The latest Housing Supply Report highlights several key trends for the first half of 2024. Total housing starts in Canada’s six largest census metropolitan areas (CMAs) increased by 4% compared to the same period in 2023, reaching 68,639 units, which marks the second-highest level since 1990. However, when adjusted for population size, this level of construction is close to the historical average and may not be sufficient to meet growing demographic demand.
Calgary and Edmonton led the growth in housing starts, driven by record interprovincial migration due to lower housing costs and favorable economic conditions. Meanwhile, housing starts declined in Toronto, Vancouver, and Ottawa.
A slight increase in apartment starts across the six CMAs was primarily due to rental construction, with nearly half of the apartments started being purpose-built rentals, the highest share on record. This reflects demographic shifts and the declining affordability of homeownership.
Condominium apartment starts, however, fell across most regions except Calgary and Edmonton. Developers are facing challenges in reaching pre-construction sales targets due to higher interest rates, which have reduced new condominium purchases from both investors and end users.
Developers have been focusing on clearing project backlogs, leading to a rise in apartment completions, setting new records in all CMAs except Montréal and Vancouver.
To address the housing shortage, municipalities and provinces are actively implementing policies aimed at increasing the supply and variety of housing to better meet the needs of both buyers and renters.
The latest data from the Housing Supply Report shows that while combined housing starts in Canada’s six largest CMAs reached 68,639 units in the first half of 2024—representing a 4% increase from the same period in 2023 and marking the second-highest level of activity since the 1990s—significant regional differences remain.
When adjusted for population growth, housing starts per 10,000 people were close to the historical average. Despite this increase, the report points out that this level of new construction isn’t sufficient to reduce the existing supply gap or improve housing affordability for Canadians, especially considering the long-standing challenge of supply not keeping pace with demographic demand.
The Housing Supply Report reveals significant variations in new home construction trends across different markets, with even greater differences than previously noted. Calgary, Edmonton, and Montréal experienced substantial increases in total housing starts, ranging from 40% to 70%. On the other hand, Toronto, Vancouver, and Ottawa saw declines in housing starts, with decreases between 10% and 20%.
To provide a clearer comparison of construction rates across these markets, the report uses a population-adjusted measure of housing starts, calculated as starts per 10,000 people.
The Housing Supply Report highlights how Montréal’s housing starts per 10,000 population have historically been significantly lower than in other large CMAs, with Toronto also falling further below the cross-CMA average. Vancouver, which led in housing starts for most of the decade, has now been surpassed by Calgary and Edmonton. The two Alberta CMAs have benefitted from stronger economic growth and better utilization of construction labor.
These trends in housing starts reflect varying levels of affordability and economic conditions across Canada. In more affordable markets like Calgary and Edmonton, homebuyers have been more resilient to rising housing costs. Affordability indicators show that homeownership costs relative to incomes in these cities remain roughly half of those seen in Toronto and Vancouver.
Alberta has also experienced stronger economic growth, with real GDP per capita outpacing Quebec, Ontario, and British Columbia by about 30% in recent years. This, combined with growing remote work opportunities and a more affordable housing market, has driven significant interprovincial migration to Alberta since 2022.
The influx of new residents has created high demand for new home construction, leading to record housing starts in Calgary and the second-highest level ever in Edmonton during the first half of 2024. The construction industry in these CMAs has been able to meet this demand more efficiently, thanks in part to a lower regulatory burden. These factors, along with strong economic conditions, have helped slow the decline in homeownership affordability in Alberta compared to other large CMAs.
The Housing Supply Report shows that while housing starts of all dwelling types increased in Montréal, they remained below the 10-year average, with most starts focused on the rental market. Despite this, meeting the region's strong rental demand has been challenging due to high financing and construction costs.
In less affordable markets like Toronto and Vancouver, as well as the more affordable Ottawa market, starts for ground-oriented homes (such as single-detached, semi-detached, and row houses) have dropped further below historical averages. Lower resale market prices have made it harder for developers to attract homebuyers, as high land costs limit their ability to lower prices.
Toronto and Vancouver also see a stronger investor presence due to the importance of the secondary rental market, particularly in condominium rental apartments. However, high interest rates, declining rental demand, and softening resale markets have made pre-construction apartments less appealing to investors.
As a result, even though apartment starts in these cities have only modestly declined and remain historically strong, the report anticipates that activity will slow further. Developers, facing limited investor support, may struggle to meet pre-sales thresholds needed for financing, which could result in slower supply growth going forward.
Outside of Alberta’s CMAs, apartment starts have declined, with the exception of Montréal, where there has been an increase in purpose-built rental construction. Overall, combined apartment starts across the six CMAs have increased only slightly in 2024, with a 47% share of those starts dedicated to purpose-built rental units, offsetting a decline in condominium apartment construction.
According to the Housing Supply Report, when adjusted for population, Edmonton had the highest rate of purpose-built rental construction, with 20 rental apartments started per 10,000 people. In Edmonton, rental supply is beginning to catch up with demand as developers respond to rapid rent increases driven by strong economic and demographic conditions.
While Calgary and Edmonton saw increases in condominium apartment starts, other major markets experienced declines in the first six months of 2024.
The Housing Supply Report notes that apartment developers in some markets are facing challenges. In Toronto and Ottawa, developers have had to reassess certain projects due to financial unviability, despite tight rental market conditions. In Toronto, purpose-built rentals are competing with an increase in condominium apartments, as investors opt to rent out their units in response to a soft resale market. With both rental listings and condo completions rising, asking rents for condos have declined, and new purpose-built apartments are similarly priced. This slower rent growth could make future purpose-built developments less feasible.
In the condominium segment, most CMAs, except Calgary and Edmonton, have seen developers struggling to meet minimum sales thresholds for financing, particularly for larger projects. This has led to delays or cancellations of new launches. Data indicates that projects that secured enough sales to move forward in 2024 were, on average, smaller and less costly than those in the previous year. In high-priced markets like Toronto, or rapidly growing ones like Calgary, developers have shifted to starting projects in less expensive areas to balance affordability and costs.
Developers have hesitated to reduce prices on unsold units in existing projects, instead offering incentives like free parking, waived maintenance fees, or upgrades. To maintain profit margins, this approach could result in longer pre-sale phases, extended project timelines, and potential cancellations, leading to fewer starts in the future.
Additionally, developers have been focused on completing existing projects rather than starting new ones. The pandemic caused backlogs in condominium apartment construction due to a tight labor market, rising costs, and supply shortages. By the end of 2023, many CMAs reached record highs in the number of apartment units under construction but not yet completed. However, by the first half of 2024, some of these challenges eased, and apartment completions increased across all CMAs, reaching record levels in Toronto, Ottawa, Calgary, and Edmonton.
Provincial and municipal policies are playing a key role in addressing housing supply and variety. Some recent initiatives include:
- Ontario’s Bill 23 (2022), which allows up to three units per lot in many residential areas without rezoning.
- British Columbia’s Bill 44 (2023), which mandates up to six units on larger lots near public transit.
- Quebec’s Bill 31 (2024), which allows municipalities to bypass local bylaws, such as height restrictions.
- Toronto’s Official Plan amendment (2023), which permits multiplexes with 2-4 units in all neighborhoods.
- Calgary’s blanket rezoning (2024), allowing single-family homeowners to redevelop their properties into duplexes, fourplexes, or row houses without a land-use redesignation.
- Calgary’s Downtown Incentive Program (2021), which supports office-to-residential conversions and co-living developments.
The impact of these initiatives is beginning to appear in the data, particularly with notable office-to-residential conversion activity in Calgary. Increased density efforts may also explain the rise in secondary suites in Edmonton and Calgary. These policy developments will be closely monitored through housing starts, completions, and data on residential conversions and demolitions.
In conclusion, while Canada's largest CMAs are seeing varied trends in housing starts and completions, the common theme across all regions is the increasing need to address housing affordability and supply. Provincial and municipal policies, like those implemented in Ontario, British Columbia, and Alberta, aim to promote higher density and more diverse housing options. However, economic conditions, rising costs, and shifting demand continue to pose challenges for developers. As we look ahead, the success of these policies and the ability of the construction industry to keep pace with demographic demand will be crucial in closing the supply gap and ensuring more Canadians have access to affordable, adequate housing.
You can read the CMHC Fall 2024 Housing Supply Report Here
