In the first half of 2025, the Canadian housing market showed minimal growth in new home construction compared to the previous year, failing to significantly address the pressing issue of affordable housing. While some regions experienced faster development, particularly for low-cost rental units, a broader trend of declining housing starts in major urban centers raised alarms among economists. In Ontario, specifically in Toronto, projections for 2025 indicated the lowest number of housing starts in three decades, as highlighted by the Canada Mortgage and Housing Corporation (CMHC). Deputy Chief Economist Tania Bourassa-Ochoa noted that ongoing slowdowns, especially in the homeownership sector, jeopardize future housing supply, workforce retention, and overall affordability. The systemic inefficiencies in the housing market, driven by high development costs and lengthy approval processes, necessitate significant reforms to foster a more favorable environment for increasing supply.
The CMHC’s Autumn Housing Supply report provided a detailed overview of confirmed housing starts for major markets including Toronto, Montreal, Calgary, and Vancouver. While the overall increase in housing units was minimal compared to 2024, certain cities like Calgary and Edmonton witnessed substantial growth in construction starts. Conversely, larger cities such as Vancouver and Toronto reported declines, suggesting stark disparities in housing market conditions across the country. The Greater Toronto Area experienced a notable decline, with July 2025 reporting a 25% drop in housing starts, further illustrating the contrast between healthy and struggling markets nationwide. Robert Hogue, an economist at the Royal Bank of Canada, emphasized the difficulty of discussing a singular housing market in Canada, as local conditions vary significantly.
Earlier reports from the Parliamentary Budget Office revealed that Canada is set to build approximately 2.5 million new homes by 2035, which falls short of the estimated 3.2 million needed within the next decade. In response to these challenges, Prime Minister Mark Carney introduced measures aimed at hastening home construction, including the removal of certain interprovincial trade barriers that could enhance housing starts. Despite Carney’s ambitious goals, skepticism remains among economists regarding the feasibility of reaching these targets. Robert Hogue cautioned that the lofty ambitions, while necessary, might lack the practicality needed to address systemic shortages in affordable housing effectively.
While adding new homes is crucial to improving affordability, economists maintain that a mere increase in supply may not suffice if demand continues to outstrip construction rates. A scenario where buyer demand exceeds available housing could exacerbate affordability challenges, causing prices to soar and potentially sidelining many prospective homeowners. In response, Conservative Party Leader Pierre Poilievre urged Carney to consider alternative strategies to combat housing unaffordability, including initiatives to lower sales taxes.
The construction industry faces a range of significant hurdles that could hinder the launch of new housing projects, including high costs, labor shortages, and cumbersome regulatory processes. Addressing these obstacles could enable developers to meet federal targets more effectively. Bourassa-Ochoa pointed out that industry sentiments remain subdued due to financing difficulties, soaring construction costs, and complex municipal processes that can create lengthy approval delays. Enhanced support and streamlined processes for developers are essential to boost construction activity and alleviate the housing shortage.
In summary, the current housing dynamics in Canada reflect a complex interplay of varying local market conditions, ongoing systemic challenges, and ambitious yet potentially unrealistic goals for housing growth. While certain regions are thriving in construction, key urban areas are facing declines that jeopardize affordability and future supply. A collective effort from government, industry stakeholders, and economists will be critical to enact meaningful reforms, streamline development processes, and ultimately ensure a healthier housing market capable of meeting the diverse needs of Canadian citizens in the years to come.
