Walking through downtown Toronto lately, I’ve noticed something telling. Construction cranes still dot our skyline, but developers I’ve spoken with carry a different tone than a year ago. There’s caution in their voices when discussing new projects.
The Canada Mortgage and Housing Corporation recently released findings that confirm what many in our city already sense. Housing starts across Canada are expected to decline through 2028. For Toronto, this means significant shifts in how our housing market operates over the next few years.
After strong growth in 2025, the national trend is turning downward. High construction costs are squeezing builders. Financing conditions have tightened considerably. Demand has weakened in key sectors. Many developers are simply postponing projects until conditions improve.
Toronto’s condominium market tells the most dramatic story. Presales of new units have dropped sharply in our city. This matters because developers typically need to sell a large percentage of units before banks will finance construction. Without those presales, projects get delayed or cancelled entirely.
I recently spoke with a developer in the King West area who explained the predicament. His firm has plans for a mixed-use tower but can’t secure financing. Presales haven’t reached the threshold lenders require. The project sits in limbo while costs continue rising.
The CMHC report points to several factors weighing on construction. Economic uncertainty tops the list. Rising inventories of unsold homes create hesitation among builders. Nobody wants to add supply when existing units aren’t moving. The sharp drop in condominium presales compounds the problem.
This slowdown could weaken the pipeline of new homes being planned for Toronto buyers. When projects get delayed today, it means fewer housing options years from now. The impact ripples forward through time.
Housing activity across Canada is diverging by region. Ontario and British Columbia are expected to see construction and sales remain below historical averages. Meanwhile, markets in the Prairies and Quebec are projected to stay stronger. Toronto falls into the slower category alongside Vancouver.
Mike Moffatt offers an interesting perspective on our situation. As a housing expert and founding director of the Missing Middle Initiative, he sees opportunity amid the challenges. He believes the next few years will actually benefit renters in Toronto.
A lot of rental inventory is coming online right now. Federal immigration targets have been reduced. International student numbers have been cut back. This combination means more rental units chasing fewer potential tenants.
Moffatt explained to iPolitics that developers are taking a wait-and-see approach with condominium projects. But renters could see increased affordability in the meantime. Vacancy rates should rise, giving existing renters negotiating power they haven’t had in years.
I’ve already heard anecdotal evidence supporting this trend. A friend recently negotiated a rent reduction when her lease came up for renewal. Her landlord preferred keeping a good tenant over risking vacancy. That scenario was nearly unthinkable two years ago.
Rents in Canada have actually declined for seventeen consecutive months. However, Moffatt noted a potential risk. If rents fall too low, they may not justify building new apartment units. Developers need to see viable returns on investment.
The CMHC also reported something I’ve observed personally. Some households are delaying moving out on their own. High housing costs and uncertain job prospects keep people living with family or roommates longer. The agency calls this “suppressed household formation,” and it’s helping ease pressure on rental markets.
Canada’s broader economic outlook adds another layer of complexity. The CMHC projected economic growth of less than one percent in 2026. Trade tensions, weak consumer spending, and business uncertainty all contribute to the sluggish forecast.
Kevin Hughes, deputy economist at CMHC, said the agency is closely monitoring the upcoming Canada-U.S.-Mexico trade agreement this summer. Nobody knows if Canadians will face bigger prices as a result. That uncertainty hangs over planning decisions across industries, including housing.
Hughes added that Canada’s modest growth outlook depends partly on major government spending programs rolling out as planned. Delays in those projects could further slow growth. Government initiatives matter more than usual when private sector activity lags.
Ottawa has been pushing new policies aimed at boosting housing supply. The Build Canada Homes initiative represents the federal government’s latest effort. This new agency focuses on constructing affordable housing across the country.
Last month, the federal government announced that Build Canada Homes advanced six partnerships. These include agreements with Ottawa, Nova Scotia, Quebec, and a tripartite deal with Nunavut and Nunavut Tunngavik Incorporated. Together, they represent more than 7,500 new homes.
The partnerships involve non-profits, Indigenous organizations, and private developers. It’s an attempt to coordinate different sectors toward a common goal. Whether this approach proves effective remains to be seen.
Conservatives argue the government should take a different approach. Scott Aitchison, the party’s housing critic, believes reducing barriers to construction matters more than new bureaucracies. He pointed to government taxes, charges, and fees as major factors driving up costs.
In high-priced markets like Toronto, those costs significantly impact final prices. Aitchison said efforts should focus on lowering costs and speeding up local approval processes. His soundbite captured the Conservative position succinctly: “We got to stop building bureaucracies and start building homes.”
Walking through Toronto neighborhoods, the tension between these approaches becomes visible. Some areas desperately need new housing but face lengthy approval processes. Other areas have approvals but can’t secure financing. Still others have both but can’t make projects pencil financially.
The CMHC report acknowledges that short-term construction slowdowns can occur even during broader housing shortages. Housing supply adjusts slowly by nature. Projects take years to plan and build. Temporary imbalances between supply and demand are common.
For Toronto residents, this means navigating a complex landscape. Renters may find improved conditions over the next few years. Prospective buyers might face limited new options. Existing homeowners could see prices stabilize or decline depending on their specific neighborhood.
The construction industry itself faces difficult decisions. Builders must balance current market weakness against long-term housing needs. Getting that calculation wrong in either direction carries consequences.
As I cover Toronto’s evolving housing story, one thing becomes clear. Simple narratives don’t capture the full picture. Our market reflects national trends while maintaining distinct local characteristics. The next few years will test whether policy interventions can meaningfully improve housing outcomes.
