How Canada’s Housing Supply Is Falling Short of Immigration Targets, by the Numbers

Analysis

Canada’s housing shortage is no longer a future concern—it’s already here. Despite Ottawa’s decision last October to scale back immigration targets from recent highs, population growth continues to outpace the number of homes being built.

There’s a widening gap between the number of people who need housing and the number of units actually coming online, particularly in the country’s largest cities. The data suggest affordability pressures are unlikely to ease without either a sharp rise in construction or a closer alignment between immigration levels and housing capacity.

A Breakdown of Housing in Canada

The average household size in Canada is approximately 2.4 people. That means, for every 240,000 new residents, the country requires at least 100,000 new physical housing units just to maintain the status quo. And this isn’t taking into account existing shortages or replacing ageing stock.

With a combined annual target of roughly 750,000 new permanent and temporary residents, Canada needs to add approximately 312,500 units per year simply to house these new arrivals.

However, current construction is trending in the opposite direction. In the first half of 2025, housing starts across Canada’s six largest urban regions totalled fewer than 68,000 units. Assuming production doubles in the second half of the year, the national total will fall significantly short.

Keep in mind that most newcomers settle in Toronto, Vancouver, and Montreal. Yet in Toronto, housing starts have recently hit their lowest annual per-capita level in decades, and in Vancouver, condominium starts have declined sharply.

Multi-unit buildings are typically the primary way these cities absorb large numbers of households. Construction in smaller municipalities will likely cushion the blow somewhat, but a slowdown in the major urban sectors creates a compounding deficit that cannot be easily fixed.

How Many Homes Does Canada Actually Need?

Long-term projections suggest the current construction pace is far from sufficient. The Canada Mortgage And Housing Corporation estimates that Canada needs to roughly double housing production to address both future demand and accumulated shortages. That would require building approximately 430,000 to 480,000 housing units per year on a sustained basis.

Independent analysis supports this conclusion. The Parliamentary Budget Officer estimates that 3.2 million net new housing units are required by 2035. Spread over the 2025-2035 period, that equates to about 290,000 units per year, well above current construction levels.

Even if you take into account the homes already built, housing output is projected to remain significantly lower than those benchmarks.

Why The Gap Keeps Widening

Several factors are contributing to the growing mismatch between housing supply and population growth.

Rate volatility and capital lag have increased borrowing costs for builders, making some projects financially unviable. Construction costs, including labour and materials, remain elevated compared to pre-2020 levels. Municipal approval processes and zoning rules continue to slow development, particularly for multi-unit housing in established neighbourhoods.

At the same time, immigration targets are set at the federal level, while housing delivery depends heavily on provinces and municipalities. This split in duties often leads to uncoordinated policies, causing the population to grow faster than local housing and services can keep up.

What This Means for Affordability

The effects of this imbalance are already visible. Rents have risen sharply in many cities, vacancy rates remain low, and home prices, while no longer surging at pandemic-era rates, remain out of reach for many households.

For newcomers, housing shortages can mean overcrowded living conditions, longer commutes, and higher living costs. Ironically, skilled trade newcomers are also needed to cover the labour shortfall so they can build the homes they need to live in.

For existing residents, increased competition for limited housing supply adds pressure to already tight markets. Economists and housing analysts increasingly warn that without a sustained increase in construction, affordability challenges will persist, regardless of any adjustments in immigration targets.

Federal Initiative

As part of his 2025 election campaign, Prime Minister Mark Carney announced that Ottawa would become a housing developer through its new agency, the Build Canada Homes program. In early January, the federal government announced that thousands of homes are moving forward, though they haven’t yet reached the promised level of 500,000 new units per year. The government has allocated an initial $13 billion for the program.

Besides this program, the government has also removed the GST for first-time homebuyers on new homes up to $1 million. The government also says more public land will be used to build additional housing and that, through a series of reorganizations, it has further streamlined the process for government-supported home construction.

The official Opposition has sharply criticized the initiative, arguing the government’s approach has failed to reduce key cost drivers such as housing taxes and development charges. These factors, they say, have made homes more expensive to build and led to a collapse in pre-construction activity in major markets.

Conservative proposals have focused on tying federal funds to measurable increases in homebuilding, reducing taxes on new construction, and freeing up land and investment to support private home production.

In early December 2025, the PBO released a statement saying the Build Canada Homes program was expected to add only a “modest amount” to the housing supply. “We estimate about 26,000 units will be created over five years,” said the PBO, noting this amounts to a 2.1 percent increase in housing completions relative to baseline projections.

A Growing National Debate

Immigration remains a cornerstone of Canada’s economic strategy to counter an aging workforce and decades of declining fertility rates. But can a country successfully integrate record numbers of newcomers if it cannot physically house them?

Supporters of current immigration rates argue that newcomers are the solution to the housing crisis, providing the skilled trades needed to build. They contend that the failure lies entirely with municipal red tape and a lack of provincial ambition.

Critics argue that the most efficient construction industry cannot build its way out of the current volume of growth. They advocate for a temporary cooling period where population targets are strictly aligned with the actual number of occupancy permits issued.

What is clear from the 2026 data is that the current math does not add up. Though the “Build Canada Homes” initiative might be providing a slight boost, the sheer volume of required household formations seems unlikely to materialize.

Without a fundamental shift in how quickly homes are approved and built, or a recalibration of how many people those homes must serve, the tension between growth and affordability is set to become a permanent feature of the Canadian landscape.