A sudden policy shift by Canada Mortgage and Housing Corporation (CMHC) has left builders and real estate investors scrambling, as the agency moves to block bundling single-family home purchases under its Mortgage Loan Insurance Select (MLI Select) program. Critics argue the unexpected change may jeopardize millions of dollars in planned housing projects.
At the end of February, CMHC informed lenders that it would no longer approve MLI Select applications unless at least five rental units were in the same building and on the same lot. Previously, investors could bundle adjacent single-family, semi-detached, and townhouse properties into a single application.
This financing model helped insure 206,157 housing units, generating $47 billion in “insured volume” during the first three quarters of 2024.
Industry backlash
Investors and mortgage brokers say the change came without consultation, leaving many deals stranded. Tawfiq Abdulsamad, an Edmonton investor, said he was blindsided after CMHC rejected his application to finance three detached homes with basement apartments—totalling six rental units—under MLI Select.
“I heard from other people that had purchased the detached product in the past that the CMHC just started declining without saying anything,” Abdulsamad told the Globe and Mail, noting he would not have bought these properties if he had known traditional financing was his only option.
The rejection means Abdulsamad must seek alternative financing, requiring a 20% down payment or costly private lending.
Jake Steinman, CEO of Meta Realty, said his firm has at least 10 deals covering 100 units—valued at $35 million to $40 million—now in jeopardy. He estimates up to $50 million in deposits have been paid for properties that may not secure comparable financing.
“No one ever thought CMHC was going to pull the rug,” Steinman said.
CMHC’s justification
CMHC denies the new restrictions constitute a policy change, calling it a “clarification.”
“We had seen a slight increase in the complexity of projects where properties with less than five housing units were being bundled,” said CMHC spokesperson Monique LaPlante. “Our clarification sought to provide an enhanced understanding of our expectations.”
Some industry experts believe CMHC is trying to prevent large commercial investors from dominating the market.
“The typical profile of someone buying between five- to 10-units was they tended to be investors that already had investments in residential single family, or duplexes. This was often their first foray into a commercial mortgage,” said Nadeem Keshavjee, president of GreenBirch Capital Inc.
Impact on housing
Industry groups warn the new restrictions will slow rental housing development. Scott Fash, CEO of the BILD Alberta Association, said the change will limit buyers and reduce rental construction in 2025 and criticized CMHC’s handling of the shift, arguing existing applications should have been grandfathered in.
CMP
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