Canada Housing Market

Thousands of new rental homes are coming to Toronto as part of a massive new housing investment announced by the federal government and the City.

On August 5, Toronto and Ottawa announced a partnership worth up to $2.7 billion aimed at accelerating construction of purpose-built rental housing across the city. The plan is expected to deliver more than 5,600 new rental homes across 18 housing projects.

And a significant portion of the new supply is expected to include housing designed to remain more affordable.

Around 1,800 homes will be delivered through City-led projects on publicly owned land, with a mix of affordable, rent-geared-to-income, rent-controlled and supportive housing.

The announcement comes as Toronto continues trying to increase rental construction at a time when its traditional condo development pipeline has slowed dramatically.

More Than 5,600 New Rental Homes Are Planned

The August 5 announcement covers 18 housing projects across Toronto, split between federally financed purpose-built rental developments and City-led projects on public land.

Altogether, the projects are expected to create more than 5,600 rental homes.

Reuters reported that the federal investment could total $2.7 billion over the next three years, as Ottawa attempts to increase rental supply and address housing affordability pressures in Canada’s largest city.

The City of Toronto is also committing another $703.7 million in funding and financial incentives to help move the projects forward.

That means this isn’t simply one giant government cheque being used to directly build 5,600 apartments.

The package combines low-cost construction financing, direct federal investment, City funding and financial incentives designed to make rental developments financially viable and get construction moving.

$1.8 Billion Will Help Finance More Than 3,700 Rental Homes

The largest specifically identified portion of the federal support is coming through Canada’s Apartment Construction Loan Program.

Ottawa is providing more than $1.8 billion in low-cost financing for nine Toronto housing developments. Those projects are expected to deliver more than 3,700 purpose-built rental homes.

Unlike a direct grant, this portion of the announcement consists of financing intended to lower borrowing costs for rental developers.

Construction financing has become an increasingly important issue for new housing projects as developers contend with high construction costs and difficult project economics.

By offering lower-cost financing, the program is designed to help projects that may otherwise struggle to move from approval into actual construction.

Another $310 Million Is Going Toward Housing On City-Owned Land

The federal government is also providing $310 million through Build Canada Homes for nine additional projects on City-owned land.

Those developments are expected to create more than 1,800 rental homes.

Unlike many traditional private rental projects, these City-led developments will include a mixture of:

• Affordable rental homes
• Rent-geared-to-income homes
• Rent-controlled homes
• Supportive housing

The City says the projects will be developed with public, non-profit and Indigenous housing providers.

That portion of the announcement is particularly significant because using publicly owned land can remove one of the largest costs associated with developing housing in Toronto.

Toronto Is Also Putting In $703.7 Million

The federal government isn’t the only level of government putting money toward the projects.

Toronto says it is investing $703.7 million through funding and financial incentives to help unlock the new housing developments.

The City is also expanding another program designed specifically to encourage purpose-built rental construction.

Under a new phase of Toronto’s Purpose-Built Rental Housing Incentives Stream, development charges can be deferred indefinitely for eligible rental projects where at least 20% of the homes are affordable housing.

Development charges can represent a significant upfront expense for housing projects, so delaying those costs can improve the economics of getting a new rental development built.

Toronto Is Trying To Get Rental Construction Moving

The timing of the announcement is particularly important for Toronto’s housing market.

For years, a large portion of Toronto’s new apartment supply came through the condominium market.

Investors would purchase pre-construction condos and later rent many of those units to tenants, effectively turning condo construction into an important source of rental supply.

But Toronto’s pre-construction condo market has slowed dramatically, reducing the number of new condo projects launching and beginning construction.

That has increased pressure on governments and developers to find other ways to build apartments specifically intended for renters.

Purpose-built rental developments differ from investor-owned condos because the entire building is designed and operated as rental housing from the beginning.

The latest $2.7-billion partnership represents one of the largest efforts yet to shift more Toronto housing construction toward that model.

Toronto Recently Received Another Major Housing Incentive

The announcement also follows another major government intervention aimed at getting housing construction moving.

Toronto, Ontario and the federal government recently announced a $1.5-billion Development Charge Reduction Program.

The program is intended to reduce development charges by approximately 40% to 60% for more than three years, while governments provide funding to help cover infrastructure costs associated with new development.

Combined with cheaper financing and rental-specific incentives, governments are increasingly trying to tackle one of the biggest problems facing Toronto’s housing market: projects that have been approved but remain difficult to build financially.

Will This Make Toronto Rent Cheaper?

More than 5,600 new rental homes sounds significant, but it doesn’t necessarily mean Toronto rents will suddenly become inexpensive.

Housing affordability depends on far more than a single group of developments.

Population growth, employment, interest rates, construction costs, household incomes and the total number of rental homes available can all influence what tenants ultimately pay.

And most of the 5,600 units announced will not necessarily be classified as deeply affordable housing.

The largest portion consists of purpose-built rental homes supported through low-cost federal financing.

However, more than 1,800 homes in the City-led portion of the plan are expected to include a mixture of affordable, rent-geared-to-income, rent-controlled and supportive housing.

The larger impact could come from simply adding thousands more long-term rental units to Toronto’s housing stock.

Increasing supply doesn’t guarantee falling rents, but having more homes available can help reduce pressure in a market where renters are competing for limited housing.

Governments Are Betting Big On Purpose-Built Rentals

The announcement also highlights a major change happening within Toronto real estate.

During much of Toronto’s housing boom, new condo construction was one of the city’s dominant forms of apartment development.

Now, as the pre-construction condo market struggles, purpose-built rental housing is becoming an increasingly important part of Toronto’s future housing supply.

The August 5 agreement will support 18 projects and more than 5,600 rental homes, backed by billions of dollars in financing, funding and municipal incentives.

For a city struggling with both high rents and a slowdown in new housing construction, governments are clearly hoping that making rental projects cheaper and easier to finance can keep more cranes in the sky.

Whether it will be enough to materially change Toronto’s affordability problem remains to be seen.

But one thing is clear: billions of dollars are now being directed toward building thousands of new Toronto rentals.

References

City of Toronto, City of Toronto, Government of Canada announce new partnership, securing up to $2.7 billion to build new homes, August 5, 2026.

Reuters, Canada to invest C$2.7 billion to build rental housing in Toronto, August 5, 2026.