A new report shows home construction in Canada is expected to slow in the coming years, potentially worsening the country’s ongoing housing affordability crisis. 

In a report released last week, the Canada Mortgage and Housing Corporation says economic uncertainty, rising inventories of unsold homes and sharp drop in condominium presales are expected to weigh down new home construction over the next several years. 

After strong growth in housing starts in 2025, CMHC is forecasting that housing starts will decline nationally from 2026 to 2028, due to high construction costs, tighter financing conditions, weaker demand and developers postponing projects. 

Much of the slowdown is expected to come from the condominium sector, particularly in major markets such as Toronto, where presales of new units have dropped sharply.

Because developers typically need to sell a large share of units before securing construction financing, weaker presales are causing some projects to be delayed or cancelled. These pressures could weaken the pipeline of new homes being planned and built for buyers, particularly in major cities, the report stated. 

Housing activity is also diverging across regions. CMHC expects construction and home sales in Ontario and British Columbia to remain below their historical averages, while markets in the Prairies and Quebec are projected to remain stronger in the near term. 

In 2025, rental construction drove new housing supply to nearly twice the 10-year average, according to the report. 

The agency noted that short-term slowdowns in construction can occur even when Canada still faces a broader housing shortage, because housing supply adjusts slowly. Projects can take years to plan and build, meaning temporary imbalances between supply and demand are common in the market. 

Rental market 

Despite a predicted slowdown in construction, Mike Moffatt, housing expert and founding director of the Missing Middle Initiative, said it’s a good time for renters over the next few years, as rental supply comes into the market. 

“There is a lot of inventory coming online at a time where the federal government has cut back on immigration targets, cut back on the number of international students and so on,” Moffatt said in an interview with iPolitics. 

Because of that, developers are taking a “wait and see” approach in condominium projects, but in the meantime, Moffatt said renters could see an increase in affordability. 

“We should see increased vacancy rates, so that allows existing renters to either maybe negotiate down their rents,” Moffatt said. 

While rents in Canada have declined for 17 consecutive months, Moffatt noted a potential risk is that rents may not be high enough to justify building new apartment units. 

CMHC also reported that some households are delaying moving out on their own due to high housing costs and uncertain job prospects. The agency said this “suppressed household formation” has helped ease pressure on rental markets in some cities. 

Slow growth in economy and uncertainty 

The report projected that Canada’s economy will grow by less than one per cent in 2026 due to world events like trade tensions, weak consumer spending and business uncertainty. 

Kevin Hughes, deputy economist at CMHC, said the agency will also be heavily monitoring forecast changes in light of the upcoming Canada-U.S.-Mexico trade agreement in the summer. 

“We don’t know if we’ll be faced with bigger prices… so that uncertainty, I think, is really more than ever present… in the next six months,” Hughes said. 

He added that Canada’s modest economic growth outlook this year also depends in part on major government spending programs being rolled out as planned. He noted that delays in those projects could further slow growth. 

Ottawa is pushing new policies aimed at boosting housing supply, including the government’s Build Canada Homes initiative, a new federal agency focused on constructing more affordable housing across the country. 

Last month, the federal government announced that Build Canada Homes has advanced six partnerships with the city of Ottawa, Nova Scotia and Quebec, and a tripartite agreement with Nunavut and Nunavut Tunngavik Incorporated.

It’s set to represent more than 7,500 new homes, in partnership with non-profits, Indigenous organizations and private developers. 

However, the Conservatives say the government’s should instead focus on reducing barriers to construction.

Conservative housing critic Scott Aitchison argued that government taxes, charges and fees are a major factor driving up housing costs, particularly in high-priced markets such as Ontario and British Columbia. He said efforts to improve affordability should focus on lowering those costs and speeding up local approval processes so more homes can be built.

“We got to stop building bureaucracies and start building homes,” Aitchison said.