Friday, October 17, 2025

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The Race Against Time: Is Government Funding Solving Calgary’s Rental Crisis?

The City of Calgary has become the epicenter of Canada’s housing story, driven by an unprecedented surge in population. For years, finding an affordable place to rent felt like winning a lottery—vacancies were near zero, and rent prices skyrocketed, leading to a recognized rental crisis.

Enter the Canada Mortgage and Housing Corporation (CMHC). As a federal agency, CMHC wields significant financial power, using various programs to influence the housing market. But is its intervention truly a fix, or is it merely a slow drip of supply trying to stop a flood of demand?

This deep-dive analysis breaks down CMHC’s key policies, examines their impact on Calgary’s construction boom, and weighs these efforts against the relentless force of market demand driven by high migration.

Section 1: Decoding the Crisis—The Root of Calgary’s Rental Pain 📉

Before we evaluate the cure, we must understand the disease. Calgary’s rental crisis is unique because it wasn’t solely caused by a lack of demand; it was a sudden, massive surge in demand against a severely constrained supply pipeline.

The Demand Shock: Migration and Affordability Arbitrage

In 2023 and 2024, Calgary recorded some of the highest population growth rates in its history. This was driven by two main factors:

High Inter-Provincial Migration: Economic woes and extremely high housing costs in provinces like Ontario and British Columbia led thousands of Canadians to seek the relative affordability of Alberta. This is often termed “affordability arbitrage.”
Immigration and Job Growth: Calgary’s economy remained robust, drawing a high number of new permanent and temporary residents seeking employment.

This explosive population growth translated to hundreds of people arriving daily, putting immediate and severe pressure on the rental market. Even with new units entering the market, this overwhelming demand was absorbing them instantly. CMHC noted that while Canada’s rental supply grew significantly in 2024, Calgary continued to lead the country in rent growth, a sign of persistent market tightness.

The Supply Lag: A Decade of Under-Building

For years, Calgary’s construction focus was heavily tilted towards detached homes and condominiums, not purpose-built rental (PBR) apartments. Building PBR housing is expensive and complex, and without strong government backing, developers often preferred more lucrative condo projects. This historical deficit meant that when the demand shock hit, Calgary had virtually no rental inventory buffer.

Section 2: CMHC’s Policy Arsenal—The Tools Designed to Accelerate Supply 🛠️

CMHC’s primary goal in this crisis is to encourage the private sector to build rental housing quickly and affordably. It does this not through grants alone, but primarily through mortgage insurance and lending flexibilities. The most powerful tool currently in use is the MLI Select program.

Tool 1: The Multi-Unit Mortgage Loan Insurance (MLI) Select Program

CMHC is not directly lending to every builder, but it is insuring the risk for banks. This insurance is the linchpin that allows lenders to offer much more favorable terms to developers building apartment buildings. The MLI Select program is specifically designed to incentivize three things: Affordability, Energy Efficiency, and Accessibility.

MLI Select Incentive	Description	Impact on Calgary Developer
Higher Loan-to-Value (LTV)	Developers can finance up to 95% of the project cost.	Reduces the massive amount of equity (cash) a developer must put up, making big projects easier to start.
Lower Debt Coverage Ratio (DCR)	Allows the project’s income to cover the debt by a smaller margin (e.g., $1.10 of income for every $1.00 of debt).	Makes projects in areas with marginally lower rents still financially viable for lenders.
50-Year Amortization	The developer can stretch the loan repayment over 50 years (up from the typical 25-35 years).	Dramatically lowers monthly debt payments, ensuring the project cash-flows better and, in theory, allowing rents to be kept lower for longer.

The key takeaway here is that these powerful flexibilities (95% LTV, 50-year amortization) are only fully accessible if the project achieves certain CMHC “points” related to affordability and energy efficiency. This is a direct government attempt to steer private investment toward socially beneficial outcomes.

Tool 2: Partnerships and Municipal Incentives

CMHC also works alongside city initiatives. In Calgary, the impact of CMHC is compounded by:

Housing Accelerator Fund (HAF): A $52.5 million federal contribution to Calgary’s HAF was designed to fast-track housing construction by streamlining city processes, including the relaxation of density restrictions (like those for R-CG four-plexes).
Downtown Development Incentive Program: The City’s program to convert vacant office space into residential units (a unique Calgary necessity) is often paired with CMHC-insured financing, which is crucial for the high upfront costs of these complex adaptive reuse projects.

Section 3: Policy Impact vs. Market Reality in Calgary (2024-2025) 📊

The question is, are these policies working in Calgary, or is the market demand simply too strong? The data suggests CMHC’s strategy is having a delayed but powerful effect that is just now becoming visible.

The Supply Surge: CMHC’s Success Story

In the period spanning late 2024 and early 2025, Calgary emerged as Canada’s housing supply engine. CMHC data confirms that purpose-built rental construction surged:

Record Starts: Calgary’s housing starts, particularly for multi-unit apartments, saw a massive year-over-year increase, rising by over 55% in the second quarter of 2025. Critically, 71% of these new apartment starts were purpose-built rentals (Source: Calgary Housing Review, Q2 2025).
Purpose-Driven Growth: Developers explicitly responded to the low vacancy rates and the favorable CMHC financing terms. In fact, one market report noted that the MLI Select program was “doing exactly what it is supposed to do,” incentivizing a glut of new purpose-built rental properties.
The Infill Effect: The push for density, supported by both CMHC and HAF, resulted in a significant increase in secondary suites, row houses, and semi-detached homes being added to the overall housing pool.

The Critical Turning Point: Rent Moderation

The most compelling evidence that supply is beginning to catch up to demand came in early 2025:

For the first time since the COVID-19 pandemic, Calgary rent prices began trending downward.

In January 2025, two-bedroom rents were reportedly down 7.2% year-over-year, and one-bedroom rents were down 6%. This decline, combined with an increase in available rental listings and landlord incentives (like free rent for the first month), signaled a notable correction in the market. This moderation is a direct result of the significant increase in new supply flooding the market, much of which was financially enabled by CMHC programs 12 to 18 months earlier.

The Policy Mismatch: Affordability vs. Market Rent

While CMHC’s policies have successfully accelerated supply, a critical mismatch remains regarding affordability.

The Definition of “Affordable”: The MLI Select program incentivizes affordability by tying financial benefits to the percentage of units rented at or below 30% of the median renter income in the area. However, the market rent for the other 75-90% of the units often remains high. Developers must charge market rates on most units to cover the high construction costs (which CMHC does not directly control, e.g., labor and material prices).
The Turnover Gap: CMHC research shows that in many major Canadian cities, while new supply eases the rental market, affordability for existing tenants isn’t improving significantly because “turnover rents” (the rent charged when a unit becomes vacant) are still high. While Calgary has shown a slight improvement compared to Toronto, the issue is structural: if market rates are high, an older unit becoming vacant will be priced closer to the newer, more expensive stock.

Conclusion of the Mismatch: CMHC’s policies are excellent at boosting the volume of rental supply and ensuring a small percentage of units are truly affordable, but they are less effective at pulling down the market average rent across the entire city, which is primarily dictated by the intense demand driven by migration.

Section 4: The Unseen Hand—CMHC’s Influence on Housing Design and Investment 💡

Beyond simple dollars and cents, CMHC policies act as an “unseen hand” that guides how and where housing is built in Calgary.

Steering Design: The Green Mandate

The MLI Select program heavily rewards developers who prioritize energy efficiency (e.g., a 40% better than code performance can earn a developer maximum financing flexibility).

Long-Term Benefit: This pushes Calgary’s new housing stock to be more sustainable, reducing long-term operating costs and utility bills for both landlords and tenants. This is a crucial, long-term policy success.
Immediate Hurdle: However, incorporating high-level energy efficiency adds complexity and cost upfront, which can, paradoxically, slow down the immediate delivery of units and contribute to higher initial rents. CMHC is effectively balancing the immediate need for shelter with the long-term goal of climate-compatible housing.

Changing the Investor Mindset

The 50-year amortization and high LTV fundamentally change the financial viability of purpose-built rental projects. They attract long-term institutional investors and developers committed to managing property for decades, rather than flipping condos for short-term profit. This shift in investment focus creates a more stable and professionalized rental housing sector in Calgary.

Risk Mitigation: By insuring the loans, CMHC mitigates the risk for banks, ensuring a steady stream of capital continues to flow into the Calgary rental market, even during periods of economic uncertainty.

Section 5: The Outlook and the Path Forward 🚀

Calgary’s rental market is in a period of adjustment. The massive supply pipeline, largely funded or facilitated by CMHC programs, is now coming online, helping to ease the pressure and stabilize prices.

Key Projections for 2025-2026:

Continued Price Moderation: Experts forecast further rent decreases through 2025 as new inventory is absorbed.
Higher Vacancy Rates: CMHC predicts vacancy rates will rise from historic lows, giving tenants more options and bargaining power.
Slowing Demand: While population growth remains strong, it is moderating compared to peak levels, helping supply catch up.

The final verdict on CMHC’s role is that while it couldn’t stop the initial, devastating surge in demand, its financing policies were the single most effective catalyst for accelerating the supply response, pulling Calgary out of its lowest vacancy period and into a phase of rental market moderation. Without the financial incentives from MLI Select and support from HAF, the construction boom—especially the shift toward purpose-built rentals—would have been much slower, leading to a prolonged and far more severe crisis.

A Future Built on Policy and Quality: The Good Earth Builders Perspective

The success stories emerging from Calgary’s rental surge are not just about raw numbers; they are about quality, foresight, and sustainable building practices. The current market transition shows that simply building more homes is not enough; the homes must be built to last, be energy-efficient, and contribute to long-term community value—exactly what CMHC’s policies now reward.

The developers who thrived during this acceleration phase are those who were prepared to meet CMHC’s rigorous standards for affordability and, crucially, energy efficiency (the Green Home requirements).

This is where companies like Good Earth Builders are setting the standard.

Good Earth Builders recognizes that CMHC’s MLI Select program is more than just a financing tool; it is a blueprint for modern, sustainable development. By specializing in multi-unit construction that achieves the highest CMHC Green Home points, Good Earth Builders aligns its projects directly with the long-term needs of the Calgary market—delivering units that are financially viable for investors (due to the favorable CMHC financing) and operationally superior for tenants (due to lower utility costs).

Our approach doesn’t just chase volume; it prioritizes environmental stewardship and long-term asset value. We design multi-family projects that target the top tiers of CMHC’s energy efficiency metrics, ensuring that every unit contributes to the city’s goal of sustainable growth.

Are you a developer or investor looking to leverage the 50-year amortization and high LTV of the CMHC MLI Select program? The path to maximizing these benefits lies in robust planning that integrates superior energy efficiency and affordability targets from the very start.

Good Earth Builders is your partner in navigating the CMHC ecosystem, ensuring your multi-unit project not only secures maximum funding flexibility but also delivers the high-quality, sustainable rental housing that Calgary demands today and well into the future.