Builders in Canada got started on roughly the same number of new homes in the first half of 2025 compared to a year prior, according to a new report, and it’s not enough to put a dent in the country’s lack of affordable housing.
Although some markets are building homes faster than others, and there is a surge in construction specifically for low-cost rental units, economists suggest the overall declines in some of Canada’s largest cities are a cause for concern.
In Ontario, and specifically Toronto, 2025 is on pace to see the lowest number of housing starts in three decades, according to the Canada Mortgage and Housing Corporation (CMHC).
“The ongoing construction slowdown in the homeownership market poses risks to future housing supply, workforce retention, and affordability,” said Tania Bourassa-Ochoa, deputy chief economist for the CMHC.
“Developers are frequently burdened by high development charges and time-consuming approval processes. Systemic changes to Canada’s housing system are necessary to create an environment with more cost and time certainty to increase supply.”
The CMHC released its Autumn Housing Supply report Tuesday, which includes confirmed housing starts in the first six months of 2025 for Toronto, Montreal, Calgary, Vancouver, Edmonton, Ottawa and Halifax.
While on average, the number of homes that began construction across all markets was only slightly higher than the same period in 2024, larger spikes in housing starts at the start of the year were seen in Calgary, Edmonton, Montreal and Halifax.
Canada’s larger cities like Vancouver and Toronto, however, saw declines.
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This year, the Greater Toronto Area is on pace to see its lowest annual housing starts in 30 years, the CMHC says.
In July alone, the CMHC says housing starts dropped 25 per cent compared to the same month in 2024.
“I think what it really illustrates is the contrast that we have across Canada for different housing situations. We’ve got significant weakness, particularly in the GTA, in terms of new home construction, whereas other parts of the country are still fairly robust,” says Robert Hogue, assistant chief economist at the Royal Bank of Canada.
“And so it’s very difficult now to talk about one housing market in Canada, where the situation can vary quite dramatically.”
A previous report by the Parliamentary Budget Office released in August found Canada is on track to build 2.5 million new homes by 2035, which would be roughly 700,000 shy of the 3.2 million needed over the next 10 years.
Prime Minister Mark Carney has launched a series of measures aimed at accelerating home construction to meet these targets. One approach is removing some interprovincial trade barriers, which the CMHC has separately reported could boost housing starts.
Although Carney’s home-building ambitions are optimistic, not all economists think these goals will be easily reached.
“I’ve never felt optimistic about meeting those very, very lofty targets. It’s great to have very strong ambitions to build a lot more because we know on the housing supply, from a fundamentals perspective, we need a lot more housing, to grow our housing stock, especially of affordable housing,” says Hogue.
“Targets like doubling the number of housing starts or completions has never been that realistic when you talk to folks in the industry. There are some capacity issues, very real reasons why it’s very difficult to scale up construction.”
Housing affordability has also been a challenge for Canadians, and economists say adding more supply to the market will help to lower rental prices and make owning a home more attainable.
If the demand for homes outpaces the rate of construction, then affordability could become even more challenging if there are more buyers than available homes, as prices could spike and push many out of the market.
Conservative Party Leader Pierre Poilievre on Tuesday called on Carney to adopt his party’s plans to tackle housing affordability, including lowering some sales taxes.
Home builders may not be starting as many projects as needed because of costs, labour shortages and other obstacles. Making it easier and more cost-effective for developers to get started could help to meet the federal government’s targets.
“There’s a lot of challenges that developers are facing when it comes to financing costs, construction costs, development charges, complex municipal processes in some regions, long delays for approvals in some municipalities as well,” says Bourassa-Ochoa.
“We are hearing from the industry, we’re hearing from developers that the sentiment is definitely on the lower side.“
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