Banks Doubled Construction Loans: So Why Is CMHC Still Asking for More Risk?

The head of Canada's housing finance Crown corporation just made a curious public plea. Speaking at an industry conference in Toronto, CMHC CEO Coleen Volk declared that her organization "would love to see the banks taking more risks" when it comes to funding residential construction.

It's the kind of statement that sounds reasonable on its face—after all, Toronto housing starts are on pace for their lowest level in 30 years. Something's clearly broken in the construction finance pipeline.

But Volk's comment is fascinating because the banks are already taking massive risks—they've just been paid handsomely to do it.

The Numbers Tell a Different Story

Bank of Canada data shows chartered bank loans to builders and developers doubled in less than a year, climbing to $85.1 billion in Q1 2025, a staggering 105% increase year-over-year.

This isn't the behavior of risk-averse lenders. This is the behavior of institutions that have found a way to profit from construction lending while transferring most of the downside risk elsewhere.

Where did that risk go? To Canadian taxpayers, through expanded federal programs that have essentially turned construction lending into a government-subsidized profit center.

The De-Risking Machine

Two key federal initiatives drove this lending surge:

The Apartment Construction Loan Program (ACLP): Originally launched to support purpose-built rental construction, the ACLP was significantly expanded in 2023, providing loan guarantees for later-stage financing that make banks more comfortable offering early-phase capital.

MLI Select: Enhanced between 2022 and 2023, this program increased maximum leverage limits and raised the project cap to a mind-blowing $1.5 billion.

The result? Banks began competing for developer clients, fueling the dramatic increase in lending volume.

So if banks are already lending and the government is already de-risking, why are housing starts cratering? Volk provided the answer herself: OSFI "has just increased the Crown Corporation's capital requirements," limiting CMHC's ability to do more.

The bottleneck isn't the private sector's risk appetite; it's public sector regulatory constraints on the very organization asking for more private risk-taking.

Enter Build Canada Homes

Volk revealed that the federal government's Build Canada Homes program will be "set up a little more like the Canada Infrastructure Bank," a comment that should make industry professionals pause.

The Canada Infrastructure Bank, launched with great fanfare in 2017, has been widely criticized for bureaucratic inefficiency and delivering far less infrastructure investment than promised. If Build Canada Homes follows the same playbook, expect another layer of federal bureaucracy competing with CMHC for the same deals while adding complexity to an already convoluted system.

What This Means for Professionals

For mortgage brokers, real estate agents, and industry operators, this disconnect between rhetoric and reality signals several things: The financing landscape will remain complex, with multiple government programs offering overlapping (and sometimes conflicting) incentives.

Despite government branding around "affordable housing," many federally backed projects only require 20%–30% of units to be priced below market, limiting the actual affordability impact. The system increasingly socializes risk while privatizes profits, creating moral hazard that could bite taxpayers during the next economic downturn.

When a public official says one thing while the data shows something entirely different, it's worth asking what's happening.

CMHC's call for banks to take more construction risk would be compelling if banks weren't already taking enormous risks—underwritten by Canadian taxpayers. The real question isn't whether banks will step up, but whether our housing finance system has become so dependent on government guarantees that it can't function without them.

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