Multi-Unit Residential Building (MURB) Structure & Background
July 2025
Introduction
The Multi-Unit Residential Building (MURB) tax incentive program was originally introduced in Canada on November 18th, 1974. It allowed retail investors to invest in newly built rental buildings, initially with a minimum of two units, later increased to four units, and deduct accelerated depreciation and related soft costs against other income. Certain soft costs were also allowed to be written off in the year incurred, as opposed to being required to be capitalized and added to the building’s cost.
The program often operated through syndicated limited partnerships, pooling high-income investors who were keen to obtain these tax shelters. A compliance mechanism was also built into the federal Department of Finance-administered MURBs; however, Canada Mortgage and Housing Corporation (CMHC) certification was required for a building to be designated as a MURB property. Notably, CMHC would certify a project only once construction had begun (defined as having the foundations/footings poured). This condition encouraged developers to initiate projects quickly, allowing investors to secure their tax deductions as soon as possible.
Previously, tax rules had generally prevented the use of rental losses, particularly depreciation, to offset other income. Under the MURB legislation, that restriction was lifted, with approximately 170,000 to 195,000 units built across Canada between 1974 and 1982.
The MURB program ended in 1982, but there is renewed federal interest in revisiting its model and structure to address today’s rental housing shortage.
Why It Matters: Relevance to Canada’s CRE Sector & REALPAC Members
A modernized MURB program could mobilize private capital at scale for rental housing construction, without direct public subsidy, by offering tax incentives that align investor returns with housing policy goals.
- For REALPAC Members: A new MURB program could unlock equity from a broader range of investors, including real estate investment trusts (REITs), fund managers, private equity and private developers, while enabling more efficient project financing through accelerated cost recovery and capital gains deferral. With proper safeguards, this structure could improve after-tax returns, attract professional capital, and expand opportunities for multi-residential development.
- For Policymakers: If carefully designed, a new MURB framework could accelerate purpose-built rental supply, particularly in high-demand urban areas, while controlling fiscal costs through caps, location targeting, and affordability criteria. It could offer a market-based solution to drive private-sector delivery of rental housing at scale, especially when paired with existing incentives like GST relief and accelerated depreciation.
Gaps in the Original MURB Program
Initially, the program spurred large-scale townhouse and apartment development, but over time, participation shifted toward heavily leveraged investments driven by tax advantages rather than the long-term viability of the underlying projects. It became a tax planning vehicle for high-income individuals.
The cost to the federal government was significant. In 1981, CMHC estimated that the MURB provisions resulted in approximately $67 million CAD in foregone tax revenue, equating to roughly $2,000 to $3,200 in tax expenditure per unit built. Over the life of the program, total federal tax costs were estimated at approximately $242 million (over $800 million in today’s dollars).
Additional concerns included inflated property valuations, projects marketed to unsophisticated investors, and assets priced primarily based on the availability of tax benefits. Some completed buildings generated weak or even negative cash flow, and many were located in marginal markets or poorly connected to transit and amenities.
Moreover, the program lacked affordability requirements. There were no obligations to deliver lower-cost units or to provide housing for low-income tenants.
In summary, the original MURB program proved to be inefficient, relatively inequitable, and prone to encouraging tax-driven rather than market-driven development.
Renewed Political Interest in MURBs
In his 2025 election platform, Prime Minister Mark Carney proposed reviving the MURB program as part of a broader strategy to accelerate the construction of rental housing across Canada. While details remain limited, the platform suggests reintroducing the program to allow for the construction of apartment buildings at scale coast-to-coast in Canada, utilizing private equity, with a tax incentive to encourage it.
This renewed interest provides an opportunity to apply key lessons from the original program and implement stronger safeguards to ensure both effectiveness and fiscal responsibility.
Policy Recommendations for a Revived MURB Program
- Cap the Shelter
While the at-risk rules will need to be relaxed for limited partners, they should not be eliminated altogether. There should be limitations on the total amount of soft costs and depreciation available to, and deductible by, an investor each year. This would need to be modelled. - Require Appraisals and Better Oversight of Values
Value should not be inflated simply on the basis of the tax shelter being available to investors. The available tax write-off should be based on appraisals and/or certified construction costs, not inflated estimates. Offering memoranda could also be reviewed by an independent party to weed out dubious projects. - Broaden the Investor Base
While the original program focused only on high-net-worth individuals, a modernized version should allow participation by institutional investors, developers, trusts, REITs, fund managers, and corporations, not just salaried professionals in limited partnerships. For example, allowing corporations and trusts to access deductions would attract more professional capital and improve oversight. For tax-exempt entities such as pension funds, a mechanism should be created to assign and monetize their share of soft costs and depreciation allowances. - Combine with Accelerated Capital Cost Allowance (ACCA)
The ACCA measures announced in the Spring 2024 Federal Budget, together with relaxed at-risk rules, align well with a modernized MURB structure. They would create a unified incentive for most investor types to invest in new purpose-built rentals. - Combine with Capital Gains Deferral
Consistent with the Liberal housing platform, allow investors to defer capital gains tax and capital cost allowance recapture when selling a rental property and reinvesting in another rental within a defined timeframe, similar to the U.S. 1031 Like-Kind Exchange. This would support continuous reinvestment in rental housing and expand supply across Canada. - Extend GST & HST Relief
While the GST exemption for purpose-built rentals has been announced, limitations remain. Builders are subject to GST on materials and services but cannot claim input tax credits, as residential rent is exempt from GST. The partial GST rebate upon completion helps but expanding it or zero-rating new rentals could significantly lower costs. Similar rebates should be extended to substantial renovations of existing rental buildings to extend the life of older stock. - Restrict to Proper Locations
A MURB certificate should only be awarded to projects in appropriate locations, such as major arterial roads, near transit, or within designated intensification areas per municipal official plans. Projects far from transit, amenities, or essential services should not qualify. - Pilot in High-Demand Cities
Consider pilot launches in key urban centres such as the Greater Toronto Area, Vancouver, and Montreal to test and refine the program before broader rollout. - Prohibit Strata Conversion
Prohibit strata title to avoid the risk of promoters converting MURB-certified buildings into condominiums for resale during the benefit period. - Establish Program Timeline and Sunset Review
Set a clear term and sunset period for the program (e.g., automatic reviews after 5, 10, and/or 15 years). Include a minimum hold period for developers. Running the program through 2040 would help it become established and effective. - Require Annual Reporting
Mandate annual reporting on per-unit costs, appraised values, rental rates, compliance with conditions, and investor returns. Maintain a central database to track performance relative to market benchmarks. - Add Conditions Similar to MLI Select
Depending on uptake, introduce affordability and sustainability requirements such as:- A share of units maintained as affordable for 5–20 years based on a defined formula.
- Buildings must include sprinklers and air conditioning.
- Projects must meet low-carbon or recognized sustainability standards (e.g., Scope 1 GHG protocol, fully electric).
- Rent restrictions enforced via contractual and title-based covenants.
- Violations could trigger clawbacks on soft cost deductibility or nullify at-risk rule exemptions.
Next Steps
REALPAC recommends modelling the fiscal impact and investor attractiveness of a modernized MURB program using sample pro formas. This should include analysis of non-capitalized soft costs, depreciation flow-through, and the potential for capital gains deferral. The modelling could be undertaken in collaboration with developers and/or a consulting firm.
Conclusion
With renewed political attention on rental housing solutions, a revived MURB program represents a timely opportunity to harness private capital for the public good. While the original program had significant shortcomings, a modernized version with stronger governance, clearer eligibility criteria, and integration with existing incentives can drive new rental construction at scale. By aligning investor incentives with housing policy goals, Canada can create a sustainable, market-based mechanism to expand its rental stock, support economic growth, and address the country’s urgent housing needs.
Contact: Michael Brooks, CEO, REALPAC, mbrooks@realpac.ca, 416.642.2700 x225
References
- Canada Mortgage and Housing Corp. (CMHC), Tax Expenditures: Housing (Research Report, 1981)
- Erin N. Davis, “Can The Rebirth Of A ’70s-Era Government Incentive Really Help The Housing Crisis?” STOREYS (May 14, 2025).
- Western Standard News, “Carney revives costly 1970s tax break for housing speculators” (Apr. 12, 2025)
- Canadian Mortgages Inc., “Revitalizing the MURB Program – What Past Mistakes Can Teach Us” (May 12, 2025) (thecmigroup.ca)
- Canadian Real Estate Magazine, “Federal Government Could Weigh the Reintroduction of MURB Tax Deduction” (June 10, 2025)
- Government of Canada (CRA), Rental Property Capital Cost Allowance Classes (accessed 2025)
- CMHC, Evaluation of Federal Rental Housing Programs (1988 report)
Disclaimer
The information that may be contained herein has been obtained by or compiled by REALPAC from sources believed to be reliable, but no representation or warranty, express or implied, is made by REALPAC, its directors, officers, staff or any other person for whom REALPAC is legally responsible, as to its accuracy, completeness or correctness. The information provided in this publication is for informational purposes only. Opinions, estimates, conclusions or other information expressed or contained herein constitute REALPAC’s judgment as of the publication date, are subject to change without notice, and are provided in good faith but without representation or warranty as aforesaid.
Neither REALPAC nor its directors, officers, or staff assume responsibility for the use of, effect of, or appropriateness of the language, wording, or standards contained in this publication or any typographical or printing errors or omissions. REALPAC, its directors, officers, staff or any other person for whom REALPAC is legally responsible assumes no liability for damage or loss arising from the use of information contained herein. REALPAC is not providing development, investment, environmental, legal, or tax advice. Readers are urged to consult their own professional advisors for further confirmation, information and advice.
Copyright
REALPAC is the owner of all copyright in this publication. All rights reserved. No part of this publication may be reproduced, transmitted or otherwise used in whole or in part in any form or by any means, without permission from the publisher. Further, no person shall use this publication, in whole or in part, in any form or by any means, to create any precedent for resale or license for remuneration.