Filed on 16-Oct-2025, 09:00 EST via CMHC

The federal government has unveiled a $136 million investment in Ottawa’s housing supply, financing the construction of 316 new rental units through the Apartment Construction Loan Program (ACLP). The announcement, delivered by the Canada Mortgage and Housing Corporation (CMHC), is part of Ottawa’s broader effort to scale up rental housing across Canadian cities at a time when affordability pressures remain intense.

The project is expected to directly support middle-income Canadians, who have been most affected by record-high borrowing costs and persistently low rental vacancy rates. With this investment, Ottawa joins a growing list of cities where the federal government is using low-cost financing to accelerate rental construction under the National Housing Strategy.

Why Ottawa?

Ottawa’s housing market has experienced significant stress in recent years. Rents for two-bedroom apartments have climbed more than 20% since 2020, while the vacancy rate has stayed below 2%. Population growth, driven by immigration and inter-provincial migration, has added further pressure on housing supply.

For policymakers, the challenge is twofold: to stabilize affordability in the short term while ensuring long-term growth in housing stock. The 316-unit project funded through ACLP is intended to address both goals, adding sustainable, multi-unit housing in a market where supply has not kept up with demand.

About the ACLP

The Apartment Construction Loan Program provides low-cost, government-backed loans to developers and builders, enabling them to break ground on rental projects that might otherwise stall due to financing costs. In Ottawa, the $136 million commitment is expected to leverage additional private investment, multiplying the project’s impact on housing supply.

The program has been a cornerstone of the National Housing Strategy, designed to deliver more than 100,000 new rental units nationwide by 2030. By offering flexible repayment terms and lower interest rates, the ACLP reduces the financial risk for developers, accelerating construction timelines.

Impact on Affordability

Housing advocates have welcomed the announcement, noting that adding new rental supply can help ease rent inflation. While the units will primarily target middle-class Canadians, the ripple effect of increasing stock is expected to benefit broader affordability.

For mortgage borrowers, the timing of this investment is significant. With interest rates still elevated—despite recent Bank of Canada cuts—many households have postponed buying homes, turning instead to the rental market. This surge in rental demand has further tightened conditions, making new supply crucial.

In practice, the addition of 316 units will not solve Ottawa’s housing crunch alone. But combined with similar investments in Burnaby, Toronto, and Atlantic Canada, the federal government hopes to create a pipeline of projects that slowly ease systemic pressure.

Broader National Strategy

This Ottawa announcement is part of a larger pattern of housing initiatives rolled out in 2025. Recent commitments include:

$763 million for nearly 1,300 rental units in Burnaby, BC under ACLP.
Repair funding for 150 rental homes in the Northwest Territories, aimed at preserving community housing.
Upcoming announcements in Saint John, New Brunswick, expected to mirror Ottawa’s model of rental construction financing.

Together, these investments illustrate Ottawa’s shift toward supply-driven housing policy, moving beyond demand-side incentives like first-time buyer credits.

Risks and Challenges

Despite optimism, there are risks. Rising construction costs—particularly for materials like lumber and steel—could erode affordability gains. Developers may also face labour shortages, delaying completion. Additionally, while ACLP loans reduce financing costs, developers are still navigating high market interest rates and cautious bank lending.

Critics argue that without stronger rent control measures, new units may not remain affordable in the long term. The government has countered that ACLP loans include affordability requirements to ensure that units remain accessible to middle-income families for at least 10 years.

Outlook

For Ottawa residents, the 316-unit project signals much-needed relief, though its impact will take years to materialize. For the mortgage market, the announcement underscores a structural shift: as housing policy prioritizes rental supply, ownership demand may cool slightly, affecting mortgage growth.

Still, as Canada heads into a critical period of mortgage renewals in 2025–2026, with many households facing higher payments, additional rental options could provide an important safety valve.

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