Stand at the corner of Edmonds Street and Kingsway in Burnaby on a Tuesday morning and you will see the story of a stalled market: a sun-bleached rezoning sign staked in front of a parking lot that was slated to become a 28-storey rental tower. The municipal approvals arrived, but the financing did not.

Across Metro Vancouver, a troubling gap has opened between the region’s record-setting pace of rental rezoning approvals and the far quieter reality of construction starts. According to CMHC’s Housing Starts and Completions Survey, purpose-built rental starts have lagged well behind the volume of units moving through municipal approval pipelines—a disconnect drawing urgent attention from housing advocates, institutional investors, and BC Housing.

The math behind the stall is straightforward. CMHC’s MLI Select program offers preferential financing that has been a cornerstone of pro forma underwriting since 2022. However, those models were built on construction cost assumptions that no longer hold. According to the Altus Group 2026 Construction Cost Guide, costs in the Lower Mainland have escalated by 8 to 12 per cent above 2023 benchmarks, driven by labour shortages, materials pricing, and persistent supply chain friction. When the spread between financing rates and actual delivery costs widens, projects that pencilled out 18 months ago are no longer viable.

In Burnaby and New Westminster—two municipalities that prioritized transit-oriented development under the provincial Transit-Oriented Areas legislation—several significant rental projects have been shelved or restructured for phased delivery as developers wait for costs to moderate or rental revenue projections to improve.

The Institutional Lens

The stall is being watched closely by institutional capital. BC’s Investment Management Corporation (BCI), which manages pension assets for public sector workers, has flagged purpose-built rental as a priority asset class—but only where returns can be underwritten with confidence. Pension funds generally require stabilized yields that are difficult to achieve when construction costs remain volatile and lease-up timelines are uncertain.

The Urban Development Institute’s BC chapter has noted that the policy environment—from rezoning streamlining to the federal Housing Accelerator Fund—has created a permitting pipeline that the financing environment cannot currently absorb. Approvals are a necessary condition for supply, not a sufficient one.

The Near-Term Opportunity for Existing Operators

For landlords holding existing purpose-built rental stock, this pipeline failure creates a near-term revenue window. Metro Vancouver’s rental vacancy rate remains among the lowest in Canada, and with fewer new units coming online than projected, that pressure is unlikely to ease through 2026.

For operators with stabilized assets, the strategic move is to lock in long-term leases now, before any potential softening in construction costs unlocks the stalled pipeline. Avison Young’s most recent Metro Vancouver rental analysis indicates that market rents continue to climb in transit-adjacent submarkets—precisely the neighbourhoods where the shelved towers are concentrated.

What Needs to Move

Closing the financing gap will require movement on at least one of three levers: CMHC rate adjustments that reflect current cost realities, a moderation in construction cost escalation, or municipal and provincial gap-financing tools. BC Housing’s co-investment programs have helped make marginal projects viable, but the scale of the current shortfall suggests these tools are being stretched.

Metro Vancouver’s development permit data showed record rezoning approvals through 2024, a headline number municipal governments celebrated. However, the conversion rate from approval to construction remains a critical bottleneck for the region’s housing supply targets.

The Bottom Line

Record rezoning approvals are a policy win on paper, but they do not house residents. The gap between approvals and actual construction reflects a financing environment that has not kept pace with cost realities. For operators with existing stock, the near-term revenue opportunity is genuine. For renters and the region’s long-term affordability trajectory, the picture is less encouraging. Watch for CMHC MLI Select rate adjustments in the coming quarters; they will be the clearest signal that the pipeline is ready to move again.