Canada’s housing construction activity is projected to slow over the next several years, even as Ottawa rolls out new measures aimed at increasing supply, according to fresh projections from the Canada Mortgage and Housing Corporation (CMHC).
In its latest Housing Market Outlook, CMHC forecasts that housing starts will decline through 2026 and into 2028, dipping below the country’s 10-year historical average. The agency attributes the slowdown to elevated construction costs, cooling buyer demand, and a growing inventory of unsold homes.
“New construction activity is projected to decline throughout 2026 to 2028,” the report states, underscoring the persistent headwinds facing builders.
While purpose-built rental projects are expected to remain the primary engine of new construction, CMHC cautions that even this segment will lose some momentum. As immigration-driven demand begins to stabilize and rental markets move toward balance, the pace of new rental builds is expected to moderate.
Ground-oriented housing including single-detached, semi-detached, and row houses is forecast to see a gradual recovery, particularly in the Prairies, Ontario, and British Columbia. However, affordability challenges and uncertainty in the labour market are likely to restrain buyer confidence and limit a stronger rebound.
The condominium sector remains the weakest link. In Toronto, pre-construction sales fell to multi-decade lows last year, and developers are largely focused on completing projects already underway rather than launching new ones. CMHC expects this subdued condo activity to persist in the near term.
Regional outlooks vary. Ontario is projected to experience historically low housing starts in 2026 before seeing a modest recovery later in the forecast period. British Columbia is also expected to face a sharp decline, while Prairie provinces are anticipated to outperform other regions. Quebec’s housing starts are forecast to dip only slightly this year.
The broader economic backdrop is also contributing to caution in the housing market. CMHC estimates Canada’s economy will grow by roughly 0.7 per cent this year, positioning 2026 as one of the weakest non-recessionary years in recent decades. Although a recession is not part of the agency’s baseline scenario, it warns that geopolitical tensions and global economic uncertainty pose significant downside risks.
The projections come despite a series of federal initiatives designed to stimulate homebuilding.
Among them is Bill C-20, the Build Canada Homes Act, introduced in early 2025. The legislation establishes a new Crown corporation tasked with accelerating affordable housing construction nationwide. The agency is designed to collaborate with provincial and municipal governments, Indigenous communities, and private-sector partners to increase supply, reduce development bottlenecks, and address housing affordability and homelessness.
Build Canada Homes, formally launched in September 2025 with $13 billion in federal funding over five years, has so far advanced six projects and partnerships. Initial developments are expected to deliver up to 4,000 housing units.
Additional federal supports include the National Housing Co-Investment Fund, the Rapid Housing Initiative, and CMHC’s lending and mortgage insurance programs, which aim to lower financing costs and encourage multi-unit construction. Programs such as the First-Time Home Buyer Incentive are also intended to stimulate demand for new homes.
During the 2025 federal election campaign, the Liberal Party pledged to double Canada’s rate of residential construction, setting a target of nearly 500,000 new homes annually over the next decade.
However, a December 2025 report from the Parliamentary Budget Officer estimates that Build Canada Homes would generate approximately 26,000 housing units over five years including about 13,000 designated for low-income households a figure well below the government’s broader ambitions.
As policymakers attempt to tackle the country’s housing affordability crisis, CMHC’s latest outlook suggests that near-term construction activity may struggle to keep pace with long-term goals.
