Why the Real Housing Bottleneck Is Financing, Not Construction

Everyone’s Blaming the Wrong Thing

Turn on the news and you’ll hear: “We need more builders.” Politicians point at construction timelines, zoning delays, or NIMBYism. All real issues, but not the bottleneck in 2026.

The real choke point is financing. Developers want to build, municipalities (finally) want approvals. But lenders hold the keys — and they aren’t opening the vault.

Why Financing Is the True Constraint

1. Equity Requirements Are Higher. Lenders now demand 30–40% equity, pricing many developers out.

2. Debt Service Coverage Tests Are Tougher. With higher rates, projects that penciled at 1.25 DSCR now fail at 1.0.

3. Appraisals Don’t Support Loan Amounts. Peak land values don’t fly in today’s underwriting environment.

4. Capital Markets Are Cautious. Institutional money prefers stability over risk, leaving projects stranded.

Construction delays make headlines. Financing choke points kill projects before shovels ever touch the ground.

Case Study: The Cancelled Toronto Mid-Rise

• Proposed: 120-unit rental, approved in 2023.

• Budget: $60M, financed at 2.8% construction debt assumptions.

• 2026 Reality: Lenders demand 40% equity injection, DSCR fails stress test. Project cancelled.

It wasn’t zoning. It wasn’t labor. It was financing.

Why This Matters for Multifamily Investors

• Existing Stock Gains Value. If financing blocks new construction, scarcity of existing units grows.

• Distress Surfaces in Development Land. Overleveraged landowners face losses.

• Policy Incentives Only Work with Debt. MLI Select or tax credits don’t matter if lenders still say no.

How to Position Yourself in a Financing-Blocked Market

1. Buy Existing Assets. They’re harder to replace every year.

2. Track Development Cancellations. These signal tighter supply in 2–4 years.

3. Be Liquidity-Ready. Cash buyers or low-leverage buyers have the advantage.

4. Work With Lenders Who Still Lend. Relationships matter more than ever.

Investor Playbook

• The real housing bottleneck is financing, not construction.

• Developers can’t get capital, so supply won’t meet demand.

• Investors who own existing multifamily stock hold the cards.

• OntarioMultifamily.ca is the hub where investors connect with professionals navigating financing realities, not headline distractions.