Canada’s home-building sector is bracing for a prolonged downturn, with new federal projections showing housing starts sliding steadily over the next two years even as the Carney government touts recent legislative wins on the file.
A report released July 22 by the Canada Mortgage and Housing Corporation, first reported by Blacklock’s Reporter, paints a subdued picture for the residential construction industry heading into 2027. The national housing agency pointed to a combination of soft buyer demand, rising input costs, and a backlog of unsold units as the primary forces dragging down new-home construction.
According to the agency, builders are pulling back in direct response to swelling inventories and the expense of getting new projects off the ground. The report also noted that home prices are still working through a correction tied to sluggish demand and slow sales activity, a dynamic that is further discouraging new development.
The slowdown won’t be felt evenly across the country. CMHC’s analysis singled out Ontario and British Columbia as the regions where the pullback will be most pronounced, especially within the condominium segment. Quebec and the Prairie provinces are also expected to see construction activity soften, though the report suggests the impact there will be less severe than in Canada’s two largest housing markets.
Housing starts actually climbed in 2025, reaching 241,171 units compared to 227,697 the year before. But CMHC’s outlook shows that momentum stalling almost immediately. The agency projects roughly 241,000 starts in 2026 before a steeper drop-off begins 223,400 units in 2027, followed by 211,900 in 2028. Taken together, that trajectory represents a decline of nearly 12 percent from 2026 to 2028.
The forecast lands awkwardly for the governing Liberals, who campaigned in 2025 on a pledge to roughly double the country’s home-building rate, aiming for close to 500,000 new units annually within a decade.
Since taking office, Prime Minister Mark Carney’s government has rolled out a series of initiatives intended to accelerate construction, headlined by the creation of Build Canada Homes a federal agency backed by $13 billion in funding spread across five years. The agency has so far moved forward on six projects and partnerships, with early sites expected to generate up to 4,000 units of affordable housing.
Independent budget analysts have offered a more measured assessment of the initiative’s reach. A Parliamentary Budget Officer report from December 2025 estimated Build Canada Homes would ultimately produce 26,000 housing units over its first five years, with roughly half of those 13,000 units earmarked for low-income households.
Speaking on July 20, Carney framed the passage of the Build Canada Homes Act as a turning point for federal housing policy, calling it a “key milestone” in the government’s plan to boost supply and improve affordability.
The CMHC numbers gave Conservative Leader Pierre Poilievre fresh ammunition against the government’s housing record. In a social media post on July 23, he argued the projections expose a gap between the Liberals’ rhetoric and reality, noting that starts could fall by as much as a fifth by 2028 despite promises to double construction. He described the pledge as “all just an illusion.”
The dueling reactions underscore how housing affordability remains one of the most politically charged files in Ottawa, with both parties likely to keep pointing to CMHC’s data as the debate over Canada’s construction shortfall continues into the fall.
