The Crisis of Homebuilding in Canada: A Complex Landscape

As Canada grapples with historic housing supply and affordability challenges, recent data reveal a troubling trend: homebuilding is consistently falling short across many regions, including major metropolitan areas where the bulk of newcomers settle. This mounting issue is shaping not only the housing market but also the broader economic landscape of the country.

Housing Starts Lag in Major Cities

A glaring example of this trend can be seen in the Greater Toronto Area (GTA) and Metro Vancouver. Here, housing starts have plummeted beneath levels necessary to address supply deficits that have arisen since 2019. The last year and a half has witnessed numerous development projects in both Ontario and British Columbia either delayed or altogether canceled. This situation is undoubtedly exacerbated by a glut of unsold condominium units and a significant drop in population growth caused by shifts in federal immigration policy.

As home sales dwindle, the ripple effect becomes evident. The slowdown in real estate transactions has a delayed but substantial impact on construction investment: fewer homes sold today translates into fewer housing starts tomorrow. The correlation is clear, yet the urgency for new housing solutions seems lost in translation.

Policy Promises Versus Economic Reality

Despite the pledges from Prime Minister Carney’s Liberal government to accelerate homebuilding efforts, on-the-ground realities tell a different story. In July, the Canada Mortgage and Housing Corporation (CMHC) projected a downward revision of its national housing start forecast for the years 2025-26. This adjustment underlines the disconnect between ambitious policy promises and the economic conditions shaping the housing sector, particularly in Ontario and B.C.

The promise to double the pace of homebuilding seems increasingly out of reach, as economic realities continue to impede progress in many communities. The evolving landscape increasingly reflects a tug-of-war between ideation and implementation.

Ripple Effects on Canada’s Economy

The implications of a slowdown in residential construction extend far beyond housing markets themselves. The construction sector, which comprises approximately 8% of Canada’s economy, is a substantial contributor to employment. More than one in ten private-sector workers is employed in this field, spanning homebuilding, renovations, and real estate sales.

The downturn in housing starts creates a domino effect that reverberates through the Canadian economy. Reduced demand for goods and services related to homebuilding, lower tax revenues at all governmental levels, and a slowdown in economic growth collectively present a complicated picture. Such weaknesses in residential investment may very well push the Canadian economy toward a predicted recession in 2025.

Falling GDP and Job Impacts

Statistics Canada provides further insight into the economic ramifications of this downturn. Last year’s GDP directly attributable to housing peaked at $238 billion, marking a slight increase from 2023 but still lagging behind the more robust figures seen in 2021 and 2022. Provinces like Ontario and B.C. have notably experienced declines in residential construction GDP since 2022, a worrying trend likely to continue into 2026.

In terms of employment, housing-related activities supported roughly 1.2 million jobs in 2024. This figure encapsulates both direct and indirect employment stemming from residential construction and related real estate activities. A crucial portion of these jobs is directly linked to housing, while others emanate from sectors that supply the construction industry.

The Road to Recovery

The economic stakes are high, with spending on homebuilding, renovations, and residential transactions constituting a significant share of Canada’s $3.3-trillion economy. The construction sector is inherently labor-intensive, sustaining over a million jobs, which underscores its critical role in economic recovery.

As Finlayson, a senior fellow at the Fraser Institute, highlights, Canada’s economy is unlikely to experience a rebound from the anticipated slowdown of 2025 without a meaningful resurgence in homebuilding. The road to recovery is rightly drawn through the necessity of addressing housing supply and affordability, which will require concerted efforts from policymakers, developers, and the community at large.

In conclusion, the housing crisis facing Canada is a multifaceted issue that demands urgent attention not only for the wellbeing of its residents but also for the overall economic health of the nation. With coordinated action and a genuine commitment to overcoming existing challenges, Canada can pave the way for a more sustainable and affordable future in housing.