Canada has made only modest progress in closing its housing supply gap, and the country could still need as many as 4.69 million additional homes by 2036 to restore housing affordability to pre-pandemic levels, according to the latest assessment from the Canada Mortgage and Housing Corp. (CMHC).
The federal housing agency estimates that Canada will need between 417,000 and 469,000 new housing units every year over the next decade across both ownership and rental markets to meet its affordability targets.
That requirement is slightly lower than CMHC’s July 2025 estimate, which called for between 430,000 and 480,000 new units annually. At the time, the agency said construction would need to roughly double to close the gap.
The latest report, however, highlights a growing concern: construction is slowing at a time when housing demand remains significant, putting recent affordability improvements at risk.
“Although slower population growth has brought some improvements in affordability, new construction is slowing faster than demand,” CMHC deputy chief economist Aled ab Iorwerth said in a news release.
He warned that the biggest risk now is that Canada underbuilds during the current softer market and ends up with an even larger housing shortage once demand strengthens again.
Construction remains well below the required pace
Canada recorded 131,851 housing starts through July this year, a four per cent decline compared with the same seven-month period in 2025.
If construction continues at its current pace, CMHC estimates that approximately 231,000 housing units would be added each year over the next decade. That would represent only about half of the annual construction rate required to bring affordability back to 2019 levels by 2036.
CMHC measures affordability according to the proportion of household income devoted to housing. Its general objective is to return to affordability conditions in which adjusted house prices account for no more than 30 per cent of average gross household income.
The agency said the ability to meet future housing demand will ultimately depend on the industry’s capacity to increase construction. Yet builders are facing several obstacles, including elevated construction costs and difficult presale financing conditions for certain projects.
Weak conditions in the condominium market are also making developers more cautious about launching new projects, further limiting the supply of ownership housing.
Population growth expected to drive future demand
CMHC said the long-term need for housing is unlikely to disappear.
Population growth is expected to recover across most major Canadian cities, while rising household incomes are expected to support additional housing demand. The agency also pointed to a form of suppressed demand created by affordability pressures.
Some households may have postponed forming their own households because housing costs have been too high. If affordability improves further, CMHC expects part of that delayed demand to return to the market.
“Housing supply needs will increase over the long term,” the report said, noting that the combination of population growth, higher incomes and previously delayed household formation will generate additional demand for homes.
While CMHC considers the national housing supply gap broadly unchanged from its previous assessment, the situation varies considerably from one major market to another.
Toronto sees some improvement, but condo construction weakens
Toronto has narrowed its housing supply gap since CMHC’s previous estimate, largely because lower home prices have improved affordability.
However, construction activity has weakened sharply, particularly in the condominium sector. That decline is limiting the availability of ownership housing and could undermine some of the affordability gains achieved through lower prices.
Vancouver presents a different picture. The housing gap has remained relatively stable, with improved affordability and stronger construction levels being offset by slower expected future supply growth and continuing population pressures.
Calgary cuts its gap nearly in half
Calgary has made more substantial progress.
Record levels of housing construction have reduced the city’s housing supply gap by almost half, according to CMHC. Affordability nevertheless remains a challenge, particularly for lower-income households and people seeking to purchase a home.
Elsewhere in Alberta, Edmonton remains the only large Canadian market without a housing supply gap.
CMHC said Edmonton has avoided a shortage because housing construction has generally kept pace with population growth.
Montreal and Ottawa face growing shortages
The situation has deteriorated in both Montreal and Ottawa compared with a year ago.
In Montreal, construction remains strong, but much of the new supply is being directed toward rental housing. Weak condominium construction is consequently restricting options for prospective homeowners.
Ottawa is facing similar challenges. The capital has seen affordability deteriorate, and CMHC expects demand to expand more quickly than housing supply despite continued strong construction activity.
“We expect housing demand to grow faster than the housing supply despite strong construction activity,” CMHC said in its assessment of Ottawa.
The latest figures therefore point to a central challenge for Canada’s housing market: even as affordability has improved in some major cities and construction remains active in several regions, the country is still building far fewer homes than the pace CMHC considers necessary to restore 2019 affordability levels by 2036.
