Housing crisis may get worse, new forecasts show

OTTAWA — Canada’s housing crisis may get worse before it starts to show much relief, as new projections say that the number of housing starts will actually decrease this year and next.  

These new estimates, from both public and private sector housing forecasts, contradict political promises from all levels of government to boost supply of homes across the country.  

The Canada Mortgage and Housing Corporation (CMHC) forecasts that the total number of housing starts in Canada this year will be about 237,800, down from 245,367 in 2024. CMHC, a Crown corporation that acts as Canada’s national housing agency, also forecasts a drop to no more than 227,734 next year and 220,016 in 2027.  

Those forecasts are all below the 267,000 annual output for housing starts from 2021-22 and less than half the 480,000 that the CMHC says Canada needs to add each year over the next decade.   

The recent drops in building are particularly acute in British Columbia and Ontario, where housing starts are down eight and 25 per cent respectively, despite the notoriously high housing prices in Vancouver and Toronto, those provinces’ largest cities.  

“Affordability remains a major issue and new construction is slowing,” the CMHC wrote in its recent update report on the country’s housing market.  

Many economists, meanwhile, say that more new builds would mean a number of positives: they create more places for people to live, put downward pressure on housing prices by boosting supply, and create economic activity and jobs through construction and the various purchases of furniture, appliances and other items that new homeowners typically make. New buildings are also a boon for government coffers at all three levels.  

The CMHC isn’t the only voice sounding the alarm that the country’s housing stock isn’t growing fast enough.    

Mike Moffatt, who was an economic advisor to former prime minister Justin Trudeau, wrote this week that governments “do not appear to be getting the message, nor do they seem willing to take the necessary steps to address the crisis.”  

During the recent federal election, all the major parties unveiled plans to boost the number of new homes, designed to make housing more affordable and to help deal with the increasing homeless problem in many cities.  

So why has there been little to no progress?  

Analysts say there’s often a lag of a dozen years or more from when a plot of land has been identified for a new home, subdivision or apartment building to when people are living there. Housing analysts say that’s especially the case when roads and key services — sewer, water, electricity — need to be added.  

The current market is also being affected by increased interest rates, higher unemployment, higher labour costs and prices for steel, lumber and other materials, the uncertainty from trade tensions with the United States, slower population growth and a sharp decline in pre-sales. In most Canadian cities, finding convenient land to build on is also an ongoing challenge.  

Developers and some analysts also point to taxation and development charges, which are typically paid by developers, as increasing costs that are passed on to buyers and continue to create barriers for builders.  

While many of these barriers and cost increases are not new, said Paul Smetanin, president of the Canadian Centre for Economic Analysis, the downturn began in 2024 and has accelerated throughout 2025.  

Smetanin, who has been following the Canadian housing market closely for years, said investors have retreated from some areas of the residential building market, particularly pre-construction condominiums. Some developers, meanwhile, are often willing to sit on land approved for residential construction until market conditions improve.  

Housing analysts agree that taxes and red tape, both of which involve all three levels of government, also play a big role. Municipalities, in particular, tend to rely heavily on the taxes collected from housing construction and development charges. Some municipalities, in response to the twin crises of housing and affordability, have started to lower their fees in recent months.  

Debt-plagued governments are not keen to sacrifice sources of revenue, but a decline in construction also carries a steep price. Beyond the social costs of too few homes, Moffatt calculated that the three levels of government are collectively poised to lose more than $6 billion in tax revenue from the decline in new home construction in the Greater Toronto Area alone.  

During the recent federal election campaign, the major parties were aligned that Canada needed many more new homes, and lower prices for shelter, and that the issue was a top priority. Each offered an ambitious strategy.  

The Liberals promised that 500,000 homes would be built annually over the next 10 years, triggering a level of residential construction not seen since the years following World War II.  

Prime Minister Mark Carney also promised a new Crown corporation to be called Build Canada Homes that would provide about $25 billion in public financing for prefab and “affordable” housing, plus $10 billion in low-rate capital. Build Canada Homes would take responsibility for some programs now under CMHC and the new organization would rely on some public land for new builds.  

The Liberals also promised to eliminate the GST on new homes that sold for less than $1 million to first-time buyers and to cut in half the significant municipal development charges for multi-unit residential construction.  

Gregor Robertson, Canada’s minister for housing and infrastructure, did not respond to interview requests.  

The Conservatives, meanwhile, promised to boost the housing supply by tying federal infrastructure funds to municipal housing targets and penalizing communities that wouldn’t take steps to increase new construction.  

The Tories also vowed to get rid of the GST on newly built homes valued at up to $1.3 million for all buyers.  

The New Democrats’ plan called for 3 million new homes before the end of the decade, part of a $16 billion national housing strategy.  

National Post

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