Housing starts are forecast to decline this year despite federal efforts to boost construction, according to new projections from the Canada Mortgage and Housing Corporation (CMHC).

In its latest Housing Market Outlook, CMHC said new construction activity is expected to fall through 2026 to 2028, dropping below the historical 10-year average. The agency cited high construction costs, softer demand, and rising inventories of unsold homes as key factors behind the slowdown.

“New construction activity is projected to decline throughout 2026 to 2028,” the report says.

CMHC said purpose-built rental housing will remain the primary driver of new housing starts, though the pace of rental construction is expected to moderate as the market becomes more balanced and immigration-fuelled demand eases.

Construction of single-detached, semi-detached and row houses is expected to recover gradually, led by activity in the Prairies, Ontario and British Columbia. However, affordability pressures and uncertainty in the job market will continue to weigh on demand, the report notes.

Condominium construction is forecast to remain particularly weak, especially in Toronto, where pre-construction sales fell to multi-decade lows last year. Developers are focusing on completing projects already underway rather than launching new ones.

Regionally, Ontario housing starts are expected to fall to historically low levels in 2026, with a modest rebound projected later in the forecast period. In British Columbia, starts are also expected to decline sharply, while the Prairies are projected to remain comparatively stronger. Quebec is expected to see only slight declines this year.

CMHC projects the Canadian economy will grow by about 0.7 per cent this year, making 2026 one of the weakest years in recent decades outside of a recession. While a recession is not part of CMHC’s baseline forecast, the agency warned that ongoing geopolitical and economic uncertainty poses downside risks.

The federal government introduced several measures last year in efforts to boost new housing starts in Canada.

Housing Starts Across Canada Will Drop in 2026: CMHC

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