The Department of Finance Canada just announced new mortgage loan insurance parameters aimed at expanding “missing middle” housing supply. The rules take effect for applications submitted on or after February 1, 2027, and they provide financing options for projects with 3 to 4 units and 5 to 50 units. Here’s the official announcement.
What’s new and noteworthy is that the insurance rules are being amended to permit private mortgage insurers to back multi-family loans and to introduce greater flexibility for smaller three- and four-unit projects. In other words, the CMHC monopoly is ending for multi-family rental housing with 50 or fewer homes.
At a high level, this is good. It will increase competition, because before, CMHC was the sole insurer, and it could often lead to problems of being stuck in the queue. I mean: We currently have a project that is shovel-ready with permits in hand, except we’re waiting on CMHC.
The way I read these new rules is that they also create a new financing baseline. If you want to build new market-rate rental housing within the 5-to-50-unit bracket, you can expect an LTV of 90%, a maximum amortization of 50 years, a minimum DSCR of 1.1 (for 10-year terms), and a net worth requirement equal to at least 25% of the loan amount.
If you want better terms than this and the project can support greater affordability, environmental, and/or accessibility features, well, then there’s still CMHC’s MLI Select points-based program.
Streamlining and simplifying everything around missing middle housing is the key to unlocking more of it. Permitting, financing, design (things like single-stair), servicing (hi, Toronto Hydro), and environmental requirements (I’m thinking specifically of Records of Site Condition) all need to be fast and straightforward.
Let’s hope this announcement improves the financing category.