Canada faces a housing supply and affordability crisis that spans both ownership and rental markets. According to a CMHC report in 2023, meeting affordability requires adding some 3.5 million new housing units by 2030—a target that equates to roughly 500,000 units per year. Yet in 2023, Canada built only 56 per cent of that annual target. This supply gap is now reflected in long waiting lists, escalating rents and swelling rates of homelessness. CMHC’s 2024 annual report underscores that rapid population growth, elevated mortgage rates and ongoing rental housing shortages continue to shape the affordability landscape.
The federal government, alongside stakeholders, has rolled out numerous tools under the National Housing Strategy to counter these challenges, with notable programs like the Apartment Construction Loan Program, Affordable Housing Fund and Housing Accelerator Fund supporting the creation and repair of tens of thousands of units in 2024.
Within this framework, MLI Select—CMHC’s Multi-Unit Mortgage Loan Insurance program—is a key financing lever designed to incentivize rental housing development by offering reduced premiums, longer amortizations and other benefits tied to affordability, accessibility and energy or climate performance. The innovative product is structured to reward projects that deliver social and environmental benefits, including affordable rents, accessibility and energy or climate-first design. Developers accrue points based on their alignment with these priorities, which translate directly into lower mortgage insurance premiums and longer amortization periods, improving capital structure and cash flow for rental projects.
Importantly, combining MLI Select with complementary tools such as the Apartment Construction Loan Program, can amplify financial impact. While ACLP provides low-cost construction funding, MLI Select secures longer-term viability through insurance incentives that reduce financing costs over the lifetime of the project. In the context of strained supply, such tools are vital. CMHC expects that without similar incentives, affordability targets will remain out of reach. MLI Select, by aligning financial incentives with social outcomes, makes purpose-built rental developments more feasible and compelling for developers.
Bonding challenges and who they affect
As of late 2024, CMHC significantly tightened its enforcement of surety bond requirements under MLI Select—a move with implications for rental project timelines and feasibility, particularly for developer-builders. Surety bonds, including performance and labour/materials payment bonds, are now mandatory for MLI Select projects, even where developers self-perform construction or hire a general contractor. Historically, this requirement was not as frequently enforced; for now, CMHC applies it uniformly across projects over 25 units.
This requirement particularly affects three key groups:
Self-Performing Developers: These developer-builders now face the full weight of underwriting and surety risk without traditional contractor intermediaries to assume it. It can be difficult to place this type of business.
Developers Working with General Contractors: These firms must now assess and validate their contractors’ bonding capacity. Prequalification accuracy is critical; letters from brokers alone may not suffice. Only letters from surety companies with detailed track records carry weight.
Specialty Sub-trades: Many subcontractors are being asked to post bonds. Without prior bonding relationships, they must establish new bond facilities, often under tight timelines and unfamiliar requirements.
When bonding is not properly addressed early in project planning, CMHC may delay or withdraw funding, costing developers millions and disrupting project delivery, presales and unit availability.
The value of industry experience
Navigating the world of surety bonds requires a partner familiar with CMHC’s requirements, particularly for developer-builders. The right support can make a significant difference throughout the MLI Select bonding process, guiding clients through each stage of compliance to enable smoother financing and timely project delivery. A strategic partner who cultivates strong relationships with surety providers and engages directly with underwriters can significantly streamline the bonding process. Proactive involvement—shaping compelling financial narratives, assembling thorough documentation, and anticipating underwriter needs—helps minimize friction, accelerate approvals, and safeguard project timelines.
When approaching surety firms, it’s essential to work with someone who does more than manage paperwork. The right partner will collaborate with you to package financials effectively, communicate the project’s value and viability, and foster underwriter confidence. This level of engagement can be the difference between a delayed project start and a successful launch.
Canada’s housing affordability crisis demands not just ambition, but action. CMHC’s MLI Select presents a powerful tool for developers aiming to deliver socially responsible rental housing, offering incentives that align with affordability, accessibility and energy efficiency. Yet the recently enforced surety bond requirements can pose complex roadblocks. Early engagement, strategic underwriting and expert surety guidance are now vital prerequisites for MLI Select success. With the right partner, however, you can turn policy challenges into financing opportunities and new housing for Canadians.
Slava Kolmatskyy is vice president of Surety at NFP Canada. Find out more at nfp.ca
