Canadian Housing Starts Stagnant, 3x Growth Was Never Realistic

Despite Canada’s efforts to boost new housing construction, housing starts are struggling to keep pace with demand. According to data from the Canada Mortgage and Housing Corporation (CMHC), new starts dropped by 15% year-over-year in September, a sign that the ambitious goal of tripling starts was unrealistic, says BMO senior economist Robert Kavcic. Although annual housing starts still exceed historical averages, the recent decline highlights the challenge of meeting demand as Canada’s population grows rapidly.

Developers are constrained by several factors that hinder cost reductions, including high interest rates, rising material costs, and development fees. Additionally, investor interest—formerly a key driver in bringing projects to life—has waned as rising costs make these investments less profitable. This shift in dynamics has affected supply and affordability, particularly for end-users who struggle to enter the market as home prices remain high.

While Canada is building more than ever in recent years, construction of multi-unit residences is slowing, especially as policy-driven incentives fail to adequately address demand. The trend is evident in major cities where a limited supply of affordable homes fails to meet demand from a growing population. BMO’s report suggests that without better conditions for builders, achieving significant new supply remains difficult.

Ultimately, while construction rates are above the national average, the lack of strong growth in housing starts underlines the difficulty of significantly increasing supply in the current market. Canada’s policies have encouraged construction, yet persistent challenges in cost, demand, and investor pullback have kept a substantial boost in housing starts out of reach.