OTTAWA—The Carney government is narrowing the housing gap, but Canada is still on pace to be short nearly 700,000 homes by the year 2035, the Parliamentary Budget Officer said Tuesday.

The PBO estimates that if the country could close that gap it would restore vacancy rates to normal levels, and slow the rise of housing prices, but it would not meet housing affordability targets the Canada Mortgage and Housing Corporation (CMHC) has set.

The report finds that immigration changes the government implemented over the last year will reduce housing demand as fewer people come to Canada. The Liberals reduced Canada’s targets for permanent residents in 2025 and 2026 and cut the number of temporary residents and international students permitted to come.

Originally, the Liberals had proposed

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