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The Public Ledger

Canada’s Housing Market Is Cooling. So Why Does Affordability Remain a Problem?

  • The Public Ledger
  • Jul 26
  • 6 min read

Updated: Jul 26

The Public Ledger

Housing & Economy

Published: 26/07/2026 - 13:35

Last Updated: 26/07/2026 - 22:17


(Stock Free Images - Run-down House - https://sl1nk.com/ttfewif)


Canada's housing market is showing signs of cooling after several years of significant price and rent increases. Home prices have fallen from their 2022 peak, rental conditions have eased in many major markets, and housing demand has weakened.


At the same time, housing affordability remains a significant challenge, while Canada continues to face a need for additional housing supply.


The result is a housing market that is changing, but not necessarily in a way that provides an obvious answer to Canada's affordability problem.



A cooling housing market


The Bank of Canada reported in its 2026 Financial Stability Report that the price of a typical Canadian home had fallen approximately 5% over the previous 12 months and 20% from its 2022 peak. The largest declines have occurred in Ontario and British Columbia, with condominium markets in Toronto and Vancouver experiencing particular pressure.1


The decline has not been uniform across Canada. Housing conditions differ substantially between regions and property types.


CMHC's July 2026 housing-market outlook expects home prices to continue declining through 2026 before returning to modest growth in 2027 and 2028. The corporation expects housing sales to recover gradually but remain below levels typically observed over the previous decade.2


CMHC attributes weak demand to several factors, including slower population growth, economic uncertainty, borrowing costs and modest income growth.3



Construction is also slowing


While demand has weakened, Canada's rate of new housing construction has also declined.


CMHC recorded 20,265 housing starts in June 2026 in Canadian centres with populations of at least 10,000. That was 13% lower than June 2025, when 23,292 units were started.


The first six months of 2026 produced 113,017 housing starts, 1% below the same period in 2025.


CMHC's six-month trend measure also declined by 2.8% between May and June, reaching an annualized rate of 248,123 units.4


There are significant regional differences.


In June, housing starts increased year-over-year in Ontario by 2%, while Quebec declined 2% and British Columbia declined 46%. Manitoba and Saskatchewan both recorded substantial increases, while Alberta declined 18%.4


The figures demonstrate why the term "Canadian housing market" can be misleading. Conditions can vary substantially between provinces and cities.



Rental conditions are changing


The rental market has also begun to ease in several major Canadian cities.


Statistics Canada's first-quarter 2026 data found that the average asking rent for a two-bedroom apartment across Canada's census metropolitan areas was $2,150, down 0.9% from $2,170 one year earlier.


Toronto's average asking rent was $2,660, down 1.1%. Montréal's was $1,900, down 1.6%, and Vancouver's was $3,100, down 2.2%. Ottawa–Gatineau's Ontario portion recorded a 5.6% decline.


Halifax moved in the opposite direction, with its average asking rent increasing 5.4% to $2,350.5


These figures describe asking rents for available rental units, rather than the rent paid by every existing tenant. Statistics Canada says the figures are based on listings on major rental platforms and include both purpose-built rental units and units in the secondary rental market.5


CMHC similarly reports that increased rental supply and weaker demand are helping rental conditions become more balanced, although it continues to identify affordability as a significant challenge.6



Lower prices do not automatically mean affordable housing


A decline in home prices might appear to provide a straightforward solution to affordability.


However, the cost of purchasing a home depends on more than its sale price.


Interest rates, household income, mortgage payments and the availability of suitable housing all affect the cost of homeownership.


The Bank of Canada's 2026 Financial Stability Report notes that approximately 12% of outstanding Canadian mortgages are expected to renew over the next year from the final group of five-year fixed-payment mortgages taken out during the pandemic.


The Bank estimates that these borrowers will see their mortgage payments increase by approximately 15% on average.1


Consequently, a decline in home prices does not necessarily result in lower monthly costs for existing homeowners.


For prospective buyers, falling prices may improve affordability, but financing costs and income remain important factors.


CMHC similarly reports that many potential buyers remain cautious because of borrowing costs, slow income growth and economic uncertainty.6



The supply problem


Housing supply remains one of the central issues in Canada's housing debate.


CMHC says Canada remains well short of closing its housing supply gap and that improving affordability over the long term will require both stronger income growth and additional housing supply.6


Increasing supply, however, is not simply a matter of constructing more buildings.


Developers face construction and financing costs, while municipalities and other governments must provide infrastructure to support new development. Demand also influences whether developers consider projects financially viable.


The current market demonstrates this tension. Canada needs additional housing, but weaker demand and high construction costs can make new projects more difficult to build.4



Ottawa's response


The federal government has introduced several measures intended to increase housing supply.


One of the most significant is Build Canada Homes, a federal organization dedicated to building and financing affordable housing.


On June 19, Bill C-20, the Build Canada Homes Act, received Royal Assent. The legislation establishes the framework for Build Canada Homes to operate as a Crown corporation, giving it additional financial authorities and greater operational flexibility.7


The government says Build Canada Homes is intended to work with provinces, territories, municipalities, Indigenous partners, private organizations and non-profit organizations to increase housing construction.7


The organization had already advanced projects in Longueuil, Dartmouth, Ottawa, Toronto, Winnipeg and Edmonton before becoming a Crown corporation.8


The federal government has also passed legislation providing $1.7 billion to provinces and territories for measures intended to increase housing supply, including reducing development fees on new homes and strengthening housing-construction programs.9


The federal measures are therefore intended to address both the construction of housing and some of the costs associated with bringing new housing to market.



The argument against the supply-focused approach


There is, however, an important argument against interpreting Canada's housing problem primarily as a shortage of homes.


Housing supply is only one component of affordability.


The current data shows that home prices have already declined substantially from their peak, while housing construction has remained relatively high in historical terms. Yet many Canadians continue to experience affordability difficulties.


That suggests that simply constructing more homes may not, by itself, resolve every problem facing households.


Income growth, mortgage rates, financing conditions, the location and type of homes being constructed, and the distribution of housing demand can all influence affordability.


The current market also demonstrates that additional construction does not necessarily mean immediate affordability improvements. CMHC expects housing starts to decline while it simultaneously expects affordability to remain a major challenge.6


This does not establish that increasing supply is ineffective. It establishes that supply alone cannot be assumed to be the complete solution.


Whether the federal government's approach addresses the underlying problem will depend in part on what is ultimately built, where it is built, how quickly it becomes available and who can afford it.



What happens next?


Canada's housing market currently contains several seemingly contradictory trends.

  • Home prices have fallen.

  • Asking rents have fallen in many major markets.

  • Rental supply has increased.

  • Housing demand has weakened.


At the same time:

  • Housing construction has slowed.

  • Borrowing and construction costs remain significant.

  • Many households continue to experience affordability challenges.

  • Canada has not closed its estimated housing supply gap.


CMHC expects housing activity to remain subdued through 2026, with gradual improvement expected in 2027 and 2028. The corporation expects home prices to continue declining in the near term before modest growth resumes.2


The federal government is simultaneously attempting to increase construction through Build Canada Homes and other housing measures. Whether those policies produce the intended results will take time to assess. The Build Canada Homes Act itself only received Royal Assent in June.7


The available evidence therefore describes a housing market that is cooling without having fully resolved Canada's affordability problem.


Home prices are lower than they were at their peak. Rental conditions have improved in many markets. Yet those changes have not eliminated the difficulty many Canadians face in finding housing they can reasonably afford.


Canada is also building new homes, but construction has slowed, and the country continues to face a substantial long-term supply challenge.


The facts establish the current conditions. Whether Canada's housing policies are sufficient, whether more housing should be built, or whether other measures should take priority are questions on which Canadians may reasonably disagree.




Bibliography




Editorial Note:

Forecasts and statements about expected future conditions in this article are attributed to the organizations making them. They are not presented as established facts.



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