MURBs & The Housing Plot Twist No One Saw Coming

How a 50-year-old tax tool could boost rental housing supply.

Meredith Martin

Mike Moffatt

, and

Sabrina Maddeaux

Aug 06, 2025

In this episode of The Missing Middle, Sabrina Maddeaux and Mike Moffatt dig into the federal government’s plan to dust off a forgotten policy from the 1970s: the MURB (Multi-Unit Residential Building) tax incentive.

Originally designed to boost Canada’s rental housing supply, this tax break could shift investor dollars away from pre-construction condos and existing homes toward building much-needed purpose-built rentals. But will reviving this old loophole really solve today’s housing crunch — or just create new problems? Sabrina and Mike unpack the history, the politics, and the unintended consequences of bringing MURBs back, and ask: Is this the fix we’ve been waiting for, or another policy déjà vu?

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Below is an AI-generated transcript of the Missing Middle podcast, which has been lightly edited.

Mike Moffatt: Sabrina, one thing you didn't know about me, but I'm pretty sure you could have guessed, is that I'm a big fan of cheesy movies. Back in high school, I saw this Jean-Claude Van Damme movie called Time Cop that wasn't objectively good, but I absolutely loved it in an ironic kind of way. It was this sci-fi movie about a police officer who had to make sure that people weren't abusing time travel. And one of the scenes in this movie sees Van Damme's character going back to the year 1929, and he has to arrest his former partner, who's traveled back in time and is attempting to profit off the stock market crash. I saw this back in the mid-90s, and ever since then, I've been thinking, like, where would I go if I wanted to do something like that, if I wanted to profit off of knowledge of past price changes?

I'm going to give you a scenario here. Suppose the two of us could go back in time 15 or 20 years and profit from our knowledge that home prices will absolutely go through the roof, particularly in the GTA. Now, I'm not sure why we wouldn't just go back in time and buy stock in Amazon or NVIDIA, but, you know, just play along with my scenario here. Let's suppose we're really committed to profiting from housing. So my question to you is: what would you invest in?

Sabrina Maddeaux: Well, I'm going to start by saying I have a little problem with the premise of the question in that I think, and I've always said, one of the biggest problems in our housing market in Canada is the psychology that housing is this vehicle to get rich quickly and that it always goes up. So I wouldn't want to travel back in time to be a part of the problem.

But, playing into your scenario here, if I were to do that, there are a few avenues that would have probably guaranteed some very, very, very healthy returns. One is investing in pre-construction condos and then flipping them at closing, which a lot of people did. And then the other one would be, you buy up a bunch of existing homes or condos and you rent them out, knowing that rental demand is absolutely going to go through the roof, particularly in areas where you're seeing a lot of international students. As we know, those uncapped numbers absolutely exploded, and the rental rates in cities near a lot of colleges and universities were going up by double digits year over year. So, between actual home price increases and rental increases, there are a few avenues to make a lot of money during that time period if you knew what was coming.

Mike Moffatt: Yeah, and I did have to change your personality a little bit in this scenario because I know I'm trying to get you to do things that you're against. But even with your existing personality or the personality I invented for this scenario, I noticed that building a bunch of apartment buildings wasn't on your list. So why is that?

Sabrina Maddeaux: Yeah, even an imaginary Sabrina wouldn't do that because it just seems way too difficult. I mean, if you're a mom and pop investor, you're not going to be investing in building large apartment buildings. And while there has been some rental construction growth, a lot of that has been these large buildings that you wouldn't have the capital to be able to invest in. And then on top of that, when you look at multiplex housing, all sorts of red tape and bureaucratic hurdles, which is part of why we're in the supply crunch we're in now, it just really wouldn't have been a feasible route for most people.

So, Mike, am I wrong in thinking that I would have been better off buying up existing homes and renting them out rather than building new ones?

Mike Moffatt No, not wrong at all. And that's exactly why mom and pop and small-scale investors made the decisions that they did, which created most of the rental stock over the last 20 to 30 years.

Back in the 1980s and 90s, we weren't creating much rental stock. And that started to change about 20 years ago and has really ramped up. But much of that has been high-rise projects that cost hundreds of millions of dollars. So you're not going to get mom and pops investing in that. And if you think that is the future, you're probably just going to go to the stock markets, the TSX and buy shares in a REIT or something like that. You're not going to physically do it yourself.

And you're absolutely right about all the red tape and other challenges. It was just so much easier for these investors to buy up existing homes rather than to start to try and create a bunch of apartments. So, the people who didn't have a time machine, but kind of did see this coming 15 or 20 years ago, basically followed the same logic; it just made a lot more sense to buy up buildings rather than trying to build new ones for purpose-built rental.

Sabrina Maddeaux: Now, according to a recent Substack piece you wrote, which we'll link to in the show notes, that's about to change. And that's because of the reintroduction of the MURB tax provision. So, Mike, what is MURB and how does it work?

Mike Moffatt: Yeah, so MURB, first of all, it stands for multi-unit residential building. The first question I always get asked when I talk about MURB is: What the heck does it stand for?

And the MURB program was something that the Liberal government put into place in 1974 to boost the supply of rental housing. And you can go back and read the budgetary speeches…Okay, maybe you don't want to do that. I think I'm the only person who does that.

Sabrina Maddeaux: I’ll try to find some time.

Mike Moffatt: Yeah, yeah, it'll be on your to-do list. It'll just be near the bottom.

But if you were to do that, you would find that the finance minister at the time, John Turner, was describing a housing situation that looks similar to ours: prices are too high, rents are too high, we're not building enough relative to population growth and things like that. You could take that speech and those comments from 1974, fast-forward them to 2024, and it would play just as well today.

And what this program does is it allows for mom and pop investors to build smaller apartment complexes. So think townhouses, three to six-story apartment buildings, and so on.

If you drive in any city in Canada and see an apartment building from the late 1970s, and once you start to look for them, you'll see them all over the place, chances are they were built through this program. Now, typically, it wasn't a single investor who would build these things, but a consortium would get together. So, you get a bunch of well-off doctors, dentists, lawyers, and so on, who would pool a bunch of money together and build one of these buildings.

What the provision does is it allows investors who build one of these rental buildings to write off expenses related to operating these buildings on their personal income tax. A lot of these expenses can flow through to their personal income tax, which lowers their tax bills. Now, they still have to pay capital gains when they sell the building. So, expensing these costs doesn't really reduce their taxes, but postpones them. But since $1 today is worth a lot more than $1, in five, 10, 15 years from now, postponing those taxes is really valuable. So what it did was create a big incentive to invest in small-scale apartment construction.

Sabrina Maddeaux: Now, can you break down what type of expenses we're talking about here?

Mike Moffatt: Yeah, so a lot of it is just the standard things you would think about operating an apartment. So, landscaping, janitorial, what have you. But the really valuable one here is something called a depreciation expense.

Now I'm going to go from economics to accounting, but depreciation takes into account that most physical assets wear out over time. For example, imagine you own a car. Over time, there's more wear and tear on that vehicle, it needs more maintenance, and the book value of that vehicle goes down. You might have bought a brand new car for $50,000 today that six or seven years from now might only be worth about $15,000 - $20,000 or so. That's depreciation. The book value of a physical asset goes down over time because it wears out and requires more maintenance.

For rental apartments, the same logic applies, but it's just for the building itself, not the underlying land. And a couple of years ago, the federal government increased the depreciation rate on rental building construction from 4% to 10% in order to spur rental construction. So what that means for the investor is - let's say the investor spends $10 million on building a new building. In the first year, the value of that building on paper goes down by 10% or $1 million. So you can expense that $1 million against your income; your income on paper is now $1 million lower than it otherwise would be. Now the building's only worth $9 million. Another year happens, you take another 10% off, which is now $900,000, and so on. So, you know, it does become a little bit less valuable over time, but being able to write all of these expenses off on your personal income tax is incredibly valuable to investors.

So you mentioned the condo piece. What it means now is that building one of these MURBs is incredibly tax advantaged, because you get a deduction now that you don't get if you buy an existing building. You don't get this deduction if you buy a pre-construction condo unit. In many ways, that's a really good thing.

You know, we've talked about the issues around investors buying up single-family homes and renting them out and how that makes it harder for first-time homebuyers to get into the market because they're competing with investors. So transferring those investor dollars from buying up homes, like our time cop scenario, to investing in new homes, that's a good thing.

The downside is that it's going to be really hard to get condos built, because condos are very reliant on investors putting up that pre-construction financing. So that is going to be a challenge here. And I think industry and government are going to have to work together to find new methods of financing condo construction.

So I would say this is mostly a good thing, but there are going to be some unintended consequences here that we need to think through.

Sabrina Maddeaux: Now, you mentioned this provision existed back in the 1970s. Do you see it operating the same way now as it did back then?

Mike Moffatt: Yeah, I do, with three big differences. So, the first is back in the 1970s, it was just easier to build these things. There was less red tape, development charges were a lot lower, things like that. If we look five to 10 years from now and find that MURB really didn't accomplish anything, that would be the reason. It will be because municipalities and provinces don't make it easy to build multiplexes and that kind of thing. For MURB to work, it has to be accompanied by reducing red tape, reducing development charges and things like that.

But let's assume that that happens, and we can actually build these things. One of the other big differences is that back in the 1970s, tax rates on some professionals, like doctors and dentists and lawyers, were much higher than they are now. So that tax deferral was worth a lot more. Now those groups have something called professional service corporations, which also reduces their taxes. So we might see a more diverse set of MURB investors.

And then finally, I think the mix of units is going to be different. I think it's going to be, if it works, more multiplexes and things like that, and probably fewer six-story apartment buildings, just because that seems to be the way that the industry is shifting.

Sabrina Maddeaux: But I have to ask, okay, so if the MURB program was such a great idea, then why did governments get rid of it?

Mike Moffatt: Yeah, so basically it died in the early 1980s. And oddly enough, the irony here is MURBs died, or were killed, because they worked.

MURBs work in the sense that they get a whole lot of apartments built because they're a tax shelter for wealthy people. The problem with MURBs, or why people don't like the MURB program, is that they're a tax shelter for wealthy people. So it's a double-edged sword here. And governments need to make sure that in the MURB program, they're not causing inequality to grow.

So I think that's one reason. The other reason is that back in the late 1970s, we saw a lot of not particularly sophisticated investors invest in these projects. And many of these projects didn't really make economic sense. But you had folks who were so enamoured with the idea of a tax shelter that they were willing to invest in, basically, crap.

It creates the conditions that if you're not a particularly sophisticated investor, you could get taken advantage of by groups that don't really have a very good project, but kind of sell you on the merits of a tax shelter. Back in the 1970s, to get this tax credit, the apartment had to be approved by the CMHC. So you basically had to go to the CMHC and say, “Okay, this is the thing I want to build, and this is what it's going to cost, and this is where I'm going to put it.” And the CMHC would offer you a certificate. So the federal government is going to have to put in some checks and balances so that they're not issuing certificates to really bad projects or really bad groups.

Sabrina Maddeaux: Yeah, that makes sense to me. Because even the scale of fraud and scams and people losing money these days is on an entirely different level. So if this is potentially going to open up to a broader pool of investors, those checks and balances are certainly necessary. Well, thank you, everyone, so much for watching and listening, and to our amazing producer, Meredith Martin.

Mike Moffatt: Now, if you have any thoughts or questions about Jean-Claude Van Damme movies, please send us an email to [email protected]

Sabrina Maddeaux: And we'll see you next time.