New housing construction hasn’t surged but slowing demand is starting to lower prices, the Liberal government suggests in Tuesday’s Spring Economic Updates. 

The 178-page update says housing affordability is improving, with average home prices down roughly 20 per cent and national rents falling nearly nine per cent.

Higher inventory levels are giving buyers more room to negotiate, the report says, as more properties come onto the market. 

Ottawa is planning to spend about $140 billion in the next five years across the housing continuum, including both non-market and market-rate housing. 

“The government’s approach focuses on expanding Canada’s housing stock by reducing building and financing costs, improving productivity in the homebuilding sector and boosting the supply of affordable housing,” the report said. 

Construction stalls 

Despite rising housing supply, construction activity is losing momentum, according to the report. 

Construction has been slowing in key markets like Toronto and Vancouver, particularly in high-rise and multi-unit developments, according to industry leaders.

Rodrigue Gilbert of the Canadian Construction Association said recent declines in housing starts reflect deeper structural challenges, not just short-term fluctuations.

“The problem right now is the cost of building,” he said, pointing to tariffs and rising material costs.

“70 per cent of everything we use in construction comes from the U.S., so that has had a real impact on our ability to build,” Gilbert said.

Housing starts reached about 260,000 units in 2025, but data from March 2026 showed a decrease to around 235,000 units.

While Build Canada Homes aims to improve construction efficiency and address homelessness and encampments to scale up housing supply, Canada Mortgage and Housing Corporation noted that housing starts need to reach 430,000 in the rental market annually by 2035 to curb the country’s housing shortage, in 2025. 

When asked if hitting that target under the current housing market is feasible, Gilbert said it will be “very difficult.”

Additionally, while average asking rents across all properties have fallen for 17 straight months nationally, according to Rental.ca, experts at the Spring Economic Update pointed to uncertainties to lower housing demands. 

While federal measures like tax breaks and reduced development charges may help, Gilbert said the impact will be limited without broader coordination.

He added that removing development charges could create unintended gaps in funding for critical infrastructure like water, sewer and energy systems.

To further increase supply, the federal government said it is working to cut red tape and support innovation in homebuilding. Finance Minister Francois-Philippe Champagn said the government sent 1.7 billion to provinces and territories to support existing housing programs. 

“We wanted to have an immediate impact to reduce charges for people,” Champagne said. 

This article has been updated with comments from the Canadian Construction Association.