Canada Housing Affordability Crisis: Why Homebuilding May Need to Nearly Double

Canada’s housing affordability crisis has become one of the country’s most serious long-term economic and social challenges. High home prices, rising rents, expensive mortgage payments, limited housing choices and intense competition for suitable homes are placing pressure on households across many regions. Although conditions vary considerably between provinces and cities, the underlying national problem is increasingly clear: Canada has not been creating enough housing at a sustained pace to keep housing costs reasonably aligned with household incomes. The latest housing supply analysis from Canada Mortgage and Housing Corporation suggests that restoring affordability toward pre-pandemic conditions could require annual housing starts of approximately 417,000 to 469,000 homes through 2036. This represents roughly twice the amount of housing currently projected and implies an estimated annual supply gap of about 187,000 to 238,000 homes. These figures are not an official government construction target and should not be interpreted as a prediction that Canada will actually build that number every year. Instead, they demonstrate the extraordinary scale of additional construction that may be necessary if the country wants homeownership and renting to become substantially more manageable for future generations.

Why Housing Affordability Has Become a Major Canadian Problem

Housing has always represented one of the largest expenses in a Canadian household budget, but affordability became significantly more difficult during and after the pandemic period. Home prices increased rapidly in many communities, rents climbed, construction costs rose, mortgage conditions changed and housing demand expanded faster than supply in numerous markets. For prospective homeowners, affordability involves far more than the listed price of a property. Buyers must accumulate a down payment, qualify for financing, manage monthly mortgage payments and cover property taxes, insurance, maintenance and utilities. When property prices grow much faster than household incomes, buyers require larger savings and must devote an increasing portion of their earnings to housing. Higher mortgage rates can make this situation even more difficult because the same mortgage balance results in larger monthly payments.

Renters experience similar pressures in a different form. When rental vacancies are limited and many households compete for available apartments, rents can rise rapidly. At the same time, developers considering new rental construction must manage expensive land, labour, building materials, financing, insurance, taxes and operating costs. Even when thousands of rental units begin construction, large projects can take several years to reach completion. This is why housing affordability cannot be judged simply by whether national home prices rise or fall during a particular month. The deeper question is whether households can obtain appropriate housing without spending an excessive share of their income.

Why Canada May Need More Than 400,000 New Homes Each Year

The suggestion that Canada may need to nearly double its homebuilding rate sounds dramatic because it is dramatic. The estimate reflects the difference between the number of homes expected to be constructed under existing conditions and the much larger number that may be required to restore affordability toward levels experienced before the pandemic. CMHC’s updated assessment estimates that approximately 417,000 to 469,000 annual housing starts may be necessary through 2036. The estimated annual housing supply shortfall is approximately 187,000 to 238,000 homes compared with projected construction.

Earlier analysis reached a similar conclusion. In 2025, the estimated requirement was approximately 430,000 to 480,000 housing starts annually through 2035, compared with a business-as-usual construction pace of roughly 250,000 units per year. The estimates have changed because population expectations, housing demand, economic conditions, construction activity and regional markets continue to evolve, but the overall conclusion remains remarkably consistent: Canada needs substantially more housing than it is currently expected to build if affordability is to improve meaningfully.

The idea of doubling construction should not be interpreted as requiring every province, city or neighbourhood to build exactly twice as many homes. Housing shortages differ dramatically across Canada. Some metropolitan areas face severe shortages and extremely high land costs, while others can expand housing more easily. Employment growth, population changes, transportation networks, local zoning, available land and existing housing stock all affect the number and type of homes required. The national estimate is therefore best understood as an indication of the scale of the challenge.

Why Pre-Pandemic Housing Affordability Matters

Pre-pandemic conditions are frequently used as a benchmark because affordability deteriorated significantly after 2019. Returning toward 2019 conditions would not mean that housing suddenly became inexpensive across Canada. Toronto and Vancouver were already difficult markets for many households before the pandemic. Instead, the benchmark helps demonstrate how much additional housing may be required simply to reverse a significant portion of the affordability deterioration that followed.

Previous affordability analysis estimated that the adjusted relationship between homebuying costs and income rose substantially between 2019 and 2024. This demonstrates why housing construction needs to be considered over a decade rather than one or two years. Hundreds of thousands of homes cannot appear immediately. Housing development requires land, planning, financing, municipal approvals, infrastructure, engineering, materials, skilled workers and construction time. Large apartment buildings may require years from initial planning to occupancy. Canada therefore needs sustained construction capacity rather than a short-lived building boom.

Housing Supply and Demand Are Closely Connected

Housing prices and rents are influenced by both supply and demand. When the number of households seeking homes grows faster than the number of available properties, competition increases. Buyers compete for listings, renters compete for apartments and land becomes more valuable in desirable locations. When housing supply can respond rapidly, new construction can absorb additional demand. When construction responds slowly because of zoning restrictions, approval delays, labour shortages, infrastructure limitations or weak project economics, affordability pressure can continue for years.

Canada’s challenge is therefore greater than simply building more homes this year than last year. The country may need to maintain unusually strong construction for an extended period while also replacing aging housing, responding to household formation and providing homes in areas experiencing employment and population growth. A successful housing system must also build the right types of homes rather than focusing only on national construction totals.

Toronto and Vancouver Remain Difficult Housing Markets

Toronto illustrates how affordability problems can become deeply embedded in a metropolitan economy. High land values, strong employment opportunities, population growth, development costs and accumulated housing demand have created a market where homeownership remains difficult for many households. Increasing supply is important, but the type of housing matters. Large numbers of small condominiums may serve investors, renters and smaller households but may not satisfy families seeking two- or three-bedroom homes. At the same time, expanding detached housing farther into suburban areas can require expensive new roads, utilities and transportation networks.

Toronto therefore needs a mixture of purpose-built rentals, apartments, condominiums, townhouses and medium-density housing that can fit into established communities. Development near rapid transit can increase housing capacity while helping households reduce transportation costs. However, simply allowing additional density through zoning does not guarantee construction. Projects must still be financially viable after considering land, financing, building materials, wages, government charges and expected selling prices or rents.

Vancouver faces an even more difficult affordability environment because extremely high land values, geographic limitations and strong housing demand restrict the ability to create inexpensive ownership housing. Increasing density can nevertheless allow the cost of land to be distributed across more households. Multiplexes, townhomes and apartment buildings can accommodate many more residents than detached houses on the same amount of land. New construction may initially remain expensive, but additional supply can gradually improve the broader market by increasing choices and reducing competition for existing homes.

Montreal, Ottawa, Calgary and Edmonton Show Different Housing Conditions

Canada’s affordability crisis is no longer concentrated only in Toronto and Vancouver. Montreal and Ottawa have also experienced substantial housing pressure, showing how affordability problems can spread when demand grows more quickly than available supply. Cities experiencing population or employment growth may need to expand infrastructure, zoning capacity and development opportunities before severe shortages become established.

Calgary provides an important example of how increased construction can help a market respond to strong demand. Rapid population growth placed pressure on prices and rents, but strong housing construction helped narrow the city’s estimated supply shortage. Edmonton stands out among large Canadian markets because it has remained comparatively affordable and was identified in the latest assessment as not showing the same estimated housing supply gap found in several other metropolitan areas. Local circumstances differ substantially, so no city’s approach can simply be copied everywhere. Nevertheless, these examples support an important principle: housing markets that are better able to add supply can respond more effectively when demand rises.

Rental Housing Is Becoming Increasingly Important

Canada’s housing debate once focused heavily on homeownership, but rental housing has become equally important. High ownership costs have caused many households to remain renters longer, while newcomers, students, young workers, seniors and people seeking flexibility also depend heavily on rental accommodation. A healthy housing market therefore needs rental homes ranging from smaller apartments to larger family-oriented units and accessible housing for seniors and people with disabilities.

Recent construction in several major markets has increasingly shifted toward rental development, while ownership-oriented construction has weakened. Additional rental supply can improve vacancy rates and give tenants more choice, but excessive weakness in ownership construction could create another problem later. If demand for condominiums, townhouses and starter homes increases while few ownership projects are being completed, shortages could return quickly. Canada therefore requires a balanced housing pipeline that serves renters and buyers at different stages of life.

Why Building More Than 400,000 Homes Annually Is So Difficult

Identifying how many homes Canada may need is considerably easier than creating the capacity to build them. Sustaining more than 400,000 housing starts every year would require significant changes across construction, infrastructure, labour markets, financing and municipal planning.

Residential construction depends on carpenters, electricians, plumbers, equipment operators, engineers, architects, technicians and project managers. Rapidly expanding construction without expanding the labour supply could increase wages, delays and project expenses. Canada may therefore need additional apprenticeships, improved skilled-trade training, appropriate recognition of international qualifications and technologies that allow existing workers to complete more housing.

Building materials create another constraint. A major construction expansion would increase demand for concrete, lumber, steel, insulation, windows, mechanical equipment and numerous other products. Supply chains and manufacturing capacity would have to support a substantially larger residential construction industry.

Financing also determines whether projects proceed. Developers often spend significant amounts of money acquiring land, preparing designs and obtaining approvals before construction starts. Large projects require substantial financing long before completed homes generate revenue. When borrowing costs are high or expected selling prices and rents cannot cover construction expenses, projects can be postponed or cancelled even when zoning already permits them.

Zoning Reform and Missing-Middle Housing

One important method of expanding housing supply is allowing more homes to be constructed in communities that already have roads, schools, utilities and services. Many established neighbourhoods historically limited development to detached houses or other low-density housing. Allowing duplexes, triplexes, fourplexes, townhouses and smaller apartment buildings can add housing without requiring every additional household to live in a high-rise tower.

These forms of housing are commonly described as missing-middle housing because they occupy the space between detached homes and large apartment buildings. They can be particularly useful for families that need more space than a small condominium but cannot afford a detached home. Missing-middle development can also help seniors downsize while remaining in familiar communities.

Zoning reform alone, however, will not solve the housing shortage. A builder still needs financing, workers, permits, infrastructure and sufficient expected revenue to justify construction. The most effective policies therefore combine zoning capacity with predictable development rules and financially workable projects.

Faster Housing Approvals Could Reduce Costs

Time has a significant financial cost in housing development. Developers may carry land costs, professional fees and financing expenses throughout the planning and approval period. Lengthy or unpredictable delays can increase project costs and sometimes make developments financially impossible.

Faster approvals do not require eliminating building safety rules, planning requirements or environmental review. Governments can instead simplify overlapping procedures, digitize applications, coordinate departments, establish clear rules and provide predictable decision timelines. Standardized designs could also reduce delays for some forms of housing, especially smaller multi-unit projects.

The objective should be to create a system in which housing that clearly meets established requirements can move through the development process with reasonable certainty.

Construction Productivity Will Be Essential

Canada is unlikely to nearly double housing construction simply by doubling the number of construction workers. Improving productivity will therefore be essential. Modular construction, prefabricated components, panelized building systems, automated manufacturing and better digital project management could reduce construction time and improve consistency.

Factory-built components can move some construction activity from outdoor sites into controlled manufacturing environments. Standardized building designs can also reduce engineering and design expenses while simplifying procurement and allowing workers to repeat proven construction processes.

Modular housing is not appropriate for every development, and transportation, factory investment, building codes and local design requirements can limit its use. Nevertheless, industrialized construction could become an important part of Canada’s strategy for producing substantially more housing without increasing labour requirements at the same rate.

Infrastructure Must Grow With Housing

Housing cannot be expanded independently of infrastructure. New homes require drinking water, wastewater treatment, electricity, roads, transit, schools and other community services. Municipalities may have land that could support additional housing but lack sufficient sewer capacity, transit connections or electrical infrastructure.

Coordinating housing growth with infrastructure investment can prevent these limitations from becoming major barriers. Governments can identify areas capable of supporting large amounts of new housing and direct infrastructure funding toward those locations.

Transit-oriented development can be especially valuable because it allows more residents to live close to transportation networks and employment. Housing affordability is not determined by housing expenses alone. A household that can live close to work and rely on public transportation may have lower overall expenses than a household living in a cheaper home that requires multiple vehicles and lengthy commuting.

Lower Mortgage Rates Alone Cannot Solve Housing Affordability

Interest rates strongly influence housing affordability because mortgage rates determine the monthly cost of borrowing. Lower interest rates can reduce payments for buyers and make project financing less expensive for developers. However, lower borrowing costs can also increase housing demand.

If many more buyers become capable of qualifying for mortgages while the supply of available homes remains limited, additional purchasing power can push prices higher. Interest-rate reductions therefore cannot replace the need for more housing supply.

A stronger housing market would be capable of responding when demand increases. Without sufficient construction, improved financing conditions can simply create another period of intense competition.

More Housing Does Not Require a National Housing Crash

Improving affordability does not necessarily require home prices to collapse. Housing can become more affordable through several channels. Household incomes can rise faster than home prices, prices can remain stable for extended periods, rents can increase more slowly, mortgage costs can decline and additional construction can create lower-cost housing options.

The objective should be to improve the relationship between household income and housing expenses over time. A severe housing crash could create other economic problems by reducing household wealth, damaging construction employment and affecting financial institutions. A gradual improvement supported by greater housing supply and stronger incomes could provide a more sustainable path.

What More Housing Could Mean for Buyers and Renters

For first-time homebuyers, sustained construction could create more choice and reduce competition for a limited number of entry-level properties. Additional townhouses, condominiums and smaller ownership homes could provide more pathways into the market. Greater rental availability could also help households by moderating rent pressure and improving their ability to save toward a future down payment.

Renters could benefit when increased apartment construction produces healthier vacancy rates. When tenants have more choices, landlords face stronger competition. People can move more easily for employment, education or family reasons instead of remaining in unsuitable accommodation because alternative housing is unavailable.

However, market construction cannot serve every household. People with very low incomes, some seniors, individuals with disabilities and households experiencing homelessness may require subsidized, non-market or supportive housing. Canada therefore needs both significantly more private-market housing and targeted affordable housing programs.

Housing Type Matters as Much as Housing Quantity

A large national construction number does not automatically mean the housing shortage has been solved. Canada needs homes that correspond to actual household requirements. Families may need larger apartments or townhouses. Young workers may need smaller affordable rental units. Seniors may need accessible housing close to healthcare and community services. First-time buyers may need smaller ownership properties.

Successful housing policy must therefore focus on building the right homes in the right locations. A city could produce a large number of units while still experiencing shortages if most new homes do not match the needs or budgets of households seeking housing.

Housing Affordability Is an Economic Competitiveness Issue

Housing affordability affects much more than the real estate market. Extremely high housing costs can make it difficult for employers to recruit workers. Young professionals may relocate to less expensive cities. Families may delay major life decisions because they cannot obtain suitable housing. Employees may accept long commutes because homes near employment centres are unaffordable.

High housing costs also reduce the amount of household income available for food, transportation, education, savings, recreation and other spending. This means housing affordability can influence productivity, labour mobility, consumer spending and long-term economic growth.

A country where workers can afford to live reasonably close to employment opportunities can generally use its workforce more efficiently. For this reason, expanding housing capacity should be viewed not only as a social objective but also as an important economic strategy.

Why the Next Decade Is Critical for Canada

Canada’s housing shortage developed over many years and cannot be eliminated quickly. Housing projects approved today may not be completed for several years, meaning decisions made now will influence affordability throughout the 2030s.

A single strong year of housing starts will not be enough. Canada requires a sustained pipeline involving land preparation, approvals, financing, infrastructure and construction. Policy stability also matters because builders and investors make decisions based on expected future regulations, taxation, financing costs and housing demand.

Repeatedly changing development rules can create uncertainty and discourage investment. A successful national strategy therefore needs to build long-term housing capacity rather than depend on temporary construction incentives.

What a Healthier Canadian Housing Market Could Look Like

Success does not mean that homes suddenly become inexpensive. A more realistic outcome would be a market in which housing costs grow more slowly than household incomes, rental vacancy rates become healthier and buyers have more properties from which to choose. Households should be able to move as their employment, family size or personal circumstances change without facing extreme financial barriers.

A healthier market would include rental apartments, starter homes, family housing, accessible senior housing, missing-middle developments and supportive housing. Construction would respond more quickly when demand increased. Municipal approvals would become more predictable. Infrastructure would be expanded before shortages became critical, and skilled workers and modern building methods would allow housing to be produced more efficiently.

The Bottom Line

Canada’s housing affordability crisis is ultimately a challenge of scale, supply and construction capacity. The latest analysis estimates that approximately 417,000 to 469,000 housing starts per year may be required through 2036 to restore affordability toward pre-pandemic conditions. That represents roughly twice the housing construction currently projected and an estimated annual supply gap of approximately 187,000 to 238,000 homes.

Reaching that level would be extraordinarily difficult. Labour shortages, expensive land, infrastructure limitations, financing conditions, construction expenses and lengthy approval processes all stand in the way. No single government program or policy reform can solve the problem by itself.

Municipal governments influence zoning and approvals. Provincial governments shape infrastructure, building regulations and municipal frameworks. The federal government influences housing programs, financing, taxation and broader economic policy. Developers, builders, lenders, investors and non-profit organizations also play essential roles.

Canada’s housing challenge is therefore no longer simply about recognizing that a shortage exists. The central question is whether the country can create a housing system capable of consistently producing enough homes, in appropriate locations and at a pace that allows supply to respond to changing demand.

If construction remains substantially below the level required, housing affordability may continue to affect renters, young adults, first-time buyers and families well into the next decade. If Canada successfully increases supply while improving construction productivity, infrastructure and development processes, housing costs could gradually move into a more manageable relationship with household incomes.

Nearly doubling homebuilding would be one of the largest construction challenges Canada has faced, but the scale of the affordability crisis explains why such a dramatic increase is being discussed. The solution will not arrive through one year of record construction or one policy announcement. It will require sustained investment, planning and homebuilding across many years.

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