Some of Canada’s largest banks and residential developers are urging Ottawa to overhaul how housing projects are financed, warning that rising development costs and regulatory uncertainty are driving private capital away from the sector.

The National Housing and Investment Initiative, whose members include Canada’s five biggest banks and developers such as Brookfield Residential, Minto Group, Mattamy Homes and Cantiro, is calling for measures ranging from federal guarantees for condo construction loans to tax incentives for rental housing investment. 

The 29 recommendations, released Tuesday, come five days after Ottawa tabled the latest federal budget, which proposed extending its foreign homebuyer ban on existing residential properties until January 2029, while exempting new homes. The ban, introduced in 2023 amid concerns that foreign investment was driving up housing prices, was initially intended to last two years but was later extended to 2027.

The proposed exemption for new homes aligns with one member of the coalition’s central demands. In a pre-budget submission, the group of developers, known as the Large Urban Centre Alliance, had urged Ottawa to adopt an approach similar to Australia’s, where a similar carve-out already exists. The group had made a similar appeal in 2025, before Brookfield Properties (recently rebranded as BGRE) the effort this year. Brookfield Corp. did not answer requests for comment.

Beau Jarvis, CEO of Vancouver-based developer Wesgroup and co-chair of the Large Urban Centre Alliance, welcomed Ottawa’s proposed change, saying that the foreign-buyer ban had made it difficult for Canada to attract international investment. While the exemption could help developers secure the presales needed for construction financing, he cautioned that it wouldn’t be enough to reverse a broader investment retreat.

“We are seeing a pullback of capital into the housing space because there’s less project viability,” he said. He added that competition from mining, oil and gas, technology, shipping and logistics is also an issue.

The challenges are particularly acute in Ontario and British Columbia, where a combination of government fees, taxes and regulations have made it difficult for developers to generate returns attractive enough to secure investment, Jarvis added.

Investment in residential development land in the Greater Toronto Area fell 43 per cent year over year to $387 million in the first quarter of 2026, according to Altus Group, a real estate consultancy. Although it’s since recovered, reaching nearly $1.9 billion over the first nine months of the year, activity has remained below historical levels. In Metro Vancouver, residential land investment declined six per cent year over year to roughly $426 million in the second quarter.

Ottawa is trying to accelerate housing construction nonetheless. The federal government has set a goal of reaching 500,000 housing starts a year, while the latest budget aims to deliver 200,000 homes over the next decade through Build Canada Homes, a Crown corporation launched in 2025 to spur housing construction.

The coalition warned that the industry could struggle to maintain current construction levels, let alone meet Ottawa’s broader ambitions. The government should measure progress through housing sales, starts, vacancy rates and affordability, rather than relying on a single construction target, it argues in its report.

A 2025 RBC report estimated that addressing Canada’s housing shortage will require approximately $2 trillion in public and private capital over five years—five times the investment levels at the time. Attracting that money will require Canada to compete with other industries and countries offering investors more predictable returns, Jarvis said.

While the budget addressed the foreign-buyer ban, it left several of its other proposals unanswered. 

Among the most significant is a proposal for a federal construction loan program for condos, similar to the low-cost financing Ottawa offers for building rental apartments. The coalition wants the Canada Mortgage and Housing Corporation to partially guarantee loans for projects that demonstrate demand but haven’t secured enough presales to meet traditional bank financing requirements.

Such guarantees could let construction proceed while banks continue assessing credit risk and developers remain responsible for delivering projects, according to the report.

The group is also calling for a capital-gains rollover program that would let investors defer taxes on the sales of their residential properties if they reinvest the proceeds in new rental construction. Such a move, the report argues, would free up capital for additional developments. 

The coalition is also arguing for alternative financing mechanisms, including tax-increment financing, special infrastructure districts and tax-free municipal bonds, to attract long-term private investment and reduce reliance on upfront charges. Jarvis said discussions about some of these approaches are gaining traction within senior levels of government.

Despite this, he warned the slowdown is already taking a toll on the industry. Even if investment conditions improve, he said, developers are cutting jobs and skilled tradespeople are leaving the construction industry. “It takes a long time to turn the housing system back on.”