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Housing starts in major Canadian cities show mixed trends

September 26, 2024

New construction in 2024 is increasing but not enough to meet demand

In the first half of 2024, combined housing starts in Canada's 6 largest cities (Vancouver, Calgary, Edmonton, Toronto, Ottawa and Montréal) increased by 4%, reaching 68,639 new units — the second-highest level since 1990. However, when adjusted for population size, these numbers are only around the historical average and fall short of meeting growing demographic demand.

Highlights

Regional variations in new construction

New home construction in Canada’s largest cities has shown diverse trends, reflecting regional differences in affordability and economic conditions. Calgary, Edmonton and Montréal saw significant increases in housing starts, while Toronto, Vancouver and Ottawa faced declines.

Calgary and Edmonton benefited from stronger economic growth, lower housing costs and favourable migration trends in comparison to other major centres, pushing housing starts in Calgary and Edmonton  to record levels.

Shift toward rental housing

Our data shows that new construction is increasingly shifting toward rental housing, with nearly half of apartment starts being purpose-built rentals. This shift indicates increased demand for rentals in an environment of declining homeownership affordability. The increase in rental construction also reflects demographic changes.

Apartment developers face challenges in some markets

Despite tight rental market conditions, developers in Toronto and Ottawa have had to reconsider plans as some rental projects became financially unviable.

Increased competition from condominium rental apartments has led to more rental listings. Investors in these markets are renting out units due to a soft resale market, leading to a decline in asking rents for condominiums, making new purpose-built rentals financially challenging (since they tend to be priced similarly to condominium rentals).

On the condominium side, in most cities, excluding Calgary and Edmonton, developers are struggling to meet sales thresholds, leading to delays and cancellations of large projects. Shifts in demand toward lower-priced condominiums and factors like land prices and approval times have influenced new project locations and sizes.

Developers are hesitant to lower condominium prices to maintain profit margins but are offering incentives, potentially resulting in longer pre-sales phases and fewer new starts.

Developers focus on completing existing projects

Condominium apartment construction has faced growing backlogs and longer construction times since the pandemic due to a tight labour market, rising costs and supply shortages. By the end of 2023, many major cities had record numbers of unfinished units.

In the first half of 2024, some constraints eased, with Statistics Canada’s Building Construction Price Index rising by 4%, compared to 8% in the previous year. This slowdown, particularly in Toronto, helped developers manage completions more effectively. Apartment completions increased in all CMAs, reaching record levels in Toronto, Ottawa, Calgary and Edmonton.

Policy measures to boost housing supply

Municipalities and provinces are actively working to increase housing supply and variety. Recent policies  aim to encourage higher-density development and streamline approval processes.

We anticipate that these measures will improve housing availability and affordability over time. Here are a few examples:

  • Ontario's Bill 23 allows up to 3 units per lot in many residential areas without requiring rezoning.
  • British Columbia's Bill 44 allows up to 3 – 4 units per single-family lot and up to 6 units per lot near public transit.
  •  The Downtown Calgary Incentive Program supports office space conversions to residential units (as well as to other kinds of developments).

These policies aim to address the diverse needs of buyers and renters and improve housing affordability over time. We’re already seeing early signs of these policies' impact in our data, such as increasing office-to-residential conversions in Calgary.

Balancing supply in Canada’s shifting housing market

Housing starts in Canada's largest cities have increased overall, but the growth is uneven across regions. This disparity is due to varying economic conditions, affordability and local policies. The increase in purpose-built rentals and the challenges facing condominium developments suggest a shift in the housing market landscape. Efforts by provincial and municipal governments to increase housing supply will play a crucial role in shaping the housing landscape.

While construction activity has been increasing in 2024, the overall supply is not keeping up with demand, especially in fast-growing urban centers. As economic conditions and demographic trends evolve, the housing market will need ongoing adjustments to address affordability and supply challenges.

Get the latest housing supply insights

Dive into the latest data and analysis on housing supply trends. Explore the state of housing starts, regional growth disparities and market conditions across Canada's largest cities.

Read the Housing Supply Report

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Discover related content using the tags below:

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Date Published: September 26, 2024
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