Key Insights on Rental Housing
- Build green, save green.
Energy-efficient developments not only qualify for better financing but also cut long-term costs, boosting margins and futureproofing against costly retrofits. - Energy-efficient homes = lower costs for renters.
Simple upgrades help to reduce utility bills and maintenance, giving renters a break while helping developers avoid rent hikes. - A win-win for developers and renters.
By prioritizing sustainability, developers can unlock greater value from programs like CMHC’s MLI Select and Retrofit Funding, which align affordability and energy efficiency requirements with financial incentives.
As potential buyers remain priced out of the market, investment capital has flowed into rental apartments at a pace not seen in decades.1 As demand for new rentals increases, it is critical to look at how new developments impact our environment considering the majority of GHG emissions from Canada’s municipalities come from buildings and transportation.2 The exciting news is that energy inefficiencies in rental housing present a dual opportunity: reducing environmental impact through favourable financing programs while enhancing affordability. As such, developers and renters have plenty to gain from going green!
The Developer’s Perspective: Why Go Green?
Rising input costs and economic uncertainty have created headwinds for new developments, creating more need for favourable financing to keep projects afloat. Programs like CMHC’s MLI Select offer reduced premiums and extended amortization periods based on affordability, accessibility, and climate compatibility measures.3 In today’s tight financing environment, developers are well-positioned to take advantage of these incentives by integrating sustainable solutions into both new and existing buildings.
Energy inefficiency in older buildings not only harms the environment but also drives up utility and maintenance costs, ultimately slimming developers’ margins. Upgrading to systems like air-source heat pumps can reduce heating and cooling expenses by up to 50%, directly boosting profitability.4 These retrofits are becoming increasingly necessary with climate goals approaching and building codes growing more stringent in response. Municipalities are beginning to implement decarbonization regulations, which, though a positive step forward, can leave landlords grappling with the high costs of compliance.1
To get ahead of these regulatory shifts, developers can future-proof their assets by investing in energy-efficient infrastructure from the outset. Examples of potential upgrades include high-efficiency heat pumps, tankless water heaters, better building envelopes to reduce air leakage and LED lighting for improved electrical efficiency. Since upgrades can be costly, programs like CMHC’s Retrofit Funding make energy retrofits more accessible by offering attractive loan terms for multi-residential buildings, allowing developers to align with climate goals while capitalizing on government-backed funding.5
The Renter’s Perspective: What’s in It for Tenants?
For renters who are responsible for paying their utility bills, energy-efficient systems result in lower costs and less maintenance. Simple improvements, such as adding insulation, can cut energy use by 45% and increase cost savings for renters.6 In the case that renters are not responsible for their utility bills, developers can reduce operating costs—helping ease the pressure to increase rents. Regardless of who pays the bill, renters can benefit from promoting sustainable housing practices in their buildings.
Aligning Incentives: How to Ensure Win-Win Scenarios
To make sustainable housing practices truly effective, both developers and renters must benefit. This requires aligning incentives. Programs like CMHC MLI Select offer developers enhanced benefits when they prioritize affordability for renters, through built-in affordability thresholds that unlock more favourable terms. Similarly, CMHC’s Retrofit Funding supports multi-residential buildings by offering favourable loan terms for deep energy retrofits if developers commit to providing affordable housing. These programs demonstrate how aligning incentives can create a win-win scenario for both developers and renters.
“When incentives align, sustainability becomes a smart business move. It creates value for developers, lowers costs for renters, and supports long-term environmental goals—a true win-win.”
Greener Housing is Smarter Housing
With big goals to meet in Canada, such as net-zero emissions by 2050, continued commitment to sustainable housing must be top of mind for new and existing developments.7 At Peakhill, we believe greener housing is smarter housing! Now is an opportune time for developers and key stakeholders to benefit from sustainable housing by committing to energy-efficient infrastructure.
Let’s continue the conversation
Footnotes
- Rowe, J. (2023, November 20). Rental housing has a carbon problem — here’s how to solve it. Corporate Knights. https://www.corporateknights.com/buildings/rental-housing-carbon-problem-heres-how-to-solve-it/ ↩︎
- Burda, C. (2024, March 5). Building the Homes Canada Needs Doesn’t Have to Cost Us Our Climate Goals- Here’s How. City Building TMU. https://www.torontomu.ca/city-building/news-research/2024/03/housing-climate-task-force-blueprint/ ↩︎
- Canada Mortgage and Housing Corporation. (n.d.). MLI Select – Multi-unit Mortgage Loan Insurance. Canada Mortgage and Housing Corporation. Retrieved April 11, 2025, from https://www.cmhc-schl.gc.ca/professionals/project-funding-and-mortgage-financing/mortgage-loan-insurance/multi-unit-insurance/mliselect ↩︎
- Independent Electricity System Operator. (2023, December 12). Energy affordability program: Free heat pumps. IESO. https://www.ieso.ca/Corporate-IESO/Media/News-Releases/2023/12/Energy-Affordability-Program-Free-Heat-Pumps ↩︎
- Canada Mortgage and Housing Corporation. (n.d.). Canada Greener Affordable Housing – Retrofit Funding. Canada Mortgage and Housing Corporation. Retrieved April 11, 2025, from https://www.cmhc-schl.gc.ca/professionals/project-funding-and-mortgage-financing/funding-programs/all-funding-programs/canada-greener-affordable-housing-program/retrofit-funding ↩︎
- Teevan, O. (2023, January 20). How does insulation save energy? Sealed. https://sealed.com/resources/how-does-insulation-save-energy/#howmuch ↩︎
- Government of Canada. (2022, March 29). 2030 Emissions Reduction Plan – Canada’s Next Steps for Clean Air and a Strong Economy. https://www.canada.ca/en/environment-climate-change/news/2022/03/2030-emissions-reduction-plan–canadas-next-steps-for-clean-air-and-a-strong-economy.html ↩︎
