Condo slowdown and policy shifts reshape Canada’s housing market, impacting supply and affordability
Toronto is on track for its lowest level of housing starts in three decades, a development that could have profound implications for future housing supply and affordability, according to the Canadian Mortgage and Housing Corporation (CMHC).
The city’s homebuilding activity, driven mainly by a 60 per cent drop in condominium starts, has fallen to its lowest point since 1996 on a per-capita basis.
This sharp decline is attributed to a pullback in investor demand, higher interest rates, and a challenging financing environment, as reported by CMHC.
While purpose-built rental construction is surging in several markets—bolstered by government support and incentives—this has not been enough to offset the steep drop in condominium apartment starts, particularly in Toronto, Vancouver, and Montreal, as highlighted by CMHC’s fall housing supply report.
Tania Bourassa-Ochoa, deputy chief economist at CMHC, noted a significant rise in pessimism, attributing it to economic uncertainty, trade issues, and inflationary pressures.
She emphasized that these concerns are particularly relevant for construction materials, which could be affected by tariffs.
Bourassa-Ochoa explained that “a lot of that is due to the current economic uncertainty, the trade situation, [and] inflationary pressures.”
The impact on construction materials, she added, is especially notable given the potential effects of tariffs.
Vancouver’s housing starts also declined in the first half of the year compared to 2024, with weak pre-construction sales leading to the cancellation and pausing of projects that failed to meet the necessary 70 per cent threshold for financing, as noted by CMHC.
The agency also identified development charges as a major barrier, estimating that 100,000 approved homes in the region are currently stalled due to related difficulties.
New provincial regulations, effective Jan. 1, 2026, will allow homebuilders to defer up to 75 per cent of development charges until occupancy.
Montreal, meanwhile, saw an increase in housing starts in the first half of 2025, primarily due to active rental apartment construction.
However, the growth was tempered by a slowdown in the condominium market, with units under construction at the lowest level in 15 years.
CMHC noted that newly built condo units are too expensive for many buyers, causing developers to move away from this housing type.
The agency emphasized the need for a significant increase in new units with prices “aligned with local incomes” to counter deteriorating affordability.
Outside the largest markets, cities like Calgary and Edmonton reported gains in housing starts, supported by strong population growth, favourable zoning, and municipal policies.
Calgary, for instance, approved ten office-to-residential conversion projects with the potential to add 1,100 homes downtown, as per CMHC.
Edmonton’s increases in both apartment and single-detached construction are attributed to new municipal policies supporting more housing supply and downtown growth.
However, a slowing pace of apartment completions in Edmonton could signal that development is being restricted by a shortage of skilled labour.
CMHC’s report underscores that systemic changes are necessary to create an environment with more cost and time certainty to increase supply.
High development charges and time-consuming approval processes continue to burden developers, and in the long term, the slowdown in construction could put further pressure on affordability when economic conditions improve and demand ramps up again.
