Executive Summary
Toronto’s June 2025 sixplex reforms quietly rewire the economics of small-scale multifamily development. In nine initial wards, a “detached houseplex” with up to six units is now permitted as-of-right, paired with sweeping fee relief and access to high-leverage CMHC financing. The catch is hidden: commercial underwriting and mandatory surety bonding filter who can execute.
For investors, this is a rare window to assemble a pipeline of “missing middle” rentals in A-locations with predictable entitlements, material cost savings, and strong tenant demand. Because we have access to financing and bonded contractors, we can help you step directly into this opportunity with an integrated, end-to-end delivery model: Design. Build. Rent. Manage. Repeat.
1) What the New Regulation Actually Does
The by-law passed June 25, 2025 creates a new, as-of-right building type, the detached houseplex, on a single lot with up to six dwelling units, where at least one unit is above another.
Key mechanics:
Geography, Phase 1: Applies in nine wards, all Toronto & East York Community Council wards (Parkdale-High Park, Davenport, Spadina-Fort York, University-Rosedale, Toronto-St. Paul’s, Toronto Centre, Toronto-Danforth, Beaches-East York) plus Ward 23 (Scarborough North). Other wards may opt in later.
As-of-right status: No site-specific rezoning if you meet the standards. This reduces entitlement risk, timelines, and soft costs.
Detached-only limitation: You can build new or convert a detached house. Semi-detached and townhouse conversions to 5–6 units are expressly prohibited.
Height and form: Up to four storeys and a 10.5 m height limit, which is a 0.5 m increase over prior multiplex rules, specifically to enable livable lower-level units.
Basement livability requirements for the extra height: The lowest level must contain a dwelling unit with a minimum 2.4 m ceiling height and ceiling joists 1.0 to 1.5 m above established grade to allow larger windows and daylight.
Parking minimums eliminated: Multiplexes have no minimum on-site parking requirements.
Definitions updated: In residential zones, “apartment building” now starts at seven units. Six units max keeps you in multiplex territory.
Standards still apply: Setbacks, lot coverage, soft landscaping, and tree protection remain binding to preserve neighbourhood character.
2) Why the City Did It, and Why It Is Politically Fraught
Policy drivers: This is the next step in the City’s Expanding Housing Options in Neighbourhoods (EHON) program and aligns with the Provincial Planning Statement, PPS 2024, on providing a range and mix of housing.
Federal lever: The sixplex reform is a milestone under Toronto’s 471.1 million dollar Housing Accelerator Fund agreement with CMHC. Because Council limited approvals to nine wards, not city-wide, the federal government has threatened to withhold about 30 million dollars per year until the City meets the original ambition. Politics will influence how fast this expands.
Pilot context: Ward 23’s pilot concluded without a built sixplex, which means little empirical data, heightening scrutiny on implementation quality in this early phase.
3) The Financial Game-Changer: Fees Wiped Away
Historically, building a fifth unit triggered Development Charges on all units, which instantly killed the economics for most small sites. That cliff is gone.
Development Charges waiver: All units in a sixplex are exempt from DCs.
Parkland dedication fees waived: Additional upfront savings on top of DCs.
Impact: With per-unit DCs for a two-bedroom reaching roughly 80,690 dollars, the total exemption can exceed 480,000 dollars on a sixplex. This single policy shift flips many sites from marginal to viable.
4) Financing: The New Bottleneck, and How to Navigate It
Because 5 plus unit properties are financed as commercial residential, CMHC MLI Select becomes the fulcrum for most sixplex capital stacks.
Why MLI Select matters:
Up to 95 percent loan-to-cost and amortizations up to 50 years
Preferential terms tied to affordability, energy efficiency, and accessibility scores
The hidden hurdle:
Mandatory surety bonding is non-negotiable with MLI Select. You must provide a Performance Bond and a Labour and Material Payment Bond, typically 50 percent of the construction contract each. Surety is underwritten like credit, not insurance, and requires strong financials, organizational controls, and demonstrable construction capability.
How we help:
We work with bonded general contractors and surety partners.
We sequence pre-qualification and bond-readiness, including financials, work-in-progress schedules, resumes, project budgets, cash flow, and procurement plans, before CMHC underwriting.
We structure the capital stack for speed: land loan or cash, construction debt, and a take-out with MLI Select at stabilization.
5) Where Investors Win: Three Scalable Strategies
Develop-to-Core, Hold and Refinance
Acquire, entitle by-right, build, lease, refinance with MLI Select, and hold as a stabilized, inflation-hedged income asset.
Benefit from fee waivers, long amortizations, and resilient urban rental demand.
Merchant Build, Build-to-Sell
Execute to occupancy and sell to yield-seeking private investors or family offices.
Premiums are available for brand-new, code-advanced multiplexes with professional management and low operating expenses.
Joint Venture with Homeowners, Equity-Light Growth
Co-develop with landowners in permitted wards, swapping development expertise and capital access for profit participation.
Reduce land carry and expand your pipeline while aligning incentives.
6) Your Investor Playbook: Design. Build. Rent. Manage. Repeat.
Feasibility and Site Selection
Target the nine wards first, as-of-right. Confirm zoning layer and houseplex permissions on the exact lot.
Screen for buildability: lot width and depth, grade for daylight to the lower unit, tree constraints, utilities, adjacent sensitive uses, and heritage overlays.
Prefer transit-proximate, school-served locations with neighbourhood retail, since these submarkets rent up fast.
Concept Design and Compliance
Optimize within the 10.5 m envelope and four-storey massing.
Ensure the lowest-level unit meets the 2.4 m ceiling and joist-above-grade criteria.
Right-size the unit mix: combine family-sized 2 to 3 bedroom units with efficient 1 bedroom units or studios on narrow lots.
Avoid de facto rooming house designs, for example 8 to 9 bedrooms in one unit with minimal common space. The City is watching for misuse.
Capital Stack Engineering
Bridge capital for land and soft costs.
Construction loan with a bonded general contractor and a fixed-price or GMP contract where feasible.
Take-out via CMHC MLI Select at stabilization. Pre-structure affordability, efficiency, and accessibility features to maximize MLI points.
Bond-Readiness and Procurement
Prepare developer financials, references, and organizational controls for surety underwriting.
Lock in a bonded general contractor with demonstrated multiplex experience.
Sequence trades with Labour and Material Payment Bond coverage to derisk liens and cash flow.
Permitting and Delivery
Stay as-of-right to avoid Committee of Adjustment delays unless a variance materially enhances feasibility.
Expect 12 to 18 months for construction. Front-load procurement of long-lead items.
Maintain quality control on acoustics, building envelope, and durable finishes to minimize future operating costs.
Lease-Up and Asset Management
Pre-market during finishing and target families, essential workers, and multi-generational demand.
Use professional property management to stabilize quickly, reduce repair cycles, and document net operating income performance.
Refinance on the income approach. Long amortization smooths DSCR and boosts cash-on-cash returns.
7) Unit Economics and Sensitivities, Conceptual
Think in terms of levers, not guesses.
Revenue levers: Bedroom count, walkability and transit, school catchments, in-unit laundry, private outdoor space, and thermal and acoustic comfort.
Cost levers: DC and parkland exemptions, structured procurement, bonded GC pricing, and energy specifications that reduce utilities and improve MLI scoring.
Financing levers: Loan-to-cost, amortization length, rate hedging, interest carry during construction, and refinance timing.
Cap rate context: New-build multiplexes have stabilized near a 6 percent cap rate in several cases. Combined with long-amortization insured debt, the result can be attractive cash yields and strong return on equity at stabilization.
Sensitivity tests to run: Plus or minus 10 percent hard costs, plus or minus 50 basis points on cap rate, plus or minus 5 percent rent, a 3 to 6 month schedule slip, and a 100 to 150 basis point interest-rate shock on construction debt.
8) Site Fit: What Good Bones Look Like
Lot geometry: 8.5 to 10 plus metres width and 30 plus metres depth make planning smoother. Corner lots offer light, entries, and services advantages.
Topography: A gentle front-to-back slope improves lower-level daylighting while meeting joist-above-grade rules.
Trees and setbacks: Early arborist review to design around protected trees and avoid delays.
Servicing: Capacity for additional units. Avoid costly relocations of mains or transformers where possible.
Neighbourhood fabric: Mixed house typologies, lane access, and existing multiplex presence reduce friction and ease approvals.
9) Common Pitfalls, and How We Avoid Them
Underestimating surety requirements: We pre-qualify with surety and use bonded general contractors to keep CMHC financing on track.
Designs that read like apartments: We maintain a house-scale massing with articulated facades and contextual materials.
Over-optimistic schedules: We lock long-lead items early and hold contingency for inspections and utility tie-ins.
Ignoring soft landscaping and tree protection: We integrate landscape early to satisfy site plan standards and avoid redesigns.
Parking assumptions: With no minimums, do not waste floor area on unnecessary stalls unless market-specific.
10) Policy and Process Watch-Items
Ontario Land Tribunal appeal windows: A standard 20-day period post-passage applied. Track any area-specific appeals before closing on sites.
Ward opt-ins: Expansion beyond the nine wards will likely be lumpy and political. Early proof-of-concept in permitted areas helps momentum.
City monitoring: Expect attention to infrastructure capacity and use and occupancy. Build to the spirit and letter of the rules.
11) Scaling Strategy: From One to Many
Templates and prototypes: CMHC’s National Housing Design Catalogue includes a sixplex concept, with an accessible-ready unit, that can jumpstart design and boost MLI scoring.
Standardized specifications: Repeatable floor plates, mechanical systems, and finish packages compress design time and reduce change orders.
Portfolio advantage: A stabilized sixplex portfolio in prime wards compounds value, with lower vacancy risk, better operating margins, and institutional buyer appeal for exits.
12) Why This Window Will Not Stay Open Forever
Land repricing: As-of-right sixplex potential will be capitalized into land values over time. Early movers capture the delta.
Policy drift risk: Federal-municipal tension around city-wide rollout could affect timing. Delivering high-quality early projects reduces the narrative risk.
Construction capacity: As more players enter, bonded GC bandwidth tightens. Securing teams now is a competitive moat.
13) How We Partner With You
Because we already have access to financing channels and bonded contractors, we can compress your learning curve and timelines.
Our integrated mandate:
Feasibility and acquisitions: Rapid site screens and offer strategy anchored to post-DC-waiver economics.
Design and approvals: As-of-right designs that meet the 10.5 m envelope and livable lower-level criteria.
Capital stack and bonding: Pre-qualify with surety, structure construction debt, and secure MLI Select take-outs.
Construction delivery: Bonded GC execution with cost control, schedule discipline, and quality assurance.
Lease-up and management: Family-friendly unit mixes, professional leasing, and data-backed NOI stabilization.
Repeat: Build a pipeline that compounds returns and bargaining power with lenders and trades.
Conclusion: A Small Building With a Big Job, and Big Potential
Toronto’s sixplex reform is more than a zoning tweak. It is a coordinated policy shift with powerful financial tailwinds, including DC and parkland fee waivers, as-of-right entitlements in top-tier neighbourhoods, and transformational CMHC financing. The gating factor is execution: commercial underwriting and mandatory surety bonding reward experienced, well-structured teams.
If you want to convert these rules into durable equity and cash flow, the strategy is clear. Target the nine wards. Keep designs house-scaled and code-forward. Secure bonding and MLI Select early. Deliver family-ready rentals where demand is deepest.
We are ready to help you move from concept to keys, to design, finance, build, lease, and manage, then repeat at scale.
If you would like us to send you a list of potential candidates or to run a quick feasibility on an address or assemble a short-list of target lots, we can start this week.
Glossary
Policy and Zoning
As-of-right: A project that meets preset zoning standards and can be approved without a site-specific rezoning. Reduces entitlement risk, time, and soft costs.
Detached houseplex: A detached residential building with up to six dwelling units on a single lot, where at least one unit is above another. Sixplexes are one type of houseplex.
Sixplex: A low-rise building containing six self-contained dwellings on one lot. Treated as a multiplex, not an apartment building, under the new rules.
Multiplex vs. apartment building: In residential zones, multiplex covers up to six units. An apartment building begins at seven or more units.
Geographic scope, initial rollout: As-of-right sixplex permissions currently apply in nine wards, all Toronto & East York Community Council wards and Ward 23 Scarborough North. Other wards may opt in later.
Committee of Adjustment, CoA: The municipal body that considers minor variances from zoning standards. Staying as-of-right avoids this process.
Ontario Land Tribunal, OLT: Provincial tribunal that hears planning appeals. New by-laws typically face a 20-day appeal window after passage.
Expanding Housing Options in Neighbourhoods, EHON: City program enabling missing middle housing, including laneway suites, garden suites, fourplexes, and now sixplexes.
Provincial Planning Statement, PPS 2024: Provincial policy that directs municipalities to provide a range and mix of housing options and densities.
Housing Accelerator Fund, HAF: A federal CMHC program providing 471.1 million dollars to Toronto, contingent on milestones that include enabling sixplexes.
Setbacks: Minimum required distances between a building and property lines.
Lot coverage: The portion of a lot covered by buildings, expressed as a percentage.
Soft landscaping: Vegetated areas such as lawns, gardens, and tree beds that are required to maintain green space and stormwater performance.
Established grade: The average grade around a building used for measuring height and basement conditions.
Basement livability rules: For the 10.5 metre height allowance, the lowest level must include a dwelling unit with minimum 2.4 metre ceiling height and ceiling joists 1.0 to 1.5 metres above established grade, allowing larger windows and daylight.
Parking minimums eliminated: The by-law removes minimum on-site parking requirements for multiplexes, improving design flexibility on small lots.
Tree protection: City rules that safeguard existing trees and root zones during development, often requiring arborist reports and protective measures.
Fees and Municipal Finance
Development Charges, DCs: City fees on new residential units used to fund infrastructure. All units in a sixplex are now exempt.
Parkland dedication fees: Contributions required for parks and open spaces. Sixplex units are exempt under the new policy.
Financing and Underwriting
CMHC: Canada Mortgage and Housing Corporation, the federal housing agency that provides mortgage loan insurance and programs such as MLI Select.
MLI, Mortgage Loan Insurance: Insurance that protects lenders on multi-unit residential mortgages. For 5 plus unit projects, MLI Select is the flagship product.
MLI Select: CMHC’s insured financing program for 5 plus unit purpose-built rentals. Offers up to 95 percent loan-to-cost and up to 50-year amortization, with preferential terms tied to affordability, energy efficiency, and accessibility scoring.
Loan-to-cost, LTC: The loan amount as a percentage of total project cost. Higher LTC reduces required equity.
Amortization: Length of time used to repay the loan for payment calculations. Longer amortization reduces monthly debt service.
Take-out financing: Long-term permanent financing that replaces construction debt when a project is stabilized, often via CMHC MLI Select.
Commercial residential financing: Lending category for 5 plus unit properties with underwriting focused on building income, debt service metrics, and sponsor strength.
Debt service coverage ratio, DSCR: Net operating income divided by annual debt service. A key covenant for loan approval.
Pro forma: A forward-looking financial model that projects construction costs, rents, operating expenses, and returns.
Income approach to valuation: Method that values a property based on stabilized net operating income and market capitalization rates.
Surety and Contracting
Surety bonding: Third-party guarantees that protect owners and lenders during construction. Required for CMHC-insured projects.
Performance Bond: Guarantees completion according to the construction contract, typically 50 percent of contract value.
Labour and Material Payment Bond, L&M Bond: Guarantees payment to trades and suppliers to prevent liens, typically 50 percent of contract value.
Bonded general contractor: A GC prequalified by a surety to provide required bonds. Often essential to access CMHC financing.
Bond readiness: The documentation and financial strength a developer or GC must demonstrate to obtain surety bonds, including financial statements, work-in-progress schedules, resumes, and contracts.
Fixed-price contract: A construction contract with a set price for defined work, transferring some cost risk to the builder.
GMP, Guaranteed Maximum Price: A contract type that caps the owner’s cost exposure while allowing shared savings and adjustments for defined contingencies.
Construction lien: A legal claim by unpaid contractors or suppliers against the property. L&M Bonds help protect against liens.
Design and Operations
House-scale massing: Architectural design that makes a sixplex read like a large house, not a mini-tower, through height, stepbacks, and contextual materials.
Purpose-built rental, PBR: Housing developed specifically as long-term rentals, not condominium conversions.
Accessibility features: Design elements that improve access, such as step-free entries and adaptable bathrooms. Can improve MLI Select scoring.
Energy efficiency features: Upgrades that reduce energy use and operating costs, supporting MLI Select points and tenant appeal.
Affordability criteria: Rent or income targeting that qualifies the project for higher MLI Select scores and better terms.
Lease-up: The period when new units are marketed and rented to reach stabilized occupancy and income.
Stabilization: The point at which a property reaches steady occupancy and NOI suitable for permanent financing.
Net operating income, NOI: Income after operating expenses but before debt service and taxes.
Cap rate: The ratio of NOI to property value, used to compare returns and set valuations.
Investment Strategies
Develop-to-core, hold and refinance: Build, stabilize, refinance with long-term insured debt, and hold as an income asset.
Merchant build, build-to-sell: Build to completion and sell to an investor seeking yield from a stabilized asset.
Buy, build, refinance: Acquire land, construct with bridge or construction financing, then refinance based on stabilized value, often recovering much of the initial equity.
Joint venture, JV: Partnership structure that combines a landowner or capital provider with a development partner, sharing risk and returns.
Build-to-rent, BTR: Development model focused on creating and holding rental assets rather than selling units.
Early mover advantage: Capturing value before land prices fully reflect sixplex entitlements and before construction capacity tightens.
