In its Fall 2025 Housing Supply Report, the Canada Mortgage and Housing Corporation (CMHC) reveals a stark divide in Canada's housing market. Purpose-built rental construction is surging and supporting new housing starts, while builds for homeownership, especially condominiums, are in sharp decline. This split raises pressing questions about affordability, access to homeownership, and whether the increasing role of large investors, often termed the "financialization" of housing, is helping or worsening Canada's housing crisis.
Rentals Rise, Ownership Falls
Nationally, housing starts in the first half of 2025 stayed stable at around 250,000 to 300,000 units per year, a slight increase from 2024. But this overall figure hides significant regional and sectoral variations. Purpose-built rental starts are fueling much of the growth, with cities like Montreal, Calgary, and Edmonton hitting record or near-record levels. In Montreal, for instance, rental apartment units under construction are poised to increase supply in the coming years. CMHC reports that purpose-built rentals now make up a larger portion of apartment construction, driven by strong rental demand and government-backed financing programs.
By contrast, condominium starts have plummeted. Nationally, condo starts fell 44 percent, with Toronto seeing a dramatic 60 percent drop, reaching a 30-year low on a per-capita basis. Vancouver experienced a 13 percent decline, and markets like Halifax also slowed. Factors like weak pre-construction sales, high interest rates, and economic uncertainty, including trade tensions and tariffs, are deterring developers from condo projects. Many developments have been delayed, canceled, or converted to rentals, with nine such conversions in the Greater Toronto Area since 2024.
This divergence shows that while rentals are meeting immediate demand, the drop in ownership options could limit future supply for buyers, potentially excluding more Canadians from homeownership, a key path to building wealth.
Drivers of the Rental Boom
Several elements are behind the rise in purpose-built rentals. Government support plays a major role. CMHC's financing programs, such as the Apartment Construction Loan Program, backed about 88 percent of new rental starts in 2024, providing low-interest loans that make projects viable despite high construction costs. Land prices, down 30 percent from their 2021 peak, have also opened doors for developers to shift toward rentals. Strong demand from population growth and high homeownership costs keeps vacancy rates low and returns profitable.
Developers are moving away from condominiums due to market challenges. Condo projects often need 70-80 percent pre-sales for financing, a hurdle that's harder to clear with investors retreating amid economic uncertainty and higher rates. Converting condo sites to rentals avoids these issues, allowing quicker progress without heavy reliance on pre-sales.
The Ownership Downturn
The slowdown in condo and single-family home construction is troubling, given Canada's ongoing housing shortage. CMHC estimates that 430,000 to 480,000 new homes are needed annually through 2035 to restore affordability to 2019 levels, nearly double the current rate. In high-cost markets like Toronto and Vancouver, this trend risks widening the gap. Toronto's housing starts are on pace for their lowest annual total in three decades, fueled by fading investor demand for condos and barriers like high development charges and slow approvals.
Tania Bourassa-Ochoa, CMHC's deputy chief economist, cautions that the ongoing slowdown in the homeownership market risks future housing supply, workforce retention, and affordability. With fewer homes available for purchase, prices stay high, especially for first-time buyers. This could deepen the affordability crisis, as two-thirds of households depend on homeownership for wealth-building, and a shrinking supply of for-sale homes may push prices up long-term.
Profit Over People?
The rental surge has ignited debates about financialization, where large investors, real estate investment trusts (REITs), and private equity firms treat housing as a financial asset rather than a public good. Critics argue this trend, boosted by government incentives and low-interest financing, favors investor profits over tenant affordability. Studies, including from the University of Toronto, link financialized landlords to faster rent increases, higher eviction rates like "renovictions," and poorer maintenance. CMHC data indicates evictions in Canada range from 1-3 percent annually, though this may understate issues in some markets.
Yet, financialization has boosted rental supply. Without capital from large investors and CMHC support, many new units wouldn't exist, helping ease vacancy rates in places like Montreal and Calgary. The downside is clear: as more housing shifts to investor-controlled rentals, renters face rising costs, and homeownership paths narrow. This risks a two-tiered market, concentrating wealth among property owners while renters miss equity-building opportunities.
Regional Differences and What Lies Ahead
The CMHC report shows clear regional contrasts. Calgary and Edmonton shine with robust rental and single-detached construction, thanks to favorable zoning, population growth, and economic optimism. Montreal's rental growth is encouraging, but its homeownership market trails, with affordability challenges growing fastest among major cities. Toronto and Vancouver face steeper slowdowns, with condo cancellations and conversions pointing to a recovery possibly not until 2027, per CMHC forecasts YouTube Analysis.
Moving forward, rental markets may ease by 2026 as new supply arrives and demand cools from slower immigration and weaker job markets. However, this could reduce incentives for future builds, risking another shortage if conditions don't improve. For ownership, changes like faster approvals, lower development charges, or incentives for affordable condos are essential to reverse the trend.
Implications for Canadians
The rental boom provides short-term relief for those in tight markets, but it falls short of solving Canada's housing crisis. The ownership decline threatens long-term affordability, especially for middle-class families aiming to buy. While financialization drives supply, it sparks concerns over rising rents, tenant rights, and inequality. As CMHC notes, systemic reforms are vital for a housing system with greater cost and time certainty for developers, while prioritizing affordability for all.
Governments must balance sustaining rentals without entrenching investor dominance and reviving ownership to ensure fair access. For now, the rental push is a vital step, but it's not the complete solution. Canadians need a market that supports both renters and aspiring homeowners, avoiding one crisis leading to another.
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