Well-meaning efforts to curb foreign speculation have made it difficult for anyone to invest in building new homes. Let’s make it easier for people to get the financing they need to build.
Builders need predictable rules and investment incentives to create the housing supply Canada desperately needs. We must create a pathway for responsible capital while ensuring investments build the homes Canadians need.
By channeling capital toward new construction, we can focus on creating new units and housing types that will create a competitive environment, bringing down prices, and benefiting all Canadians.
Goals
Reverse the policies that have inadvertently strangled housing supply by preventing legitimate investment in new construction. Targeted changes will allow investors to finance new housing while ensuring these properties contribute to resolving our housing shortage. The goal:
- Redirect at least $20 billion in global capital toward Canadian housing construction within 5 years
Background and Motivation
Canada desperately needs more homes but our regulatory environment actively prevents investment in building them. This contradiction lies at the heart of our housing crisis.
We’ve implemented well-intentioned but ultimately counterproductive measures aimed at curbing speculation. In 2023, Canada enacted the Prohibition on the Purchase of Residential Property by Non-Canadians Act – recently extended until 20271. We’ve added anti-flipping taxes that treat all short-term property sales as speculation regardless of circumstances.
For example, British Columbia recently enacted 20% anti-home-flipping tax applies to properties held for less than a year2. These policies were created with good intentions – to protect housing affordability by discouraging speculation. But these blunt instruments often fail to distinguish between harmful speculation and investments that increase housing supply. Yes, we’ve reduced some speculative purchases that would leave homes empty, but we’ve simultaneously cut off capital that would build the housing we desperately need.
Most new home construction needs pre-sales and/or substantial equity in order to go ahead. Yet, the current policies stifle the ways in which builders can raise the necessary funds and then hamper their ability to make the projects viable.
The consequences are evident in the numbers. Housing investment is collapsing precisely when we need it most. Real residential investment is still below its pre-pandemic level driven by a decrease in housing sales and starts3.
Multi-unit housing – the exact type of development that provides affordable options in our cities and is most environmentally efficient – has suffered most dramatically. According to the Canadian Home Builders’ Association (CHBA), the sentiment among builders for multi-unit housing is cratering as the multi-family Housing Market Index fell to a record low of 22.0 in the fourth quarter of 2024, dropping 6.5 points from the previous quarter and 7.1 points from Q4 20234. According to the January 2025 data, there has been a decline of $424.2 million in the multi-family component across Canada. Specifically for Ontario, where availability is some of the worst in the country, multi-family permits decreased by $738.5 million5.
Overall housing starts nationwide decreased by 7% in 20236. And, while there seemed to be some limited recovery over the following year, in December 2024, the seasonally adjusted annual rate for housing starts fell to 231,468 units – a 13% drop from the previous month7. This lack of new supply and further anticipated drops in starts, translates directly to a worsening housing crisis for Canadian families.
Part of the solution lies in targeted reforms that maintain protections against harmful speculation while reopening pathways for investment that actually builds housing. By carefully redesigning our approach, we can ensure foreign capital works for Canadians by adding to our housing supply rather than competing for existing homes.
Real-World Solutions
Other jurisdictions have successfully balanced investment incentives with housing availability. Their experiences offer valuable lessons for Canada’s approach:
Singapore implemented a differentiated tax system for residential real estate that channels investment toward national housing goals. Foreign buyers face a 60% Additional Buyer’s Stamp Duty on existing properties but receive substantial reductions when purchasing new developments that add to housing supply8. This approach has successfully maintained strong foreign investment while ensuring it contributes positively to Singapore’s housing ecosystem.
Australia exempts foreign investors from certain restrictions when they invest in new housing developments9. Their Foreign Investment Review Board applies different standards to investments that increase housing supply versus those that simply transfer ownership of existing properties. This nuanced approach has successfully directed billions in foreign capital toward creating new housing while maintaining controls on speculation in established neighbourhoods.
New Zealand initially implemented broad foreign buyer restrictions similar to Canada’s but later refined their approach10. They now allow overseas investment in multi-unit developments above a certain size, recognizing that larger-scale housing projects provide substantial public benefit. The key insight was distinguishing between investments that add housing stock versus those that merely transfer ownership.
What Needs To Be Done
We will implement a balanced policy framework that distinguishes between speculation and productive investment in housing. Our approach maintains protections against harmful market activities while creating clear pathways for capital that builds housing Canadians need.
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Create a foreign investment exemption for new housing development. Modify the Prohibition on the Purchase of Residential Property by Non-Canadians Act to permit foreign investment in new housing developments with 4+ units, provided units are made available for occupancy through either ownership transfer to Canadians or rental availability. This maintains protections against speculation in existing housing while channeling global capital toward increasing supply.
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Establish a graduated speculation tax system based on property use. Replace the current one-size-fits-all approach with a tax system that distinguishes between different property uses. Properties held vacant would face the highest taxes, while properties made available for rent would receive substantial relief even if held for shorter periods. This ensures investments contribute to housing availability while discouraging properties being left empty.
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Require banks to offer interest rate capped pre-construction mortgage programs. Currently, if interest rates go up, a purchaser who is qualified and buys a pre-sale unit may no longer qualify on the purchase when the project is completed even if their financial circumstances did not change. Let’s require Canadian banks to always offer financing options that guarantee interest rate maximums for qualified buyers who purchase pre-construction properties for up to three years to completion known as “24-36 month capped rates from time of purchase” alongside traditional financing options. This can provide certainty for both homebuyers and developers during the multi-year construction period.
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Direct incentives for investors to areas of need such as designated neighbourhoods for revitalization and efficient land use on public transit etc. Similar to Special Economic Zones, identify areas that are most in need of new housing and work with provinces and municipalities to remove all restrictions on investment in those areas. Use the excess funnelled capital to stimulate growth and create affordable, high quality housing.
Success can be measured through quarterly housing start metrics, vacancy rate monitoring in key urban centres, and direct measurement of capital inflows to new housing projects. A new intergovernmental housing investment council will ensure accountability across jurisdictions, with provincial and federal officials coordinating implementation. This transformation will begin immediately, with legislative changes enacted within 6 months.
Common Questions
Won’t allowing foreign investment drive up housing costs? This proposal’s focus is specifically on new housing development, not existing homes. By channeling investment toward creating additional supply rather than competing for existing properties, these changes will ultimately lower costs through increased housing availability. Investment is directed exclusively to creating new units, addressing our fundamental supply shortage.
How will you prevent these properties from sitting empty? The graduated taxation approach creates strong financial incentives for property use. Vacant properties will face significant tax burdens while those made available as housing receive substantial relief. Additionally, development exemptions require that units be made available either for sale to Canadians or as rental housing. This ensures investment translates to actual housing, not empty assets.
Won’t these changes just benefit wealthy investors? The primary beneficiaries will be Canadian residents who gain access to housing that wouldn’t otherwise be built. The average Canadian doesn’t care who financed the apartment building they live in – they care that it is stable housing supply and at an affordable rent. By increasing supply, these policies benefit everyone needing housing regardless of ownership structure. Additionally, construction jobs created will provide employment opportunities across skill levels from the labour force to the design and planning community.
Will this approach be effective with higher interest rates? Yes – a pre-construction mortgage guarantee program specifically addresses this challenge by providing certainty during the development period. Higher rates have indeed reduced housing investment, but our proposed changes create alternative pathways for financing that are less interest-rate sensitive, particularly for purpose-built rental where long-term income stability matters more than short-term rate fluctuations. We know financial institutions have the tools to “back stop” against the risk of rising rates.
How will you ensure this doesn’t just benefit major cities? The national framework includes specific provisions for different market types. While the housing crisis is most acute in major urban centres, this approach allows for regional customization including enhanced incentives for development in smaller communities and mid-sized cities. The transparency requirements and beneficial ownership registry will apply nationwide, ensuring consistent protection against short-term speculation across all markets.
Conclusion
Canada’s housing shortage demands immediate, decisive action. By targeting the policies currently strangling investment in new development, we can unlock billions in capital that will build the homes Canadians desperately need. These reforms maintain important protections against harmful speculation while creating clear pathways for investment that increases housing supply. The result will be more homes, more jobs, and ultimately more affordable housing options for Canadians.
