CMHC Rule Change Leaves Builders and Investors in Limbo — What Mortgage Consumers Should Know

Canada’s housing market was rocked by a recent clarification from the Canada Mortgage and Housing Corporation (CMHC) that could significantly change how multi-unit financing works for builders and investors — and may have broader implications for the market that mortgage consumers should understand. (Mortgage Professional)

At the end of February, CMHC informed lenders that it will no longer approve Mortgage Loan Insurance (MLI) Select applications unless at least five rental units are in the same building on a single lot. Previously, investors could bundle adjacent single-family homes, semi-detached houses or townhomes into one application — a strategy that helped insure more than 206,000 housing units and roughly $47 billion in insured volume in 2024. (Mortgage Professional)

This change — described by CMHC as a clarification — has left many investors and builders scrambling, with some deals now in doubt. (Mortgage Professional)

How This Affects the Housing Market

1. Builder and Investor Uncertainty

Many small developers and investors used the bundled properties approach to finance multiple units in lower-density markets. Without this option under the MLI Select program, some projects could become harder — or more expensive — to finance. (Mortgage Professional)

2. Potential Slowdown in Rental and Starter Homes

Industry groups warn that the restriction could slow down certain rental housing developments and put previously planned projects at risk, especially where investor financing was critical. (Mortgage Professional)

3. Shift Toward Larger Developments

With the five-unit minimum now in place, there could be a shift toward larger multifamily projects, which may ultimately boost purpose-built rental supply — but only over time. (New Homes Alberta)

What Mortgage Consumers Should Consider

While this rule change primarily targets commercial financing and construction lending, mortgage borrowers and future buyers should understand how it could ripple through the broader housing market:

✔ Higher Costs for Some Properties

If financing becomes harder to secure for smaller multi-unit properties, sellers may adjust pricing, potentially impacting affordability in some markets.

✔ Supply Impacts Could Affect Prices

Slower development of certain housing units may put more pressure on supply, which — when combined with strong demand — can contribute to upward price pressure.

✔ Alternative Financing Might Grow

Investors and developers might turn to alternative lenders or private financing, but this typically means higher costs — a consideration for borrowers looking to compete in the same markets.

Q&A for Mortgage Consumers

Q: Will this CMHC change affect my personal mortgage application?
A: Directly, no. This change affects how CMHC insures loans for multi-unit and investment projects, not standard residential mortgage insurance for homes and condos you might buy for personal use.

Q: Could this indirectly impact mortgage rates or availability?
A: Possibly. If housing supply tightens as a result of disrupted development financing, market dynamics could shift. Limited supply can keep prices elevated, which may affect borrowing costs and qualification thresholds — especially for first-time buyers.

Q: What does this mean for investment property financing?
A: Investors who previously counted on bundling smaller units for CMHC insurance will likely need to adjust strategies. Many may need 20 %+ down payments or alternative financing routes rather than relying on CMHC-insured products for smaller portfolios. (Mortgage Professional)

Q: Should buyers be concerned about future rule changes?
A: Yes. CMHC has been updating mortgage-related rules over time — including mortgage insurance criteria and premiums — as part of broader housing policy shifts. It’s wise to stay informed and consult a mortgage professional about how any new rules could affect your plans.

Looking Ahead

Housing affordability and supply remain major priorities for policymakers and agencies like CMHC. Broader initiatives — including federal housing strategies aimed at increasing starts and addressing construction productivity — are underway, but the housing market continues facing complex challenges. (Canada Mortgage and Housing Corporation)

For mortgage consumers, the key takeaway is this: policy changes in one segment of the housing market — even those targeting investors — can ultimately influence supply, demand and competitiveness for all buyers. Staying informed and proactive with your mortgage strategy will help you navigate these shifts successfully.

If you’d like, I can add a section on how this impacts first-time buyers specifically or explain CMHC mortgage insurance basics in simple terms for your audience.