Canada’s housing construction shifts to rentals as ownership supply weakens: CMHC

Canada needs roughly twice as much housing construction as currently projected to restore affordability to pre-pandemic levels by 2036, as a growing shift toward rental development leaves ownership housing facing a significant supply crunch, according to Canada Mortgage and Housing Corp.

CMHC’s Fall 2026 Housing Supply Report estimates Canada needs between 417,000 and 469,000 housing starts annually over the next decade, compared with about 231,000 under current projections. That leaves an annual supply gap of between 187,000 and 238,000 homes.

The agency warns that failing to build enough during the current housing downturn could leave the country short of homes when demand strengthens again.

Construction increasingly shifts to rentals

CMHC’s report says “elevated rental construction masks insufficient ownership construction.” Photo: CMHC

Purpose-built rentals now account for two-thirds of all apartment starts across the key markets examined by CMHC, while condominium and ground-oriented construction has weakened sharply in Toronto, Vancouver, Ottawa and Montreal.

Those ownership-oriented homes have historically also provided secondary rental supply.

CMHC says rental markets are moving toward better balance as new purpose-built supply comes online and rent growth slows. But the agency says the greater long-term risk may be insufficient ownership construction rather than too much rental construction.

Housing demand is expected to remain weaker over the next two years as slower population growth weighs on both rental and ownership demand. Over the longer term, however, CMHC expects population growth to recover in most major cities while rising incomes support housing demand.

“As a result, the greater long-term risk may not be excessive rental construction,” reads the report. “Instead, it may be insufficient condominium and ground-oriented housing supply that leaves too few ownership options when demand strengthens again.”

Toronto condo construction collapses

The shift is particularly pronounced in Toronto, where CMHC says annual housing starts need to increase by at least 50 per cent over the next decade to return affordability to 2019 levels.

Population-adjusted housing starts in the first half of 2026 were the lowest since 1996, excluding 2025. The inventory of permitted units awaiting construction has fallen 50 per cent from its 2023 peak, while condominium project launches have largely stalled.

CMHC estimates Toronto needs between 21,000 and 26,000 additional starts each year.

The weakness is concentrated heavily in ownership housing. Ground-oriented freehold starts are at record lows after more than two decades of decline, while condo construction has fallen amid weak presales, poor investor demand and high resale inventory.

In the City of Toronto, just 156 condominium units started construction during the first half of 2026, compared with an annual average of about 7,000 over the previous decade.

Rental starts move in opposite direction

Purpose-built rental construction is moving sharply in the other direction.

Toronto-area rental apartment starts increased 82 per cent in the first half of 2026 compared with 2025, making rentals the only major housing category to record growth.

Rental apartment starts also surpassed condominium apartment starts for the first time since 1994.

Government financing programs, municipal incentives and the conversion of some proposed condo projects to rentals have helped support the increase.

CMHC says the growing rental pipeline has helped bring greater balance to Toronto’s rental market. However, fewer condo completions in the years ahead will also remove an important source of secondary rental units.

Supply gaps vary across Canada

The scale of the challenge differs significantly across the country.

Montreal has the largest estimated annual supply gap among the major markets examined, requiring between 42,000 and 56,000 additional starts. Ottawa needs another 22,000 to 27,000 annually, Vancouver needs 5,000 to 7,000 and Calgary needs 4,000 to 5,000.

Edmonton stands apart, with no measurable housing supply gap because construction has generally kept pace with population growth.

CMHC says recent improvements in affordability could be difficult to sustain if housing construction fails to keep pace when demand eventually strengthens.

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