The Canada Mortgage and Housing Corporation (CMHC) has terminated its agreement with the City of Red Deer for millions of dollars in housing funds, but city council is refusing to return the grant money allocated so far.
CMHC announced it is cancelling its Housing Accelerator Fund (HAF) agreement with Red Deer effective Friday afternoon, as the organization found that, as of July 21, 2025, the city was “non-compliant with a mandatory requirement of the program’s second funding round.”
The City of Red Deer and the federal government signed an agreement for $12 million in HAF funding in February 2025, with a series of conditions, but just $3.2 million has been allocated to date.
According to CMHC, Red Deer’s commitments “have not been met.”
“Our government is committed to removing barriers and cutting red tape to enable more housing development in communities across Canada,” federal Housing and Infrastructure Minister Gregor Robertson said in a statement.
“We are also committed to demonstrating the results of the Housing Accelerator Fund and being transparent, while maintaining the integrity of agreements, as we work to build more homes across Canada.”
According to city council documents, the second round of HAF funds was conditional on Red Deer adopting zoning rules to allow “four units as of right” on a single residential property.
In July 2025, Red Deer city council unanimously supported a motion to not move ahead with the zoning changes and instead commit to finding other ways to build affordable housing in the community.
Documents said the City of Red Deer has been advocating to the federal government that moving forward with the zoning changes to allow four units on a single lot “was unacceptable to our residents,” and that other existing city initiatives can be used for “densification and increasing the number of housing units.”
Get breaking National news
For news impacting Canada and around the world, sign up for breaking news alerts delivered directly to you when they happen.
Council documents also show two letters sent to Robertson by former Red Deer mayor Ken Johnston in July and October 2025, advocating that the minister reconsider the zoning conditions.
“In the central Alberta housing market, no other community has blanket requirements for 4-units as of right,” Johnston wrote in a July 21 letter.
“We are concerned this may deter people from living and building in Red Deer, driving them to the nearby communities where they will have certainty of the types of building that can be built on the adjacent property.”
Johnston did not run for re-election in the fall and was succeeded by Cindy Jefferies.
CMHC sent a letter to Jefferies and the city manager, warning the city was in breach of the conditions in the funding agreement and would need to repay the first installment of $3 million in HAF funds.
In an interview with Global News, Jeffries said the city is seeking a “softening” in the conditions to receive the housing funds.
She noted residents were clear that changing the city’s zoning to allow for four units on a single property was “not going to fly.”
“I’m confident we can deliver on the units we said we could in the categories as outlined in our application without the blanket zoning piece,” Jefferies said.
“All we’re asking for is some ease and the opportunity to put that $12 million to use in our community.”
On Tuesday, city council voted in favour of a motion from Coun. Chad Krahn, which said the City of Red Deer will not return the HAF money until “a discussion has occurred” with Minister Robertson.
“There are scenarios where we return the money, but there are not scenarios where we return the money next week,” he said in his debate Tuesday.
“This is something that can unlock incredible private investment in our community.”
Jeffries told Global News that city estimates show the HAF money could leverage up to $40 million in private investment in Red De
Red Deer city manager Tara Lodewyk warned councillors they run the risk that withholding the funds could impact other federal grants.
Council voted 7-2 in favour of the motion with councillors Jaelene Tweedle and Kraymer Barnstable voting against.
“The longer we go on with this, the longer that cloud hangs over the community,” he said. “I think we need to start preparing for how do we make housing work in the city of Red Deer without the federal dollars.”
According to Jefferies, staff from her office met with federal officials to “go through what was happening,” and she believes there is room for negotiation and discussion.
Jefferies pointed to other zoning initiatives undertaken by city council, including allowing house suites as a permitted use, and backyard suites in up to 15 per cent of the single-family housing stock in the community.
Documents show duplexes are also allowed as a discretionary use with no maximum limitations.
“We’re here to work with the federal government to help them reach a point that can empower our community to build housing,” she said.
“It’s a huge need here and we want to get on with that job and I trust they’ll work with us to get that done.”
© 2026 Global News, a division of Corus Entertainment Inc.
