Canada needs to build 3.2 million new homes in the next 10 years to address the country’s housing shortfall but is not currently on course to achieve this, despite a deceleration in immigration rates, new analysis by the country’s budget watchdog suggests.
The PBO said it expects an average of 227,000 new homes will be completed annually for the next decade, totalling approximately 2.5 million new builds by 2035. That falls nearly 700,000 builds short of the 3.2 million new homes the report identified as necessary to remedy the housing shortage.
“PBO estimates that 690,000 additional units—65,000 annually, on average, over 2025 to 2035—would need to be completed by 2035 to eliminate the housing gap in Canada, beyond the 2.5 million net completions projected in the baseline outlook over the same period,” the Aug. 26 report reads.
In total, an additional 290,000 homes would need to be completed each year from 2025 to 2035 to close the housing shortfall, the PBO said.
“This pace of housing construction would be equivalent to outperforming the record high of 276,000 units completed in 2024 for 11 consecutive years,” the report noted.
Demand for new housing will diminish somewhat due to Canada reducing its immigration targets, but the unprecedented number of new households that have emerged in recent years will continue to drive high demand for some time, the report said.
Canada reached a historic peak of 482,000 net new households in 2024. The PBO expects that number to drop over the next decade to an average of 159,000 new households a year between 2025 and 2035, with the total number of households in Canada projected to reach 18.4 million by 2035—a 10.4 percent jump compared to 2024.
An increase in construction along with the decline in demand will ultimately work together to rectify the historically low vacancy rate, which has played a role in the dramatic rise in home prices in recent years, the PBO said.
CMHC Projections
The PBO’s evaluation contrasts with the projections provided by the Canada Mortgage and Housing Corporation (CMHC) in June. The CMHC indicated in its most recent housing stock report that Canada requires between 430,000 and 480,000 new homes annually to regain affordability.By merging baseline projections for net housing completions with estimates of the housing gap, CMHC’s recent study suggests 5.3 million new units will be needed between 2025 and 2035—substantially higher than PBO’s estimate of 3.2 million units during that period, the report noted.
It also estimated a housing gap of 2.6 million units by 2035, which is several times larger than the PBO’s estimate of 690,000 units.
“The stark difference between our estimates of the amount of housing required by 2035 primarily reflects the additional supply in CMHC’s framework necessary to reduce house prices … and achieve targeted levels of housing affordability,” the PBO said.
“In other words, even after accounting for increased household formation from lower house prices, reaching CMHC’s targeted levels of affordability would require significant overbuilding of new housing units such that there would be abnormally high levels of unoccupied housing units and or households with second homes.”
