Canada Mortgage and Housing Corporation (CMHC) announced on May 7, 2026, an expansion of its mortgage loan insurance offerings to cover prefabricated and modular construction under two distinct programs, broadening financing access for individual homebuyers and multi-unit developers alike.
Background
Canada's housing shortage has intensified pressure on federal agencies to accelerate supply. CMHC has previously stated the country must double housing starts over the next decade to gradually restore affordability to 2019 levels. Meeting that target requires not only more construction but faster construction-an area where modular and prefabricated methods hold a structural advantage over conventional site-built approaches.
Until recently, financing posed a core obstacle for modular developers. Up to 80 percent of a modular project is completed off-site in a factory, requiring substantial upfront payments before any on-site progress can be measured. Conventional lending practices, however, are structured around on-site progress draws-a mismatch that has restricted capital flows into the sector, according to research published by the C.D. Howe Institute. Lenders have historically cited security concerns around projects where factory-fabricated modules offer limited collateral if construction stalls.
Canada's modular housing permitting landscape has also been evolving. A national framework to standardize modular permits was unveiled in March 2026, addressing fragmented provincial and municipal approval processes that have further slowed adoption.
Details
CMHC's announcement introduces two related but distinct mechanisms. The first, branded CMHC Prefab Plus, targets individual homebuyers purchasing factory-built homes. Under the program, homebuyers can purchase a factory-built home with a minimum down payment of 5% and access CMHC-insured financing for their mortgage. The product is structured around staged draws: a buyer can access a first draw to acquire and prepare land, followed by a second draw once the home is delivered and ready for installation-aligning disbursements with the actual sequencing of prefabricated construction.
The second component addresses multi-unit construction. Following a pilot initiative that provided insured financing for more than 800 new rental homes using modular construction across five provinces, CMHC is expanding its multi-unit mortgage loan insurance to allow modular construction for all its multi-unit products, including MLI Select. MLI Select is CMHC's affordability-linked insurance product that awards premium discounts to projects meeting targets in energy efficiency, accessibility, and affordability.
To manage lender risk during the factory phase, the program framework relies on performance bonding from the modular manufacturer alongside legal and insurance protections arranged with participating lenders-mechanisms that allow CMHC to advance mortgage funds while modules are still being fabricated. CBRE has described this structure as providing "a replicable model to roll out in other Canadian markets" for affordable housing providers.
The pilot program's most cited precedent, 605 Studio West in Calgary, was an 84-unit affordable housing complex developed by Attainable Homes Calgary and was built and occupied in under one year, compared to nearly two years for a comparable conventionally built project in the same community. The development was manufactured by ATCO Structures, with 56 modular boxes assembled on-site following approximately three months of factory fabrication.
CMHC-backed insured loans can typically be borrowed at loan-to-cost ratios of up to 90 to 95 percent, and at interest rates generally one to two percentage points lower than conventional rates, according to industry sources-a differential that becomes more pronounced when shorter construction timelines reduce total interest accrual. Harley Gold, a managing director at Peakhill Capital, noted that CMHC insurance on modular construction loans had previously been unavailable and that broader access would draw more investors and developers to the sector.
Outlook
With the multi-unit expansion now applying to all MLI products, lenders and builders will need to update underwriting processes to accommodate factory-phase advance structures and manufacturer bonding requirements. Provincial permitting timelines for modular builds-which remain inconsistent across jurisdictions-will also influence how quickly the expanded insurance framework translates into new housing starts. CMHC has indicated it will continue deploying its full suite of tools to scale housing supply, with Prefab Plus and the multi-unit modular expansion representing its most direct intervention yet into the construction financing workflow for off-site building methods.
