The volume of multi-unit residential properties financed through insured loans jumped nearly 75% in the first nine months of 2024 compared to the same period in 2021, according to Morningstar DBRS.
That’s despite a more modest 20% increase in purpose-built rental starts over the same timeframe.
While the data includes both new construction and financing for existing buildings, the shift toward insured borrowing is clear.
The introduction of CMHC’s MLI Select program in 2022 played a key role, the report says, offering developers more favourable loan terms for projects that meet affordability, energy efficiency, and accessibility benchmarks.
HOW CMHC-INSURED FINANCING WORKS
CMHC offers mortgage insurance for multi-unit residential properties—including apartment buildings, student housing, retirement homes and other forms of rental housing. By insuring these loans, CMHC allows lenders to offer developers lower interest rates, longer amortizations and higher loan-to-value ratios than they could with uninsured financing.
The most popular option is MLI Select, which provides additional incentives for projects that meet specific social or environmental goals. Properties that qualify can access amortizations of up to 50 years and financing of up to 95% of the project cost. To fund these loans, lenders securitize them through federally backed programs such as the National Housing Act Mortgage-Backed Securities (NHA MBS) program and the Canada Mortgage Bond (CMB) program, which together provide a stable and low-cost source of capital.
This structure has opened the door for smaller and mid-sized lenders to play a much larger role in financing multi-unit development.
Mid-sized lenders lead in multi-family insured volumes
The analysis highlights just how active mid-sized lenders have become in the insured multi-unit space, with Equitable Bank holding the largest share among all issuers.
Equitable had $27.5 billion in insured multi-unit residential mortgages under management—including de-recognized loans—as of January 31, 2025. That marks a 175% increase from year-end 2021, compared to just 27% growth in the previous three-year period from 2018 to 2021.
Other leading issuers include National Bank, First National Financial, TD, and Peoples Trust Company, each with between $10 billion and $15 billion in outstanding balances.
According to the report, government-guaranteed securitization funding has allowed smaller and mid-sized lenders to compete more effectively with the Big Six banks. This funding access, combined with the lower credit risk of insured loans, has made the multi-unit segment particularly attractive to a broader range of lenders.
Short-term pressures, but long-term support remains
While structural demand for rentals remains strong, recent market shifts could put pressure on near-term development activity, according to Morningstar DBRS. The report points to softening rents toward the end of 2024, driven by record completions of rental and condo units and by more restrictive immigration policies.
At the same time, CMHC has introduced stricter underwriting criteria for both its MLI Select and standard MLI programs. These include enhanced bonding and appraisal requirements, and restrictions on applications for bundled small properties.
“This is a further acknowledgement, in our view, of CMHC’s concern for the overall economic environment as well as the significant growth in its multi-family book, which has already caused it to temporarily suspend its dividend to the federal government,” the report notes.
Falling interest rates may also revive demand for conventional lending. Since mid-2024, the Bank of Canada has lowered its overnight rate by 225 basis points, which could lead to increased competition in the multi-unit space from larger banks.
Outlook for insured rentals remains strong
Despite these headwinds, the report maintains a positive medium- to long-term outlook for CMHC-insured multi-unit financing.
With condo starts down 18% year-over-year in 2024, developers are increasingly turning to purpose-built rentals, where starts rose 12% over the same period.
Government support also remains robust. Securitization limits were expanded in 2023 to accommodate more multi-unit lending, and federal agencies continue to purchase a portion of CMHC’s Canada Mortgage Bond issuance to keep funding costs low.
“We believe developers will continue to rely on insured lending to fund a significant portion of their multi-unit projects,” the report concludes.
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Last modified: April 2, 2025