A LOFTY GOAL: HOMES FOR A COUNTRY

The newly-elected Liberal government has created a new federal entity called Build Canada Homes (BCH). Its two main objectives are to 1) build affordable housing at scale and 2) build faster, better, and smarter. BCH aims to achieve these goals both by building homes itself, as well as by offering financing to development partners. This is one of the main ways the government aims to achieve its new goal of construction for the country: 500,000 housing starts annually.

More details on BCH are due to come,  but we do not believe that 500,000 housing starts annually are achievable (CMHC reported just shy of 228,000 starts nationally in 2024). BCH may be able to increase the amount of affordable housing construction, but Canada does not have the labour force required to achieve that level of construction. Even if BCH is successful at increasing construction productivity, they will still fall well short of the 500,000 goal.

THE FIRST ONE IS (TAX) FREE

On May 27th the federal government announced a new GST rebate for first- time buyers of new homes that are used as principal residences. The rebate will be up to a maximum of $50,000 for homes purchased on or after May 27th, 2025.  For homes purchased up to $1 million the full amount of the GST will be rebated.  For homes purchased between $1 million and $1.5 million the rebate will decrease linearly from the maximum of $50,000 at $1 million to $0 at $1.5 million. For example a purchase of $1.25 million would yield a rebate of $25,000 and the purchaser would owe the remaining GST of $37,500.

Over the past two years, first-time homebuyers who were end-users and  bought homes for less than $1 million accounted for 21% of all purchases at rennie's new-home projects. This policy will improve purchasing power for one segment of new home buyers and should therefore increase the number of new-home transactions at the margin; in turn, this will aid in bringing new supply to the market.

The policy, if enacted, would be more beneficial to creating new supply if it were bolder—by, for example, removing the GST for all enduser buyers, or even all buyers. Additionally, policies that have price thresholds lose their value over time. We suggest indexing any cap, either to inflation or benchmark prices, to ensure that the limit remains relevant over  the long-term. This new rebate replaces an old one that was implemented in 1991 and had a cap of $350,000. That cap was not updated over time, even as home prices tripled, meaning that today’s limit is roughly equivalent to what was available in 1991.

The MLI Select program from CMHC has been a boon to new purpose-built rental construction, but that could change in the future with rising premiums.

On July 2, 2025, the provincial government introduced changes to the way development cost charges (DCC) and amenity cost charges (ACC) will be collected, beginning on January 1, 2026. Developers will now be able to pay 25% of these costs to local governments at the time of building permit issuance (previously 100% was required) with the remaining 75% paid either at occupancy or four years from the building permit issuance date, whichever comes first.

By delaying part of these payments this change improves the viability of new housing developments. It does so by lowering the upfront capital requirements from developers costs, though ultimately it doesn't reduce the total value of the levies paid to the municipality. We welcome this change, as it will increase the likelihood of projects moving forward, and thus will have a positive impact on the future supply of new homes.

WAIVING SEE YOU LATER (BUT NOT GOODBYE) TO DEVELOPMENT COST CHARGES

The MLI Select program, which has been in effect in its current form since 2022, is a mortgage insurance product for multi-unit rental housing operating on a points-based system. Borrowers with a qualifying number of points can use the program to increase their mortgage amortization or loan-to-value ratio, or decrease their debt service coverage ratio. It also allows for lower interest rates as lenders view insured mortgages more favourably. MLI Select has been wildly popular with developers of new purpose-built rental housing, with more than 179,000 rental homes insured through the program in 2024 (compared with 127,000 in 2023).

Effective July 14, 2025, CMHC made several changes to the program. A new premium structure institutes higher rates—especially for higher-leverage loans—along with new surcharges of 0.25% for every five years of amortization beyond 25 years and an additional 0.25% if the effective gross income test is not met at funding. Structured premium discounts will now be tied to points for achieving outcomes on affordability, energy efficiency, or accessibility features. These changes will make new construction financing for multi-unit residential buildings more expensive, make fewer projects viable, and will result in fewer new homes being delivered than otherwise would have been.

PAYING A PREMIUM PREMIUM

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