Pension funds weigh “de‑risked” affordable housing pitches against $30 billion locked in private property vehicles
Private real estate funds in Canada have gated about $30bn just as Ottawa is asking banks and pension plans to bankroll a large new push into affordable housing.
According to Bloomberg, roughly 40 percent of the $80bn in private real estate funds is now locked up, with managers restricting withdrawals and cutting distributions as prices fall and projects stall.
At the same time, federal Housing Minister Gregor Robertson wants Canadian banks and pension funds to provide “long-term stable” capital for non‑market and mixed‑income projects through the new Build Canada Homes agency.
The agency launched in September with $13bn in federal capital, according to Global News.
Robertson told Global News he is targeting the “lowest rungs of the housing ladder,” using Build Canada Homes to expand affordable or “non‑market” stock and mixed developments that pair below‑market units with market‑rate rentals.
One of its first announced projects, the 540‑unit Arbo development in Toronto, is slated to have at least 40 percent affordable units.
Build Canada Homes has already received about 450 applications from provinces, community housing providers and private developers.
Robertson says the agency will “crowd” federal, provincial and private money into projects that otherwise do not clear a market hurdle, and he explicitly named banks and pension funds as the pools of capital he hopes to attract.
His pitch, as reported by Global News, is to “dramatically” reduce project risk so that affordable housing becomes a long‑term, stable investment for Canadian capital rather than a niche policy tool.
The investment case is not straightforward for institutions with strict fiduciary mandates.
Housing policy expert Mike Moffatt told Global News that the idea of using public capital to smooth housing cycles “makes a great deal of sense” in theory, particularly during construction lulls.
But he also pointed out that affordable or social housing is, by nature, low‑margin or non‑profit.
Banks and pension plans, by contrast, must maximise returns for shareholders and beneficiaries.
Moffatt told Global News that providing very low‑income housing “doesn’t…generate a lot of profit” and said it is “not clear” what tax or regulatory tools Ottawa can use to get large financial institutions to commit meaningful capital.
In other words, the federal government is describing affordable housing as a de‑risked, stable asset, while much of the existing real estate fund universe is in the middle of a confidence shock.
Bloomberg reports that the gating wave followed ten Bank of Canada rate hikes in 2022 and 2023, which drove condo values down by hundreds of dollars per square foot and choked off new development.
Investors who had been told they could redeem at will discovered their funds held illiquid assets — towers, warehouses and construction loans — that could not be sold quickly without crystallising losses.
Romspen Mortgage Investment Fund halted redemptions in 2022 and has kept them frozen.
The article highlights investor Andre El‑Baba, a Vancouver property manager who put in a combined $2m with his father in 2022 and now receives only a 2 percent income stream with no access to principal.
In September, Nicola Wealth told clients redemptions from two of its largest real estate funds would take longer than usual, citing slower sales and tougher market conditions.
Those funds, which together manage about $2.7bn, have cut regular cash distributions by more than a third, based on Nicola’s reports cited by Bloomberg.
A smaller Nicola development fund lost about 21 percent of its value in the first nine months of last year after nearly a decade of uninterrupted gains.
Hazelview Investments has twice suspended redemptions in its $1.3bn Four Quadrant Global Real Estate Fund since 2023 as withdrawal requests neared 30 percent of assets.
Trez Capital froze withdrawals in August across five funds totalling $2.8bn in commercial real estate loans while continuing monthly distributions, and said it aims to reopen them in 2026.
Centurion Apartment REIT and KingSett Capital’s Canadian Real Estate Income Fund have restricted or halted redemptions, with KingSett resuming distributions after a one‑year suspension.
Some managers are borrowing against portfolios to fund payouts, a tactic York University professor Jim Clayton described to Bloomberg as “a bit of a house of cards” that extends the appearance of stability while deepening the eventual adjustment.
Jamie Grundman of Irager Investments told Bloomberg that “as soon as you gate, investors stop believing you,” and said concern spreads quickly across funds once one manager shuts the door.
The macro backdrop makes rebuilding confidence harder.
Bloomberg reports that Canadian home prices have fallen 18 percent from their peak, citing Canadian Real Estate Association data, and that development pipelines in Toronto and Vancouver have thinned to levels last seen in the 2000s.
Canada Mortgage and Housing Corp. is monitoring the gating trend but has not commented on its implications for future construction.
At the same time, population growth — the core driver of long‑term housing demand — has stalled.
Statistics Canada data show growth at zero and a 0.2 percent population decline in the third quarter of 2025, the only non‑pandemic quarterly drop in records going back to the 1940s. With fewer new renters and buyers, absorption of new units has weakened.
Commercial real estate investment in Canada fell 22 percent year over year in the first half of 2025, according to an Altus Group report, which linked the pullback to economic uncertainty.
Economist Diana Petramala told Bloomberg that a credit crunch now could translate into a housing affordability crisis five to ten years from now if demand revives but supply does not recover.
She warned that “supply, once curtailed, does not simply bounce back” and said Canada may “never return to the same levels of supply,” making it harder for families to access housing when the economy recovers.
