The permit is framed on the wall. The site is cleared. The architect has been paid. Yet, for a growing number of small builders attempting to bring duplexes, triplexes, and laneway homes to Vancouver’s residential streets, the construction crane never arrives. The barrier is not neighbourhood opposition or municipal red tape; it is a financing gap hiding in plain sight between the approval counter and the construction site.

Metro Vancouver’s "missing middle" housing push—the duplexes, triplexes, fourplexes, and laneway infill that form the backbone of the City of Vancouver's near-term housing supply strategy—is producing approved permits at a pace unseen in years. However, a structural mismatch between how traditional lenders underwrite construction loans and the economic reality of small multiplex projects is widening the gap between permits issued and shovels in the ground.

The problem lies in underwriting logic. Canada’s major banks and most institutional mortgage lenders built their residential construction models around a single-family home: one borrower, one title, one appraised value upon completion. A four-unit infill project on a 33-foot East Vancouver lot does not fit that template. Lenders applying single-family loan-to-value ratios—typically capped in the 65–75% range for construction financing—against a project with a harder-to-benchmark completion value leave builders facing equity shortfalls that can stall a project before it begins.

According to data from the CMHC's 2025 Housing Supply Report, a growing divergence exists between missing middle housing starts and completions in British Columbia. Approvals are climbing, but completions are not keeping pace. This gap represents real housing units—and real families—stuck in financing limbo.

For small builders, the experience is concrete. A duplex or triplex project in Grandview-Woodland or Mount Pleasant might pencil out at a 70% loan-to-cost ratio from a lender familiar with the local rental market. However, when the same project is processed through a major bank’s automated underwriting system—calibrated for a detached home in Burnaby rather than a three-unit infill build in a transitional neighbourhood—the numbers often fail to align. Builders are left scrambling for additional equity or abandoning permits they have already secured.

Permit lapse is the downstream consequence that concerns housing advocates most. The City of Vancouver's Development and Building Services division tracks permit expiry, and the infill category has historically shown higher lapse rates than larger purpose-built rental or condo projects. Small builders often lack the resources to maintain a permit through a prolonged financing delay. Every lapsed permit represents a unit the city counted on that will not be built.

The Rise of Alternative Capital

A small but growing cohort of BC-based lenders has identified this gap and is moving to fill it. BC’s mortgage investment corporations (MICs) have emerged as a primary source of construction financing for small multiplex builders unable to access institutional capital. Unlike chartered banks, MICs operate under a more flexible underwriting framework, allowing them to price risk at the project level rather than applying a national template. The BC Mortgage Investment Corporation Association reports increased member activity in the infill and small multiplex segment, with several MICs developing specific product lines for two-to-six unit residential construction.

Terms differ from bank construction loans. MIC rates for small multiplex projects typically range from 8–11% on an annualised basis, reflecting the additional risk premium and the bespoke underwriting required. For a builder with a solid project, a clear exit strategy, and an approved permit, this cost of capital is often viable compared to the alternative of a lapsed permit.

BC’s credit union sector is also playing a significant role. Several Lower Mainland credit unions have developed construction lending desks with expertise in infill projects, applying relationship-based underwriting that considers a builder’s track record, the local rental market, and site-specific characteristics. Central 1 Credit Union's data on SME construction lending suggests credit unions now account for a disproportionate share of financing for projects under eight units—a segment largely ceded by major banks.

The Urban Development Institute Pacific's surveys have consistently identified financing access as the top operational constraint for infill developers, ranking above permitting timelines and construction costs. This underscores the centrality of the lending issue to the city’s housing ambitions.

Navigating the Gap

Successful developers point to several factors for navigating this landscape. First, lender familiarity with the specific neighbourhood is critical. A MIC or credit union with an established book of business in East Vancouver understands as-complete rental values in Hastings-Sunrise differently than a lender whose comparables are based on Kerrisdale detached homes. This local knowledge leads to more accurate loan sizing.

Second, construction draw structures matter. Small builders managing cash flow across a six-to-twelve-month build cycle require draw schedules aligned with actual construction milestones. Alternative lenders who have built inspection and draw management processes specifically for small multiplex projects report lower default rates and stronger builder relationships.

Third, policy adjustments could provide further relief. The BC Financial Services Authority's underwriting guidance for residential construction lending has not fully kept pace with the province’s shift toward missing middle density. Guidance calibrated for single-family construction creates compliance friction for lenders attempting to develop multiplex-specific products. Advocates are pushing for updated guidance that reflects the current policy reality.

While CMHC's MLI Select program offers support for purpose-built rental projects, its application to small infill multiplex builds—particularly owner-occupied duplexes and triplexes—remains limited. Expanding federal insurance products to cover the missing middle segment more comprehensively would reduce the risk premium lenders must charge, bringing rates closer to conventional construction financing levels.

The Bottom Line

Metro Vancouver’s housing future depends on whether a builder with an approved permit for a four-unit infill project can secure construction financing at a viable rate. Currently, the most effective options are often BC MICs or specialist credit union desks rather than traditional major bank branches.

This is not a permanent condition. The lenders filling the gap are building track records and developing scalable products. If BCFSA updates its underwriting guidance and CMHC expands its insurance reach, the risk premium that makes alternative financing expensive will likely compress. The pipeline of permits exists, and the builders are ready; the financing layer is forming, but it must accelerate to meet the region's needs.