Canadian Bank Loans for Real Estate Development Surge: What’s Behind the Boom?

Bank loans to Canadian real estate developers have more than doubled in just one year, signaling a dramatic shift in the country’s housing and finance landscape. In the first quarter of 2025 alone, chartered bank loans to real estate developers soared to $85.1 billion, up a staggering 105% year-over-year—an unprecedented $43.7 billion increase.

So, what’s behind this explosion in lending? And what does it mean for affordability, taxpayers, and the long-term health of Canada’s housing market?

Why Are Canadian Banks Suddenly Lending So Much to Developers?

Historically, Canadian banks have been cautious about real estate development loans due to the high risk of default during construction. This reluctance often pushed developers into private lending markets with significantly higher interest rates.

But that landscape began shifting dramatically in 2022 and 2023, as federal housing policy took center stage. In an effort to accelerate housing construction, the Canadian government—primarily through the Canada Mortgage and Housing Corporation (CMHC)—introduced and expanded several programs that made development lending far more attractive to traditional banks.

Government Programs Behind the Boom

Two key federal initiatives are directly responsible for the recent surge in bank lending to developers:

1. Apartment Construction Loan Program (ACLP)

Originally launched to support purpose-built rental construction, the ACLP was significantly expanded in 2023. The program provides loan guarantees for later-stage financing, which makes banks more comfortable offering early-phase capital. This de-risks projects for lenders while funneling more money into the development pipeline. To learn more about the ACLP program, please click here

2. Mortgage Loan Insurance (MLI) Select

Enhanced between 2022 and 2023, MLI Select increased maximum leverage limits and raised the project cap to $1.5 billion, providing a massive financial backstop for large-scale developments. With lower risk and higher borrowing limits, banks began competing for developer clients, fueling the dramatic increase in lending volume. To learn more about the MLI Select program, please click here 

Are Taxpayers Picking Up the Tab?

While these programs have catalyzed construction, they also transfer much of the financial risk from banks and developers onto Canadian taxpayers. In effect, public dollars are being used to underwrite private-sector projects, which critics argue could come at a cost to ordinary Canadians.

Even if the risk of widespread defaults remains low, the broader economic consequences are real. Increased public borrowing to support housing initiatives contributes to higher overall interest rates, raising the cost of credit for families, small businesses, and first-time homebuyers.

Is This Really Creating Affordable Housing?

Despite government branding around "affordable housing," many of these federally backed projects only require 20%–30% of units to be priced below market. The majority of units remain at market—or even luxury—rates, particularly when institutional landlords are involved.

Some housing advocates argue that this model may actually accelerate rent inflation, especially in urban centers where new construction is dominated by large developers. Rather than fostering affordability, these programs may simply inflate asset prices and consolidate ownership among fewer, bigger players.

Longer-Term Risks and Policy Questions

The policy direction also raises concerns about over-leveraging and long-term risk. Recent changes now allow developers to stretch repayment timelines up to 55 years, increasing exposure to market volatility and prolonging debt burdens.

As Canada continues to use taxpayer-backed loans to stimulate housing construction, some experts are asking: Who really benefits? And are these policies solving the housing crisis—or deepening it by inflating development margins while sidelining truly affordable, community-led solutions?

Final Thoughts

Canada's strategy of using federal programs to supercharge bank lending for real estate development has undoubtedly increased construction starts—but at what cost?

• 🏗️ More buildings are going up.

• 💰 Banks are lending like never before.

• 💡 But affordability remains elusive.

As policymakers double down on these tools, Canadians should ask whether a housing system fueled by debt and backstopped by taxpayers is a sustainable or equitable path forward.