CMHC is expanding access to mortgage insurance for building new suites on existing properties

Canada’s escalating housing crisis and continuing supply challenges have seen a growing focus on the development of secondary suites on existing properties, with last week marking the launch by the government of a new insured mortgage refinancing product to spur that type of construction.
First unveiled in last year’s federal budget, that new Canada Mortgage and Housing Corporation (CMHC) offering allows borrowers who already own their properties to secure a loan-to-value of up to 90% of the property value to add further units to their homes.
The borrower (or a close relative) must already be occupying one of the current units and any extra units constructed must not be used as a short-term rental, with a maximum of four dwelling units including the existing unit and a maximum “as improved” property value of under $2 million.
Effective as of January 15, that policy aims to encourage densification and mitigate the overall sluggish pace of homebuilding across the country.
Which areas will see the biggest uptake of financing for secondary suites?
The construction of so-called laneway homes appears to be seeing strong interest in major cities and pricier markets. Anthony Zhang (pictured top), a mortgage broker based in Vancouver, told Canadian Mortgage Professional that many borrowers were considering adding units to their property as a means of dealing with escalating mortgage costs.
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“I’ve gotten inquiries in the last few months talking about this – and some clients are really thinking about doing a refinance or any financing option to build a laneway house to have more space for rental, to generate incomes to help with the mortgage payment,” he said. “Some clients, because of high payments, are changing the house layout to get more rental income.”
British Columbia has recently clamped down on the use of non-primary residences as Airbnb units, meaning some owners in Vancouver have decided to renovate their main property to be able to use part of it as a short-term rental. “As long as it’s a primary home, it’s legal,” he said. “So some clients are changing half of the house to become an Airbnb unit and then trying to get more incomes to get prepared for the high mortgage payments.”
Housing starts ticked upwards by just 2% last year compared with 2023, according to CMHC’s latest data, with the pace of 245,120 units constructed last year falling well short of what’s needed to restore affordability by 2030.
Vancouver, Toronto, and Ottawa all saw housing starts decrease, offsetting gains in Calgary, Edmonton and Montreal and contributing to an overall 3% dip in housing starts across Canada’s six biggest metropolitan areas.
Affordability still a big challenge despite falling interest rates
While mortgage rates have slid in recent months thanks to Bank of Canada rate cuts, affordability remains a significant challenge for many Canadians, meaning the development of secondary suites is a viable option for them to boost income in the face of tight budgets.
“I see that some people actually couldn’t afford it when the rates skyrocketed. Most of them went through with [keeping their homes] but they were sacrificing a lot of savings and they limited their budget for entertainment or travel to get through the last two years,” Zhang said.
“Especially those who are on a variable mortgage payment – they suddenly had their payment doubled within a few months. They definitely sacrificed a lot... So people are looking for options to get more income, to increase affordability – Airbnb, rental income, all kinds of stuff.”
While many homeowners will only sell their property as a last resort – and prefer to exhaust all other options before doing that – Zhang said downsizing can prove a viable choice for Canadians who’ve found their budgets stretched by higher payments.
“Sometimes if you have a large mortgage, the interest payment is actually more than your rent. So there’s nothing wrong, if you just can’t really afford it at this moment, selling or downsizing is still an option,” he said.
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