Starts high but supply still short
Even though 2025 recorded one of the country's highest starts (259k units, +5.6% YoY), analysts warn Canada still needs roughly 430–480k units annually and that starts will likely slump through 2028. At the same time, rentals are weakening because higher rates, reduced immigration and condo oversupply are cooling that segment. ( )
Canada built 259,028 homes in 2025, the fifth-highest total on record, and that still was nowhere near enough for a country that Canada Mortgage and Housing Corporation says needs millions more homes by 2030 to get affordability back near 2004 levels. (cmhc-schl.gc.ca, cmhc-schl.gc.ca) The reason the 2025 number looked strong is that rental construction carried it. In urban Canada, record rental starts made up just over half of all housing starts for a second straight year. (cmhc-schl.gc.ca) That strength was uneven across the map. Calgary and Edmonton set annual records, Montréal starts jumped 58%, and Ottawa-Gatineau rose 12%, while Toronto fell 31% and Vancouver fell 3%. (cmhc-schl.gc.ca) The problem is that builders are entering 2026 with less momentum than the annual total suggests. Canada Mortgage and Housing Corporation said the six-month trend in starts had been falling since September 2025, after most of the year’s building burst came in spring and summer. (cmhc-schl.gc.ca) Its February 10, 2026 outlook says new home construction is set to decline through 2028. The agency points to high construction costs, weaker demand, and a growing pile of unsold homes, with condominium projects expected to be especially weak. (cmhc-schl.gc.ca, cmhc-schl.gc.ca) That condo slowdown matters because condos are often the first rung for both buyers and investors, and many rental units come from condo owners leasing out apartments. When fewer condo towers get financed, fewer future homes arrive for both ownership and rental markets. (cmhc-schl.gc.ca, cmhc-schl.gc.ca) At the same time, the rental market is no longer as tight as it was in 2022 or 2023. In Canada’s largest cities, the purpose-built apartment vacancy rate rose to 3.1% in 2025 from 2.2% in 2024, which put it above its 10-year average. (cmhc-schl.gc.ca) Rents for new tenants actually fell in several big markets. Canada Mortgage and Housing Corporation said average two-bedroom turnover rents declined in Vancouver, Calgary, Toronto, and Halifax as landlords offered incentives like free rent and moving allowances to fill units. (cmhc-schl.gc.ca) That cooling came from two forces hitting at once: more apartments were completed, and demand slowed as population growth and the economy cooled. The same agency says significantly lower population growth, soft labor markets, and modest income growth are weighing on housing demand in 2026. (cmhc-schl.gc.ca, cmhc-schl.gc.ca) Toronto and Vancouver show the squeeze most clearly. Canada Mortgage and Housing Corporation says both cities are getting extra competition from rented condominium apartments now, but higher vacancy rates and slower rent growth are also making the next wave of rental projects harder to justify. (cmhc-schl.gc.ca, cmhc-schl.gc.ca) So Canada has landed in an awkward middle ground: not enough homes to fix the long-run shortage, but enough near-term cooling to make developers hesitate. That is how you get one of the strongest years for starts on record and still end up with forecasts for weaker building through 2028. (cmhc-schl.gc.ca, cmhc-schl.gc.ca, cmhc-schl.gc.ca)
