This article is part of our September Special Report on Real Estate in Canada and around the world. To see all the articles so far, click here.
The federal government’s “Build” program promises to “spend less on government and invest more in the people and businesses that will grow our economy,” in the words of the Liberal Party of Canada, in part by running large deficits. Two recent developments—the new Major Projects Office of Canada (MPO) and the establishment of the new Build Canada Homes agency—have piqued investor interest, although both initiatives are short on detail in the absence of a federal budget so far.
The MPO primarily lists large infrastructure and resource projects for “further assessment and consultations,” as well as a series of handpicked efforts that include a critical minerals strategy, the Arctic Economic and Security Corridor, the Port of Churchill Plus, and the Alto High-Speed Rail service between Toronto and Quebec City.
Build Canada Homes promises to lavish a $13-billion budget to build 4,000 homes on federal lands beginning next year. That number would barely shift the needle on Canada’s housing deficit, and at an apparent cost of $3.25 million per home, would make a mockery of the notion of delivering “affordable” dwellings. However, Prime Minister Mark Carney’s pledge to ramp up construction to 500,000 new homes per year by decade’s end—250,000 homes more than the market is expected to deliver—has inspired some thought on the conditions that would attract private capital to participate more broadly in the housing market to deliver both market value and affordable homes.
Here’s how a handful of experts we talked to see the potential—and the risks:
Real estate investors still searching for housing opportunities
“Investors want to monetize their investment, reach a general consensus on how to get there and to have the comfort in knowing there’s an exit,” says Jeremiah Shamess, who heads up the private capital investment group at Collier’s, where he and his team represent sellers of development land and commercial buildings. In the federal announcements, “I don’t think there’s a lot of potential yet.”
Mass housing programs on federal lands could, however, provide a bonanza for private developers who excel at low- and highrise projects.
“That would be very attractive for private developers who are really good at process-driven housing projects,” Shamess says. “But unless the federal government opens up small-scale projects all over the place, you’ll likely have preferred builders, three to five companies, do all the projects because they’re good at it.”
A focus on rental
With the government emphasizing rental over home ownership, a promise to reintroduce the Multiple Unit Rental Building (MURB) cost allowance program might be a winner, Shamess says. The tax incentive policy, which was in place from 1974 to 1981, allowed investors in new rental apartments (primarily low- and midrise) to lower personal taxes by claiming depreciation and related costs against other forms of income. Under MURB, builders added 200,000 units to Canada’s rental stock.
“Investors would be happy with that because it provides some income and cash flow,” he explains. “And if you have another business, you can spread the tax burden of the rental units across the debt yield of both assets. You’re looking at a net effective tax rate as much more attractive than a single entity.”
Shamess notes that Canada lacks a broad federal housing construction strategy that favours investment in the construction of affordable housing. He says the provincial Building Ontario Fund, established in 2024, could provide a model for a country-wide program. It focuses on five priority areas, including affordable housing.
The Building Ontario Fund is “going to start acting like a private equity fund,” Shamess says. “You might have a large-scale development site on a transit stop with multiple phases and potential to build thousands of units, and you’re stuck because of the market conditions today. The fund could come in and say, ‘We’re going to buy 50 per cent of the project, and we want 30 per cent of the project to be affordable and delivered first.’ They deliver affordable housing for the community and make a return on the investment for Ontario.”
Small multiplex development is booming
For Brandon Sage, a Toronto-based real estate investment advisor with LandLord Property & Rental Management, the federal government’s announcement on Build Canada Homes wasn’t coincidental to news that Canadian private housing starts had declined 16 per cent month-on-month in August.
“However, even though you may think overall development is low, we’ve never been busier, because we’re in a market segment that’s having its moment,” Sage says. “We see the best returns for buildings with four, five or six units with three bedrooms, family-friendly, and locations anywhere in the Greater Toronto Area.”
Sage explains that zoning changes have made a big difference in Ontario, where the province has mandated approval for three-unit buildings anywhere in the province. Toronto exceeds those allowances with four-unit buildings allowed anywhere in the city and developments of up to six units in downtown wards—or any ward that chooses to opt in. The increased density significantly reduces project risk.
“Compared to even three years ago, when only the most adventurous of our clients were willing to take on that kind of project, it’s become more mainstream,” he says. “But there’s still a lot of hurdles to clear.”
The Canada Mortgage and Housing Corporation’s (CMHC) Apartment Construction Loan Program has helped, he says. Applicants can build or convert non-residential buildings into sustainable rental housing and can qualify for up to a 100 per cent loan to costs at preferred rates, and up to a 50-year amortization period. Designs pre-approved by CMHC to support infill housing and “gentle density” make the application process easier.
“It puts less pressure on landlords to push for high rental rates,” Sage says. “Even if we try to get the points for affordability that earn preferential rates and amortizations, we can create affordable housing that gets locked in at those moderately lower rents for a fixed period of time and still get a decent ROI.”
A bigger role for the federal government in local zoning?
While division of powers seems to preclude the federal government from hefting its influence on local zoning, Sage says there’s historical precedent for the feds to get cozy with a more active role. During and after the Second World War, the federal government offered pre-approved designs for homes that could be assembled in as little as 36 hours and established a Crown corporation, Wartime Housing Ltd. (now CHMC), to finance them.
“They told Durham Region and Scarborough at the time, ‘We’re building this, you can’t stop us, and please put in roads,’” Sage says. “I wouldn’t be shocked if, within the next few years, or in the next budget, the federal government said, ‘Six units anywhere, and here are some pre-approved plans that every municipality must accept.’”
Sage says that some investor clients who are turning to multiplex investments consider them a store of intergenerational wealth.
“You can operate them as income products or sell them off as condo units after the mortgage has been paid off—an added layer of flexibility that could be revisited many years down the line,” he says. “You can also pass individual units down to your kids, who can operate them as landlords or sell them off.”
Public-private partnerships may flourish
There’s also potential in the large undertakings being considered by the federal government, says Arthur Salzer, chief executive officer and chief investment officer of Northland Wealth Management. He considers the formation of the MPO the government’s most important announcement, even without full project costs and disclosure, or their inclusion in a federal budget.
“The creation of the Major Projects Office indicates that public and private partnerships will play a significant role for Canada going forward,” he says. “The Build Canada program is part of this policy. It’s Canada’s version of ‘capitalism with Chinese characteristics’—aka corporatism. While the Build Canada program seems small initially, it could evolve into something much larger. While I don’t believe that extensive government involvement is, as Martha Stewart says, ‘a good thing,’ it appears to be the trend the Carney government is focusing on.”
He says Canada’s flagging commercial real estate market is more likely to be boosted by simple interest rate cuts by the Bank of Canada and the U.S. Federal Reserve over the coming months, not direct federal involvement.
“If yields can come down, then cap rates will also decline, and we could see many deals getting completed or refinanced,” he says.
A return to nation-building?
Alex Carrick, former chief economist with construction information and technology company ConstructConnect, says that Build’s focus on strategic planning and nation-building will provide opportunity for investors as it promotes an expanding slate of energy, critical minerals and transportation infrastructure projects.
“For 40 years, I’ve stressed that Canada needs to think strategically,” he says. “That means less dependence on the United States, looking at our place in the world, and knowing what actually drives the economy—not so much the stock market, whose performance seems increasingly disconnected from it.”
For investors in Canada, that means looking for opportunities in copper, uranium and other critical minerals, opportunities in energy exports, and the development of energy infrastructure to power AI data centres and an increasingly electrified economy.
“The proposed merger of AngloAmerican and Teck Resources Ltd. into a single copper giant is the type of deal that Canadian investors would also be able to participate in,” he says.
There’s no doubt that the federal government can build homes and megaprojects supporting resource and infrastructure development if it throws enough money at them. The Trans Mountain Pipeline, budgeted at $21.4 billion, was delivered by the feds at a price tag of $34.2 billion. The question for Canada’s Build program is whether the government has enough faith in private industry and market forces to offer the conditions that will allow motivated investors to do much of the heavy lifting.
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