Tailwinds for Rental, and Why It’s Winning Over Condos.

We don’t need to sugarcoat it: the condo market is not comforting right now. Assignments are plummeting, purchasers are facing funding shortfalls on closing, and developers are struggling to get projects off the ground due to proforma challenges.

Recently, however, several powerful tailwinds have pushed developers across Toronto to seriously consider purpose-built rental instead ofcondo projects.

In this article, we highlight three key advantages helping Modcity successfully pencil fourplex and sixplex projects across the city.

• Development charge (DC) and parkland dedication exemptions
• Waiving of HST on purpose-built rental project costs
• CMHC MLI Select financing

1. Development Charges and Parkland Dedication

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In recent years, DCs and parkland fees have skyrocketed, making it increasingly difficult for projects to meet investor return thresholds. For example, if Modcity built a fourplex with a laneway suite in the rear, all with three-bedroom units, the DC bill would total roughly $225,000 ($45,000 per unit). On top of that, with a $1.0M land value, parkland fees at 10% ($100,000) would bring the total to $325,000. The costs are even more punishing for sixplexes.

DCs are taxes charged to developers to help fund growth-related infrastructure, such as roads, transit, water, and sewer systems. While the merits of these costs can be debated, one thing is clear: they disincentivize four- and sixplex developments, even on lots where they are otherwise feasible.

Fortunately, fourplexes have been exempt from DCs and parkland fees since their as-of-right introduction to Toronto’s zoning bylaw in May 2023. Sixplexes received the same exemption as of July 2025, a game changer for small- and mid-scale rental housing.

2. HST Savings on Purpose-Built Rental

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As of November 2023, HST, covering both the federal GST and provincial PST components, is waived on all soft and hard costs for purpose-built rental projects with four or more units.

While vendors must still charge HST on invoices, developers can file with the CRA monthly or quarterly for a full rebate. The process is simple, and the savings are substantial: for every $1 million of project costs, developers save $130,000.

3. CMHC MLI Select Financing
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For fourplexes, Modcity often includes a laneway or garden suite to qualify for CMHC MLI Select financing. This program allows investors topull out significantly more equity compared to conventional income-backed loans, since CMHC underwriting is not strictly tied to rental income.

CMHC uses a points-based system across three categories: affordability, energy efficiency, and accessibility, to determine mortgage terms. Higher points unlock better loan-to-value ratios (up to 95%), lower interest rates (hundreds of basis points cheaper), and longer amortizations (40–50 years).

Modcity focuses on the energy efficiency pathway, which is the most financially feasible at this scale. All of our fourplexes and sixplexes qualify as CMHC-approved energy-efficient builds, earning 50 points. For sixplexes, a laneway or garden suite isn’t required for CMHC eligibility, but often strengthens the overall proforma.

The Bottom Line

Today’s federal and municipal policies make purpose-built rental significantly more attractive than condos. These three tailwinds not only make more projects viable, but also allow developers to pass savings down to renters through lower monthly rents.