Feds Launch Mortgage Refinancing Program to Support Secondary Suites in Bid to Tackle Housing Crisis

Deputy Prime Minister and Minister of Finance Chrystia Freeland responds to a question during a weekly news conference in Ottawa on Feb. 27, 2024. The Canadian Press/Adrian Wyld

Ottawa is introducing additional mortgage reforms that support secondary suite construction in a bid to address Canada’s housing shortage.

Beginning Jan. 15, homeowners can access default-insured mortgage refinancing of up to 90 percent of their home’s value, including the value of the new unit, to build secondary suites, Minister of Finance Chrystia Freeland has announced.

The borrower can amortize the refinanced mortgage over a 30-year period, she said, noting that the mortgage insurance home price limit will be raised to $2 million.

“The idea here is to make it easier for people to build a secondary suite in their home, for someone to build a basement flat, a garden flat, laneway housing,” Freeland said at an Oct. 8 press conference. “This is all about gentle density, creating more homes for Canadians to live in.”

​​The goal, she said, is to boost rental supply in areas of high demand while offsetting escalating mortgage costs for homeowners.

Under the new rules, homeowners can add up to three new units on their property, but each unit must have separate living facilities, such as a private entrance, kitchen, and bathroom to comply with municipal zoning requirements, the government said in a press release.

All living quarters must be also used as long-term rentals, not as Airbnb units or for other types of short-term stays.

“This is to let a family who already owns a home … to build that basement flat, to build that garden suite, so grandparents can move in,” she said.

The measures follow the Canada Secondary Suite Loan Program announced in Budget 2024. The program will enable homeowners to access up to $40,000 in low-interest loans to add a secondary suite to their homes and will be administered by the Canada Mortgage and Housing Corporation.

The latest mortgage reform follows a series of government measures that raised the cap on default insurance and brought back a 30-year amortization option. Freeland announced last month that Ottawa would raise the cap on insured mortgages to $1.5 million from $1 million, and expand eligibility criteria for 30-year mortgage amortizations to encompass first-time homebuyers. Both changes are to be put in place as of Dec. 15.

The government is also taking steps to make more vacant land available for housing development.