A policy paper published in November presents a practical approach to addressing a significant obstacle to affordable rental housing in Ontario: early-stage financing. As the province approaches 2026, the progress of housing developments is increasingly hindered by insufficient funding for predevelopment and initial costs—expenditures that are essential for moving projects forward but frequently result in delays prior to construction.

Currently, affordable housing projects can access funding from four levels of government—federal, provincial, regional/county, and municipal—but most programs focus on construction and long-term debt. Only a handful of federal programs support predevelopment work, and these typically provide nominal amounts that fall short of covering full due diligence and feasibility costs.

The report, prepared by global consultancy Arcadis for WoodGreen Community Services and the Building Industry and Land Development Association (BILD), proposes a provincially backed Affordable Housing Revolving Fund (AHRF) that would provide low-interest loans to cover early-stage expenses such as design work, technical studies, application fees, and business case preparation.

“Right now, promising housing projects are stalling due to inadequate predevelopment and upfront investment capital,” said Mwarigha, Vice President of Housing Growth, Development & Asset Sustainability at WoodGreen. “The AHRF would give both non-profit and purpose-built rental developers the financial foundation they need to leverage long-term lenders and scale up mixed-income affordable housing in Ontario.”

According to a September 2024 study by Altus Group Economic Consulting, construction delays can cost between $2,673 and $5,576 per unit per month depending on the municipality. Streamlined access to predevelopment funding could shorten timelines by up to 18 months, reducing costs and accelerating delivery.

“Securing reliable predevelopment funding is challenging for many rental housing developers,” noted Tony Irwin, President & CEO of the Federation of Rental-housing Providers of Ontario (FRPO). “The AHRF model can bridge this gap so that private and non-profit developers can initiate more mixed-income rental housing that is urgently needed across Ontario.”

By offering flexible loan amounts, interest rates, and repayment schedules, the AHRF would reduce the equity shortfall that often prevents projects from advancing. Its self-sustaining design ensures repayments flow back into the fund, creating a continuous pipeline of capital for future housing developments.

“This model can play a pivotal role in meeting rental housing targets,” said Dave Wilkes, President & CEO of BILDGTA. “It provides certainty in the rental housing market for both private and non-profit developers to pursue viable mixed-income housing projects.”

“The Affordable Housing Revolving Fund gives non-profit housing providers the upfront support they need to secure reliable financing during the critical pre-development phase,” added Marlene Coffey, CEO of the Ontario Non-Profit Housing Association. “With predictable early-stage funding, our sector can scale up development, get projects shovel-ready faster, and help Ontario reach its goal of 1.5 million homes. It’s a practical tool that helps us do what we do best.”

Source: Arcadis

What’s next

The AHRF remains in its proposal phase, with several components requiring further assessment in a future business plan. Key considerations include:

• Overseeing body: likely a third-party entity backed by the Government of Ontario.
• Investment structure: how initial capital will be raised, whether outside investors are permitted, and terms of repayment and returns.
• Eligibility: whether the fund will be open to both non-profit and for-profit developers.
• Coverage: clear criteria for eligible costs and project phases.
• Financial parameters: appropriate loan amounts (proposed at 5–10% of project costs), feasible interest rates, and repayment timelines.
• Fund management: whether it could operate like an endowment to balance project financing with long-term sustainability, while safeguarding against early withdrawals and maintaining its revolving nature.

Despite recent legislative efforts by the Province to streamline approvals, the lack of easily accessible funding for upfront predevelopment work remains a critical barrier—one that continues to delay, and in some cases prevent, rental housing projects from ever reaching construction. As such, sector leaders are calling on the Ontario Government to move quickly with housing partners to launch the fund, suggesting it would offer a clear path to scaling affordable rental housing for the long term.

For a case study and examples of successful revolving funds, read the full policy paper at woodgreen.org/AHRF