Free Land for Developers? How the Federal Lands Initiative Works

What Is the Federal Lands Initiative?

The Federal Lands Initiative (FLI) is a Government of Canada program that makes surplus federal properties available at below-market or no cost to organizations committed to building affordable, inclusive, or mixed-income housing. Administered by CMHC in partnership with Canada Lands Company and various federal departments, the program has transferred hundreds of properties across the country since its inception under the National Housing Strategy.

Source: CMHC, Federal Lands Initiative - Program Overview, 2024

For developers, this program is remarkable: it effectively removes the single largest barrier to affordable housing development - land cost. In markets like Toronto, where land can represent 25–40% of total project cost, receiving free or discounted land can transform a marginal project into a highly viable one.

How the Program Works

The FLI operates through a straightforward process:

1. Identification: Federal departments and agencies identify surplus properties that are no longer needed for government operations
2. Assessment: CMHC evaluates the properties for suitability for housing development (location, zoning potential, site conditions)
3. Transfer: Eligible properties are offered to qualified proponents at discounted prices - ranging from free transfer to below-market sale - based on the housing outcomes committed to by the developer
4. Development: The successful proponent develops the site according to agreed-upon affordability and inclusivity requirements
5. Compliance: Ongoing monitoring ensures the housing continues to meet the program's affordability conditions

Source: Canada Lands Company, Federal Lands for Housing - Process Guide, 2024

What Types of Properties Are Available?

The federal government holds an enormous real estate portfolio - one of the largest in Canada. Surplus properties that have been or may be made available through the FLI include:

• Former Department of National Defence (DND) properties - bases, training facilities, housing blocks
• Canada Post facilities - sorting centres, postal depots
• Transport Canada lands - former airport lands, railway rights-of-way
• Public Works and Government Services Canada (PSPC) - office buildings, administrative centres
• RCMP properties - former detachments and training facilities
• Canada Mortgage and Housing Corporation - CMHC's own surplus properties

Source: Treasury Board of Canada Secretariat, Directory of Federal Real Property, 2024

Notable FLI projects completed or underway include:

• Former CFB properties converted to mixed affordable housing communities
• Surplus postal lands in urban centres developed as inclusive rental housing
• Former institutional properties transformed into co-op housing developments

Eligibility and Application Requirements

Who can apply?

The FLI is open to a range of proponents, though the program favours applications that demonstrate deep affordability commitments:

Source: CMHC, Federal Lands Initiative - Proponent Eligibility Guide, 2024

Application requirements:

• Concept proposal: Architectural concept, unit count, unit mix, affordability breakdown
• Financial plan: Development pro forma demonstrating project viability
• Affordability commitment: Minimum 20% of units at below-market rents (deeper commitments receive better land pricing)
• Community benefit plan: How the project will serve the local community
• Development timeline: Realistic schedule from land transfer to occupancy
• Organizational capacity: Track record and financial capacity to complete the project
• Partnership documentation: If applicable, agreements with non-profit or co-op partners

Combining FLI with CMHC Construction Financing

The most powerful application of the Federal Lands Initiative is combining it with other CMHC programs to create a fully funded development:

Recommended program stack:

Source: CMHC, Stacking Federal Housing Programs - Guidance for Proponents, 2024

Example scenario: A developer receives a surplus federal site (valued at $5 million) at no cost through FLI. They secure RCFI construction financing at below-market rates, receive $3 million in NHCF forgivable loans for affordability and accessibility, and upon completion, lock in CMHC MLI Select permanent financing at 95% LTV with 50-year amortization. The net effect: a project that would have required $8–10 million in equity under conventional financing now requires a fraction of that amount.

For details on construction financing, visit our financing options page.

Current and Upcoming FLI Sites

The federal government has committed to making additional surplus properties available through 2030. While specific site listings change regularly, interested proponents should monitor:

• CMHC's Federal Lands Initiative page - updated as new properties are identified
• Canada Lands Company - manages the disposition of many federal surplus properties
• Treasury Board Secretariat's Directory of Federal Real Property - the comprehensive database of all federally owned real estate in Canada

Source: CMHC, Federal Lands Initiative - Available Properties, 2024

How to stay informed:

1. Register with CMHC's proponent database to receive notifications of new FLI properties
2. Monitor Canada Lands Company's development opportunities portal
3. Contact your regional CMHC office to express interest in specific geographic areas
4. Attend CMHC's housing program information sessions (held quarterly in major centres)

Challenges and Considerations

While the FLI presents significant opportunities, developers should be aware of potential challenges:

• Site conditions: Federal surplus properties may require environmental remediation (former military and industrial sites). Budget for Phase I and Phase II Environmental Site Assessments.
• Zoning: Many federal properties are zoned for institutional or government use and will require rezoning through the municipal planning process, which can take 12–24 months.
• Community opposition: Affordable housing projects can face neighbourhood resistance. A strong community engagement strategy is essential.
• Affordability compliance: Commitments made to secure land discounts are legally binding for 20–25+ years. Model your pro forma conservatively.
• Processing time: Applications can take 6–12 months to process. Factor this into your project timeline.
• Competition: Desirable sites attract multiple applicants. Differentiate your proposal through deeper affordability commitments, innovative design, or strong community partnerships.

For properties with environmental challenges, see our guide on 'unfinanceable' commercial properties for remediation and financing strategies.

How The Mortgage World Can Help

The Mortgage World works with developers across Ontario, Alberta, and Manitoba to structure financing for projects utilizing federal housing programs. We can help you:

• Navigate the FLI application process and identify suitable surplus properties
• Stack financing programs (FLI + RCFI + NHCF + MLI Select) for maximum benefit
• Structure partnerships with non-profit and co-op organizations to enhance your eligibility
• Arrange construction and permanent financing through our network of 40+ lenders
• Coordinate timelines across multiple program applications and approvals

Whether you are developing affordable rental housing, co-operative housing, or mixed-income communities, the combination of federal land and CMHC financing programs can make your project significantly more viable. Contact us to explore how these programs apply to your next land development or construction project.

For more on government-supported housing programs, read our articles on Financing Co-op Housing in Canada and Green Retrofits That Pay for Themselves.

References

1. CMHC Federal Lands Initiative: https://www.cmhc-schl.gc.ca/professionals/project-funding-and-mortgage-financing/funding-programs/all-funding-programs/federal-lands
2. Canada Lands Company: https://www.clc-sic.ca/
3. Treasury Board Secretariat, Directory of Federal Real Property: https://www.tbs-sct.canada.ca/dfrp-rbif/home-accueil-eng.aspx
4. CMHC National Housing Co-Investment Fund: https://www.cmhc-schl.gc.ca/professionals/project-funding-and-mortgage-financing/funding-programs/all-funding-programs/co-investment-fund
5. CMHC Rental Construction Financing Initiative: https://www.cmhc-schl.gc.ca/professionals/project-funding-and-mortgage-financing/funding-programs/all-funding-programs/rental-construction-financing-initiative
6. Canada's Housing Plan 2024: https://www.canada.ca/en/department-finance/news/2024/04/canadas-housing-plan.html
7. CMHC MLI Select: https://www.cmhc-schl.gc.ca/professionals/project-funding-and-mortgage-financing/mortgage-loan-insurance/multi-unit-insurance/mli-select