Purpose-built rental construction is driving residential activity across Western Canada right now, but the momentum heading into 2026 looks less certain. Saskatchewan set new records through the first three quarters of 2025. Manitoba saw exceptionally strong starts. Alberta pushed ahead of British Columbia to become Canada's most active housing market, fueled by people moving in and needing places to live.

And yet, even with all that activity, warning signs are flashing. British Columbia's housing starts cooled in the third quarter despite rental construction hitting record highs. That combination, cooling overall activity while rental stays strong, matters more than it might seem.

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The Rental Construction Renaissance

Vancouver-area firm Rennie & Associates called the current moment a "renaissance" for purpose-built rentals. Makes sense when you look at the numbers. Metro Vancouver saw almost no rental construction for nearly 30 years, according to Rennie senior economist Ryan Berlin. Supply of purpose-built rental homes fell 40% on a per-capita basis from 1990 levels. Now the market is trying to catch up fast.

What drove this surge? Mainly lower-cost financing and insurance through Canada Mortgage and Housing Corporation programs. The Apartment Construction Loan Program and MLI Select have been responsible for roughly 90% of all multi-family new construction in Canada, said Nadeem Keshavjee, founder and president of GreenBirch Capital. His Calgary-based firm has financed around 300 MLI Select approvals over the past four years.

But CMHC is pulling back. The agency is becoming more stringent in how it assesses deals. "I think in the new year we're going to see more financing shift to the non-CMHC market," Keshavjee noted. That shift means financing will likely cost more, leverage won't go as high, and partnerships or joint ventures will matter more than ever in getting projects off the ground.

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How The Prairies Led The Way

Saskatchewan nearly doubled its housing starts in early 2025, up 94% year-over-year through April. Alberta's starts rose 23% over the same period, with single-detached and multi-unit projects both contributing. Manitoba added 38% more starts. These provinces weren't just participating in the housing market; they were driving it.

By October, Alberta accounted for roughly one-quarter of all Canadian housing starts, with 11,470 starts in Q1 alone. Purpose-built rental complexes in Calgary and Edmonton led the way. Saskatchewan's 1,295 starts nearly doubled from the prior year, with many six-storey wood-frame apartment blocks popping up in Saskatoon and Regina.

Manitoba continued a three-year upward trend with steady single-detached and townhouse activity. The Prairie provinces collectively produced 24% of national starts, up from 17% a year earlier.

Meanwhile, Ontario's starts fell 38% year-over-year, reflecting financing challenges and project approval timing. British Columbia saw a 30% decline, though smaller interior markets like Kelowna kept launching wood-frame townhome clusters.

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CMHC Programs Face Major Changes

Changes started rolling out through 2024 and 2025, shifting programs away from pandemic-era social incentives toward tighter risk management. In July 2025, CMHC introduced premium discounts for projects achieving affordability, accessibility, and energy efficiency goals. Premium schedules were updated to encourage specific construction types, like seniors housing.

The big change came when CMHC clarified in February 2025 that MLI Select would only support properties with at least five rental units in the same building on the same lot. Previously, investors could bundle adjacent single-family or townhouse properties into one application. That's over now.

The move left some investors scrambling. Edmonton investor Tawfiq Abdulsamad told the Globe and Mail he bought three detached homes with basement apartments, six rental units total, expecting CMHC to approve his MLI Select application. When CMHC rejected it, he was blindsided. "I heard from other people that had purchased the detached product in the past that the CMHC just started declining without saying anything."

Jake Steinman, CEO of Meta Realty, said his firm had at least 10 deals covering 100 units, valued between $35 million and $40 million, suddenly in jeopardy. "No one ever thought CMHC was going to pull the rug."

CMHC denied the change was a policy shift, calling it a "clarification." Spokesperson Monique LaPlante said they'd seen a slight increase in complex projects where properties with fewer than five units were being bundled. "Our clarification sought to provide an enhanced understanding of our expectations."

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Build Canada Homes Steps In

One potential offset to CMHC's tightening is the new Build Canada Homes agency. Backed by up to $13 billion in federal funds, the agency is charged with building non-market housing and providing financing to developers. Initial focus includes six Canada Lands Co. sites.

Edmonton's Griesbach neighborhood is designated for 2,400 units of row and multi-family housing, beginning with 355 homes. The Winnipeg site, developed in partnership with Treaty One First Nations, projects 2,100 homes. These projects support the federal push to double the pace of housing construction through non-market homes.

Jessica Toppazzini, vice-president and managing director for Western Canada at CMLS, said Build Canada Homes is still in early stages. "Like the rest of the industry, we're waiting for more detail on how the program will be implemented and how it could work alongside existing CMHC tools. The goals are ambitious, and we're hopeful the design will create pathways for the private sector to support more affordable rental supply."

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Construction Costs And Market Dynamics

Holding costs bite hard right now. With so many development sites returning to market after court-ordered sales of residential land, some owners see purpose-built rental as a way to generate cash flow rather than sell at a discount.

"Developers that have purchased sites over the last few years, many of whom planned to do condo projects, because the condo market is so soft, they are pivoting over to rental," Keshavjee said. "They're forced to look for ways to develop what they do have. Building is one of the few pathways they have without taking a significant loss. I think you'll start to see more of that in the new year."

Fortunately, construction costs have come down across the West, making it more viable for developers to start building. That, combined with demand for housing, drove Prairie markets while Vancouver developers wrestled with entitlement processes and rising development levies.

Altus Group reported a 61% decline in residential land sales in Metro Vancouver in the first half of 2025. "Developers were likely to delay new projects due to the softening demand in both the condominium and rental sectors, and the higher cost of building materials," Altus Group noted.

Consumer behavior matters too. If presales have been weak, stalling project launches in Vancouver, resale volumes stayed steady. "There continues to be a lot of housing demand; consumers are demanding housing, and one of the ways we know that is because the resale market is performing well," Peter Norman, vice-president and economic strategist at Altus Group, observed in October 2024.

Greater Vancouver Realtors data showed sales in the first 10 months of 2025 totaling 20,417 units versus 20,837 in the same period of 2019, suggesting activity remained close to pre-pandemic baseline levels despite all the market disruption.

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Immigration Policy Changes The Long-Term Picture

Multiple policy changes are hitting the industry, particularly around immigration, as new construction stalls. These point to future adjustments in what developers build to match slower population growth and address the need for family-sized units.

"It's really up-ending the way we deliver new housing to market, the kinds of financial models we have," Norman said. "What we're facing with the new immigration policy is dramatically lower levels of population growth, not just this year, which will probably be a population decline coming forward in Canada, but also over the next 10 and 20 years. We're going to see a lower pace of population growth and that's what we're going to have to adopt and adapt to going forward."

Canada added 3.85 million people between 2019 and 2025. The federal government curbed immigration in 2024, with temporary resident outflow reaching over 660,000. Increased tightening and outflow are expected to continue through 2025 and beyond.

Without the same population pressures, rental demand might ease in ways that shift developer calculations about which projects pencil out financially. Purpose-built rental made sense when population growth seemed limitless. With that growth moderating, the math changes.

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What Comes Next For Developers

Optimism picked up in the third quarter of 2024, with the annual Emerging Trends in Real Estate report from PricewaterhouseCoopers and the Urban Land Institute flagging opportunities for well-capitalized developers.

All players in the residential market appear open to deals, driving down values across the board. But the financing environment remains tricky. CMHC's 2025 updates to multi-unit mortgage loan insurance, including the move to standardized risk-based premium approaches and new MLI Select premium discount schedules tied to affordability and efficiency outcomes, are influencing how rental projects get structured.

One of the biggest potential changes is CMHC refocusing its activities on supporting homebuyers while the new Build Canada Homes agency assumes responsibility for working with housing developers. How that split plays out will determine whether financing becomes easier or harder for rental construction.

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Regional Markets Showing Different Trajectories

Montreal posted a 104% year-over-year increase in housing starts in October 2025, driven by significantly higher multi-unit starts. Vancouver recorded a 36% decrease due to fewer multi-unit starts. Toronto declined 42% with both multi-unit and single-detached starts considerably lower.

Calgary saw a 21% increase in total starts through early 2025, while Edmonton experienced a 12% decline. Nova Scotia saw housing starts more than double year-over-year, reflecting strong multi-unit growth.

These regional variations tell you where momentum sits right now. Prairie markets stayed hot. Ontario and British Columbia cooled significantly. Quebec showed surprising strength. Atlantic Canada posted gains from a smaller base.

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Looking Ahead To 2026

Purpose-built rental drove the 2024-2025 boom across Western Canada, but conditions are shifting. CMHC programs that funded most of that activity are tightening. Build Canada Homes might fill some gaps, but it's too early to know. Immigration policy changes will moderate population growth and rental demand over the next decade.

Construction costs coming down helps, but only if developers can secure financing at reasonable terms. The shift from CMHC to private or alternative lenders will increase costs and reduce leverage, making some projects pencil out differently.

Developers who planned condo projects and pivoted to rental because the condo market softened will continue building what they can to avoid losses. But new projects launching in 2026 will face a more challenging financing environment than what existed through 2024.

Regional markets will keep diverging. Calgary, Edmonton, Saskatoon, and Winnipeg look stronger than Vancouver or Toronto for rental construction. Montreal keeps surprising people. Atlantic markets are small but growing.

The rental construction renaissance isn't over, but it's entering a new phase. The easy financing is gone. The massive population growth is moderating. What comes next depends on how quickly Build Canada Homes scales up, whether CMHC finds ways to support more projects despite tighter risk management, and whether construction costs stay manageable.

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Expert Guidance For Market Shifts

Navigating these changes requires local expertise and market knowledge. Whether you're looking to buy, sell, or understand what's happening in the Okanagan real estate market as these broader trends play out, having knowledgeable advisors makes a real difference. Coldwell Banker Horizon Realty brings experience helping clients understand complex market conditions and make informed decisions. Reach out to discuss your specific situation and how these shifting dynamics might affect your real estate goals.