per square foot to over $1,000. With the rising costs of materials and labour, finding ways to reduce your expenses can be meaningful. By prioritizing energy efficiency in your new and retrofit projects, you can reduce these costs, boost the appeal of your project among buyers and tenants, and attract capital. And, if participating in Canada’s climate change action is important to you, your energy efficient development can have a valuable contribution to the country’s climate goals.
How MCAP’s Commercial Mortgages Team can help
Interested in learning more about the CMHC MLI Select Program? Reach out to any of our team of CMHC experts today.
