Expanding housing supply: The Rental Construction Financing Initiative

The Rental Construction Financing initiative is one of the National Housing Strategy programs tackling the housing supply shortage in Canada. The program is making a positive impact in addressing this pressing issue.

The Rental Construction Financing initiative is specifically designed to incentivize the construction of purpose-built rental housing and increase the supply of housing where it’s needed most. It does this by providing fully repayable low-interest loans to developers.

Filling a gap

The traditional real estate market has typically favoured higher-end condominiums over purpose-built rental housing for middle-income households. Without any financial incentives, it’s more attractive and less risky for developers to build luxury condominiums than to build purpose-built rental housing for middle income households. This approach, however, does not address the widespread need for more rental housing and has led to unbalanced markets, especially in larger cities.

The Rental Construction Financing initiative is designed to fill this gap. The result? More rental housing that meets the needs of middle-income Canadians.

More rental housing benefits people, communities and the economy

Unfortunately, many people in Canada struggle to find suitable housing, especially in major cities that have historically low vacancy rates. The construction of rental housing has not kept pace with Canada’s growing cities and population. This, combined with aging stock over the decades, has led to a decline in rental housing.

The shortage of rental supply doesn't just affect residents — it also impacts local economies. Cities need workers and workers need places to live. A balanced and well-functioning rental market makes local economies more attractive to businesses and their employees.

Accelerating the construction of purpose-built rental housing has other benefits such as:

• building stronger communities
• offering more options for middle-income families
• supporting the growth of our cities

The Initiative also encourages housing that is energy-efficient, accessible and makes efficient use of urban spaces.

Reshaping Canada’s housing system

We project that Canada will need to build an additional 3.5 million homes above current projections by 2030 to restore housing affordability. The Rental Construction Financing initiative plays a crucial role in meeting this target and aligns with The Government of Canada’s aim to double the rate of housing construction over the next decade.

The Rental Construction Financing initiative is more than just a financing initiative — it's a transformative program that’s reshaping Canada's housing landscape. Incentivizing the construction of purpose-built rental housing addresses an urgent need while also investing in the future of our communities and cities.

On November 21, the 2023 Fall Economic Statement announced the renaming of the Rental Construction Financing initiative to the Apartment Construction Loan Program. The program will receive an additional $15 billion in new loan funding, starting in 2025 – 26, to build more rental apartments, faster.

Learn more about the Rental Construction Financing initiative

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