Owning a home has never been more unaffordable than it is today.1 Many potential owners have looked to renting as an alternative, but today’s rent prices have offered little financial relief. As reflected in 2025 rent-to-income ratio data, Vancouver and Toronto have reported the highest percentage of rent-to-income in Canada over the past 5 years. Unsurprisingly, across the country, each city tells the same story of rents continuing to consume a growing portion of income year-over-year.
Chart 1: Canada’s Upward Trending Rent-to-Income Ratio
Source: CMHC2, Peakhill Capital
Stuck between two increasingly unaffordable options, many Canadians risk being priced out of both markets. This leaves the public and private sectors to answer the pressing question:
How do we solve Canada’s housing affordability crisis, and more importantly, where to begin?
Where To Begin?
To start, incentives must address the cause rather than the symptoms of this crisis. In other words, incentives should focus on increasing housing units rather than targeting prices, which have continued to rise as a result. Such incentives support long-run market success rather than create short-run band-aids, which, as we explore further in this article, can make the housing crisis worse rather than better for Canadians.
Incentivizing Small-Scale Housing Initiatives
The idea behind small-scale housing is to increase the number of housing units in lower-density neighbourhoods. Leading by example, in 2009, the city of Vancouver legalized laneway construction and single-family zones. More than a decade later, in 2022, Toronto legalized the construction of garden suites in single-family zoning areas.3 These construction options allow for additional units to maximize land efficiency without large infrastructure upgrades, but strict zoning regulations have constrained the overall usefulness of this initiative.
The success of small-scale housing, via methods such as garden and laneway suites, is undeniable in cities like Vancouver. With the development of more than 2000 units since its implementation, this strategy demonstrates the importance of ensuring zoning works in tandem with initiatives rather than against them.3 For Canada’s metropolitan areas struggling to balance development and density, such solutions may prove to be crucial in increasing affordable housing supply.
Focusing on Modular Housing
CMHC estimates that Canada would need to add 3.5 million units by 2030, in addition to the already forecasted 2.3 million units between 2021 and 2030, requiring the current rate of construction to double.4,5 Given this, development time has become exceedingly valuable in Canada’s quest to increase its housing supply.
Compared to traditional builds, modular housing presents developers with a much more efficient option. Prefabricated housing, also known as modular housing, is a type of home built in modules that are then shipped to a permanent location for assembly. Options include condos, townhouses, and single-detached homes. Estimated by industry experts to be 30-50% faster to build than traditional methods, modular housing is an underused resource in Canada’s development landscape.6
Modular housing manufacturer, preparing modules to be shipped to their destination.
Currently, just 1% of dwellings are developed using the modular housing construction method, primarily due to local building approval systems.6 Until such approval systems provide regulatory certainty for modular housing manufacturers, their ability to scale will remain constrained, despite their evident impact on providing affordable housing for Canadians.
Amid these hurdles, the federal government has emphasized the importance of utilizing modular housing in development. This is a welcome change for Canadian prefabricated housing manufacturers, who will receive $1 billion in equity investments from the federal government, as well as a focus on bulk orders from the Federal Government to create sustained demand for modular units.7
Avoiding Rent Control Policies
In theory, rent control appears to be a logical solution to affordability, but in practice, the opposite proves true. Price controls distort market signals essential for supply and demand to function as they should.8 As a result, renters outside of rent-controlled apartments face higher rents in vacant apartments. Investors are more likely to withdraw from the market due to lower profitability in new developments, further pushing up prices for renters in the long run. As such, bolstering rent control policies would only amplify scarcity and, in doing so, further worsen Canada’s housing crisis.
Where We Are Seeing Progress
It’s not all bad news for Canadians. We are seeing progress and a concerted effort from both private and public sectors in working toward addressing this crisis. For example, the MLI Select program, a multi-unit loan insurance product created by CMHC, incentivizes the implementation of more affordable housing units by offering borrowers benefits ranging from reduced premiums to longer amortization periods through a point-based system.9 In addition, the federal government is focused on addressing this crisis, as shown through initiatives such as the Housing Accelerator Fund, which rewards both urban and rural areas that remove barriers which have slowed down construction timelines.10
Chart 2: The Growing Proportion of MLI Select Funded Units to Rental Apartment Starts in Canada
Source: CMHC2, Peakhill Capital
Since its inception, Peakhill has been committed to improving affordability for Canadians. In 2025, year-to-date, we have funded $1.4 billion in MLI Select loans that have met Affordability criteria, tracking to surpass the $1.7 billion financed in 2024. With plenty more to build, Peakhill is committed to informing, supporting, and advocating for affordability efforts across Canada.
“The MLI Select Program incentivizes the construction, purchase, and refinancing of purpose-built rental housing with five or more units by offering reduced insurance premiums (up to 30%), longer amortization periods (up to 50 years), and higher loan-to-value ratios (up to 95%) for projects that commit to affordability, accessibility, and energy efficiency. The MLI Select program continues to evolve to balance affordability incentives with financial sustainability. Changes notably include eligibility for 50-year amortization on new construction, a big win for developers not accessing MLI Select. Finally, with some volatility in transactional volume, 2025 has seen enhanced focus on smaller investors with projects of 12 units and less.”
Room to Grow
A common theme that emerged when deep diving into this crisis was the abundance of red tape hindering the effectiveness of initiatives targeted to address it. For instance, in Canada, project approval timelines are among the longest in the world.11 As such, the best way to address affordable housing in Canada may be first to address regulatory hurdles, such as lengthy approval processes and zoning restrictions, which reduce the efficiency of affordable housing initiatives. Despite disagreements in the best way to approach this crisis, one thing all Canadians can agree on, whether developers or politicians, is that there is no single answer or quick fix to a complex problem. Rather, it will require a collaborative effort across the private and public sectors to ensure housing affordability across Canada.
Download the French Version
Read “Addressing Canada’s Housing Affordability Crisis” in French.
Faire face à la crise de l’accès au logement au Canada
Jamais l’accès à la propriété n’a été aussi difficile qu’à l’heure actuelle.1 De nombreux candidats à la propriété ont choisi la location comme alternative, sans pour autant trouver un véritable soulagement face aux loyers élevés. En effet, les données du ratio loyer/revenu pour 2025 montrent que, depuis cinq ans, Vancouver et Toronto ont enregistré les pourcentages les plus élevés du Canada. Sans surprise, la situation est identique dans l’ensemble des villes du pays : les loyers continuent de représenter une fraction croissante des revenus année après année.
Interested In Learning More?
Read our Municipal Incentives Guide to learn more about how municipalities are addressing the affordable housing crisis through innovative incentive programs!
Municipal Incentives Guide: 2025 Edition
Peakhill Capital is a leading commercial real estate asset manager with credit and equity platforms across North America. As a CMHC-approved lender, Peakhill is active across all real estate asset classes, such as multi-family, industrial, retail, and construction, ensuring tailored solutions for each client.
Recognizing the dynamic needs of developers across Canada, Peakhill has curated this resource, detailing the housing development incentives available across key Canadian municipalities. This guide serves as a practical tool to navigate and leverage local affordable housing opportunities, foster informed decision-making, and drive growth in major markets nationwide.
Let’s continue the conversation
Footnotes
- Storeys. 2024. It’s Never Been Tougher to Afford A Home in Canadian History. ↩︎
- CMHC. 2025. 2025 Mid-Year Rental Market Update. ↩︎
- Chan, J. 2025. A “New” Solution to Toronto’s Housing Affordability Crisis. ↩︎
- CMHC. 2025. Housing Shortages in Canada: Updating how much we need by 2030. ↩︎
- CHEC. 2025. Rethinking Canada’s Target for 5.8 million New Homes by 2030. ↩︎
- CIBC. 2024. Manufacturing a housing solution: The role that modular homes could play in Canada. ↩︎
- ROCModular. 2025. Why Modular Housing is Canada’s Fastest Path to Affordability. ↩︎
- RENX. 2025. The rent control myth: Stability today, scarcity tomorrow. ↩︎
- CMHC. 2025. MLI Select. ↩︎
- CMHC. 2025. Housing Accelerator Fund. ↩︎
- RBC. 2025. The Great Rebuild Seven ways to fix Canada’s housing shortage. ↩︎
