When a proposed apartment project in McHenry, Illinois lost out on a $3 million redevelopment incentive, the fallout raised more than just local eyebrows. It also shed light on a growing push-pull dynamic between public dollars and private development—something with ripple effects we’re seeing right here in Canada.
At its heart, the McHenry decision was about whether municipal governments should foot part of the bill for private housing projects. While this particular property sits south of the border, it highlights a recurring issue relevant to many Canadian homeowners: when housing construction projects stall or collapse, we all feel it—whether in the form of higher prices, lower supply, or ongoing affordability challenges.
Slowed Projects Mean Slower Relief from Rising Prices
Across Canada, housing affordability is running up against a familiar wall: limited supply. The Canadian Mortgage and Housing Corporation (CMHC) estimates Canada needs to build 5.8 million new homes by 2030 to restore affordability. Yet, even with clear demand signals, developments are getting snagged—not just by interest rates, but by local politics and funding disagreements, like McHenry’s.
This Illinois case may feel geographically distant, but it mirrors situations we’ve seen across Canadian municipalities. From delays in zoning approvals to halted infill projects, developers are increasingly wary of taking on massive redevelopments when incentives dry up or support from local councils fades. This means fewer new units enter the market, keeping pressure on home prices and mortgage borrowing.
Among the hardest hit? Middle-income Canadians in their 30s to 50s, many of whom are buying or upgrading homes during peak rate periods. They’re increasingly caught between inflated resale prices and limited new-build inventory—which underscores why development incentives matter, even miles away.
Municipal Backing Matters More Than Ever
Municipalities play a surprisingly outsized role in how fast (or slowly) housing stock is replenished. While the federal government can provide national incentives or change borrowing rules, city councils control zoning, density permissions, and—crucially—direct funding for projects that expand local housing inventory.
In McHenry’s case, the local council’s decision to withhold the $3M incentive cast serious doubt on the future of a structural conversion: a former First Midwest Bank building that could have become multi-unit residential housing. That’s the kind of innovative reuse increasingly needed in Canadian cities, where vacant commercial properties are mounting, and urban sprawl is becoming harder to justify environmentally and financially.
Toronto and Vancouver have both floated similar adaptive reuse strategies. Without local incentives—or even soft approvals—developers may balk. Meanwhile, homeowners watch as affordability targets drift further away.
Whether you’re an investor or someone considering a refinance to access equity for upgrades, these delays affect our strategic options. Limited inventory keeps competition high and reduces flexibility for families hoping to relocate or right-size.
What This Means for Canadian Mortgage Planning
Rising interest rates have already reshaped mortgage conversations. According to the Bank of Canada, average mortgage interest costs are up over 30% year-over-year, placing new pressures on budgets. When housing supply remains flat—or even declines—because projects like McHenry’s fall through, it adds upward pressure on resale markets.
What’s more, projects that could offer mid-market or affordable rental units are precisely what’s needed to relieve the overworked homebuyer segment. In some cases, borrowers who might have exited the rental market to buy instead remain tenants, driving up rents and crowding out those with fewer housing options.
This is also where a product like a construction mortgage comes into play—especially if you’re considering building on your own land due to limited listings. We’re seeing more interest from clients trying to go direct-to-land rather than buy at today’s premium market values. But even then, financing options and timelines will depend on local regulations and build timelines—many of which are impacted by policy signals at the local level.
So whether you’re thinking of exploring a reverse mortgage to unlock home equity, or entering the market for the first time, knowing the housing supply pipeline in your city should be part of your research. After all, housing economics don’t just function nationally—they’re shaped neighbourhood by neighbourhood.
Real Estate Isn’t Just About Rates—It’s About Readiness
We tend to focus on interest rates—and rightly so. The Bank of Canada held its benchmark rate at 5% as of early 2024, which affects nearly everyone carrying a variable-rate loan. But long-term planning shouldn’t be limited to rate changes. What we’re learning from situations like McHenry is that even when financing exists, housing doesn’t grow itself. It takes aligned priorities between developers, governments, and communities.
A property that doesn’t get built today may impact local affordability five years from now. And that connects directly to the long-term value and borrowing strategy for your own home. Making sense of when and how to act in this environment means looking at the full picture—not just today’s numbers but tomorrow’s opportunities—or missed ones.
If you’re considering buying, upgrading, or investing, your strategy should consider more than rates. Let’s talk timelines, municipal developments, and how to navigate mortgage products suited to your goals. Whether you’re planning a move or just curious where prices and policies are headed, Unrate has the tools and insights to help you plan wisely—for today and tomorrow.
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