In Canada's evolving housing landscape, innovative policies are key to addressing affordability challenges. A recent CIBC report highlights the potential revival of the Multi-Unit Residential Building (MURB) program, a tax incentive that could boost purpose-built rental supply. This strategic move aims to align private investment with national housing goals, offering more than just short-term relief. As a real estate brokerage focused on helping clients navigate market shifts, we explore how this revival could reshape opportunities for renters and investors alike.

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Understanding the MURB Program's Roots

The MURB program first launched in 1974 to stimulate rental housing construction during a period of economic uncertainty. It allowed investors to claim depreciation and soft costs on new rental units, reducing their personal or corporate taxes. This incentive spurred the creation of about 200,000 units between 1974 and 1981, equivalent to roughly 100,000 units annually when adjusted for today's population.

By channeling private funds into public priorities, the program effectively increased rental stock. However, it ended in 1981 due to high costs, with forgone tax revenue estimated at $2.4 billion. Critics noted benefits skewed toward high-income investors and developers, alongside concerns over overvalued projects. Despite these issues, the program's success in accelerating construction remains a benchmark for modern housing strategies.

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Why Revive MURB Now?

Canada's housing market faces persistent shortages, with regional divergences adding complexity. For instance, while Atlantic Canada sees record-high housing starts, provinces like Ontario and British Columbia grapple with elevated inventory and slower activity. The CIBC analysis suggests reviving MURB could signal government commitment to purpose-built rentals, especially as condo markets weaken in urban centers.

A key driver is the surge in rental demand, fueled by factors like falling construction costs and institutional investor interest. Recent data shows purpose-built rental starts surpassing condo starts since late 2023. If redesigned for today's environment, MURB could add significant units by offering tax advantages, such as increased capital cost allowances from 4% to 10% as proposed in recent budgets. This would encourage efficient projects, potentially incorporating zoning reforms and modular building incentives to streamline approvals.

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Balancing MURB with Condo Investments

One question the report raises is whether MURB can coexist with the condo sector. Historically, condo activity rose after MURB's cancellation in 1981 to fill the rental gap. Today, a revived program might draw investors away from condos due to its tax edges, but CIBC argues both can thrive.

In markets like the Greater Toronto Area, condos have driven over 60% of construction starts in recent decades, contributing to 80% of new rentals. Yet, with resale prices down 19% from their 2022 peak and unsold inventory declining, the sector is adapting. MURB could complement this by focusing on buy-and-hold strategies, shifting emphasis from speculative flips to sustainable rentals. This realignment might lead to larger, more livable units, benefiting long-term tenants and stabilizing markets.

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Potential Impacts on Housing Affordability

Reviving MURB isn't a complete solution, given modern hurdles like higher construction costs and longer approval times compared to the 1970s. However, combined with measures like lower development charges and enhanced CMHC financing, it could move the needle on affordability. CIBC estimates that, if implemented effectively, the program might attract institutional capital and boost rental stock in high-demand areas.

For renters, this means more options amid declining vacancy rates. Investors could see tax-efficient opportunities, particularly in purpose-built projects. As Canada's population grows, policies like this address the shift toward renting, where renter households increased 21.5% from 2011 to 2021—more than twice the rate of owner households.

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Looking Ahead

The strategic revival of MURB, as outlined by CIBC, goes beyond tax incentives, it's about fostering a resilient housing ecosystem. With consultations underway, the program could launch by 2026, prioritizing simplicity and clear eligibility to avoid past pitfalls. For those in the real estate space, this signals potential growth in rental investments, especially in underserved segments.

At Coldwell Banker Horizon Realty, we're monitoring these developments to guide clients through emerging opportunities. Whether you're exploring rental properties or investment options, understanding policies like MURB can inform smarter decisions. Contact us to discuss how these changes might impact your real estate goals in Canada's dynamic market.