OTTAWA — Canada’s housing crisis is expected to deepen, with new projections indicating a decline in housing starts this year and next. These estimates, from both public and private sector forecasts, challenge political commitments from various levels of government to increase the supply of homes nationwide.

The Canada Mortgage and Housing Corporation (CMHC) predicts that housing starts will total approximately 237,800 in 2024, a decrease from 245,367 in 2023. The CMHC, which serves as Canada’s national housing agency, also anticipates further declines to 227,734 in 2025 and 220,016 in 2026. These figures fall short of the 267,000 annual housing starts recorded in 2021-22 and are less than half of the 480,000 homes that the CMHC estimates Canada needs to add each year over the next decade.

The downturn in construction is particularly pronounced in British Columbia and Ontario, where housing starts have dropped by eight and 25 percent, respectively. This decline occurs despite the high housing prices in major cities like Vancouver and Toronto. The CMHC noted, "Affordability remains a major issue and new construction is slowing," in its recent update on the housing market.

Economists argue that increasing new builds could yield several benefits, including more housing options, reduced pressure on housing prices, and enhanced economic activity through construction and related purchases. New construction also contributes significantly to government revenues at all levels.

Mike Moffatt, a former economic advisor to ex-Prime Minister Justin Trudeau, expressed concern, stating that governments "do not appear to be getting the message, nor do they seem willing to take the necessary steps to address the crisis."

During the recent federal election, all major political parties presented plans aimed at increasing the number of new homes to make housing more affordable and address rising homelessness in urban areas. However, analysts point out that there is often a lengthy delay—sometimes over a decade—from the identification of land for new developments to the completion of homes. This delay is exacerbated when essential infrastructure, such as roads and utilities, must be established.

Current market conditions are influenced by rising interest rates, increased unemployment, and higher costs for labor and materials like steel and lumber. Additionally, trade tensions with the United States, slower population growth, and a significant drop in pre-sales are impacting the housing market. Finding suitable land for development remains a persistent challenge in many Canadian cities.

Developers and analysts have also highlighted the role of taxation and development charges, which are typically borne by developers and passed on to buyers, as significant barriers to construction. Paul Smetanin, president of the Canadian Centre for Economic Analysis, noted that while many of these challenges are longstanding, the downturn began in 2024 and has intensified through 2025. He observed that investors have withdrawn from certain segments of the residential market, particularly pre-construction condominiums, and some developers are opting to hold onto land approved for residential use until market conditions improve.

Housing analysts agree that taxes and bureaucratic hurdles, which involve all levels of government, significantly contribute to the slowdown. Municipalities often depend heavily on the tax revenue generated from housing construction and development fees. In response to the dual crises of housing and affordability, some municipalities have begun to reduce their fees in recent months. However, governments facing budget constraints are reluctant to forgo these revenue sources, even as a decline in construction could lead to substantial losses.

Moffatt estimated that the three levels of government could collectively lose over $6 billion in tax revenue due to the decline in new home construction in the Greater Toronto Area alone.

During the recent election campaign, all major parties acknowledged the urgent need for more homes and lower housing costs. Each party proposed ambitious strategies. The Liberals pledged to build 500,000 homes annually over the next decade, a level of construction not seen since the post-World War II era. Prime Minister Mark Carney announced plans for a new Crown corporation, Build Canada Homes, which would provide about $25 billion in public financing for affordable housing and an additional $10 billion in low-rate capital. This new entity would take over some programs currently managed by the CMHC and utilize public land for new developments.

The Liberals also promised to eliminate the GST on new homes priced under $1 million for first-time buyers and to halve municipal development charges for multi-unit residential projects. The Conservatives proposed linking federal infrastructure funds to municipal housing targets and penalizing communities that fail to increase new construction. They also aimed to eliminate the GST on newly built homes valued up to $1.3 million for all buyers. The New Democrats called for the construction of 3 million new homes by the end of the decade as part of a $16 billion national housing strategy.