Whatever the rhyme will be, 2026 will be complicated and timing will be key

  • Aaron Cameron, Vice President, Commercial Operations

This article was originally published on RENX.ca.

We went from “survive until 2025” to “stay in the mix until 2026”. Now one month in, we don’t yet have a new catch phrase for 2027 (what rhymes with seven?), but you can feel things are changing to a very complicated environment for the multifamily housing sector. 

While purpose-built rental continues to be a key driver of new housing activity in Canada, developers are being cautious and some are pulling back. In both big and small cities, rents have come down or stabilized, particularly for new product and there is little relief from the cost side. Geopolitical issues are also creating economic uncertainties and volatility for investors.  

The impact on the condo market and how that plays out is another influencing factor. How unsold condo inventory gets absorbed into the market and the impact it has on rents in places like Toronto and Vancouver will drive future decision making.

Then there is the land market, still frozen, still waiting for banks to halt forbearance practices stalling a much-needed reset on land values.

For those ready to refill their coffers and move forward, I don’t think interest rates will go much lower, so the hardest thing will be timing the market amid all of this.

A year shaped by policy

We may start to see new multifamily development show up in different forms from what we have been used to. We may see the rise of more multiplexes on major streets – thanks to new zoning policies in Toronto and Vancouver – and a ramp-up of modular construction projects thanks to Build Canada Homes' lean toward modern methods of construction.

This varies from city to city, but the Housing Accelerator Fund in some places has paved a smoother runway for development. In others progress is lagging, with uncertainties around timelines and complicated municipal approvals processes.

On the flip side, Canada Build Homes recently unveiled new plans and partnerships across the country, to get thousands of new homes built. We also now have more clarity regarding its investment policy framework, and the Federal Rental Protection Fund is expected to launch in 2026 with $1.5B committed to fuel the community housing stock through acquisitions.

It's not as front and centre in headlines anymore, but GST relief for new rental construction continues to influence feasibility, and many are still waiting to see if Prime Minister Mark Carney will fulfill his promise for the Multi-Unit Residential Building (MURB) tax provision. 

What will define success?

So, what will success in this market look like this year? In addition to leveraging new policy and strategic timing, developers need to consider accepting a lower yield and a longer horizon for their ROI. 

Cost engineering construction and doing your homework ahead of time, to ensure you are aligning your product with your target market is also extremely important to succeed, especially as we are seeing rents and lease-up time frames for newly completed projects not aligning with initial pro formas. 

Building owners and investors should also consider prioritizing stability and performance of existing assets over speculative expansion in the current environment. Whether it is refinancing and investing in building retrofits to improve functionality for tenants or operational efficiencies, there are programs like CMHC’s ‘refinance plus improvements’ program that can make this very attractive.

There also continues to be plenty of liquidity in the market for apartment construction, but the challenge is funding the take-out. Even though the federal government expanded the Mortgage Bond (CMB) issuance by $20 billion to help fund the exit term loans needed for purpose-built rental projects already under construction, there remains a significant gap in the near-term between five-year term demand and funding availability.

From stable mess to recovery

While 2026 is likely going to be messy, we are starting to see policy promises turn into mechanics for change, so I'm optimistic it won’t get much worse. 

To stay afloat, the multifamily market this year should focus on recalibrating, thinking creatively about financing, built form and construction, finding ways to enhance asset values and, if possible, stay focused on longer 10- to 15-year term horizons. 

This year will be about finding the bottom.

There are tail winds coming from various policy decisions, the condo and land markets will begin to untie themselves, and with a stable interest rate environment, the purpose-built apartment market will be “set to be in heaven in 2027."

Now how is that for a new rhyme!

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