Skip to main content
Builder working on house construction
• Nov. 10, 2023

If you've been reading headlines lamenting the housing supply in Canada and are wondering what's going on, you're not alone.

Housing is a fundamental need for all people, but that need isn't so easy to satisfy in Canada right now. So how did we get to a place where housing is becoming not only increasingly unaffordable, but also difficult to find for so many people – especially as our population continues to grow?

To help explain what's going on in the housing market, the TD Stories team sat down with TD Economist Rishi Sondhi on the heels of his latest report, Canadian Housing: Navigating Challenges. He spoke to us about what's happening with the Canadian housing supply right now, and what we can expect to see in the next two years.

What is the housing supply like in Canada right now?

Early this year, resale supply had sunk to multi-year lows, consistent with considerable weakness in sales and prices. Since, then, new resale listings have increased for six straight months through September 2023, marking a 35% surge over that time.

However, because the starting point preceding these gains was so low, they had only returned to their long-term average, meaning that they were at levels that could be considered "typical." So while new resale listings have certainly increased, they haven't gone up so much as they've returned to a kind of normalcy.

Ontario forms an important exception to this, as listings have leapt to levels that are notably above long-term averages, possibly indicating that a subset of homeowners feel pressured to sell due to higher rates. This increase has driven the sales-to-listings ratio down to 40%. This means that inventory remains quite low for those looking to buy a home.

This is the lowest it's been since the depths of the Global Financial Crisis in 2008, particularly as it's been matched with a steep decline in sales since the Bank of Canada resumed hiking rates in June and July. The Bank of Canada has since paused its hiking campaign, but the elevated interest rate backdrop has hit home sales in Ontario hard.

When it comes to the market for new builds, the level at which new homes are being started isn't considered low, but it is struggling to keep up with population growth.

When you look at how housing has been keeping up with population growth over time, it was faring well until about 2016, which is when federal immigration targets picked up. Around that time, population growth began to outpace the rate at which new houses were being completed in many parts of Canada. Since then that gap has widened as population growth has continued to climb.

With the population rising, it's very difficult to build enough new houses to keep up with demand.

How quickly are new homes being built across Canada?

Despite high borrowing costs and persistent labour shortages in the construction industry, builders have been able to sustain a pace of housing starts (an economics term that refers to the number of new units started within a certain time frame) that's roughly 20% above pre-pandemic levels and near-multi-decade highs. These high levels mean builders are completing projects at a rate considered the fastest on record so far for 2023, with 140,000 units finished in Census Metropolitan Areas (designated areas made up of multiple connected municipalities) across Canada through September.

We've also seen a resurgence in purpose-built rental (apartments) construction that's being supported by skyrocketing rental prices and by government programs, such as the federal government's decision to remove the GST on purpose-built rental construction. Purpose-built starts are by far the highest they've been since at least 1990.

More construction sounds like a good news story. Is there a "but" … coming?

To some extent. The number of new units under construction is at record highs, but this is partly because it takes so long to deliver new projects to the market so there are many simultaneous projects on the go increasing these numbers. As of September 2023, it took 18 months to finish a construction project in Canada.

Part of this has to do with the shift to building purpose-built rental apartments, which take longer to complete than single-family homes. However, construction timelines have lengthened across all types of homes.

Even with relatively high levels of construction the main concern is that we will struggle to keep pace with increased demand due to our growing population. TD Economics forecasts Canada's population to grow by more than 1 million people this year and 740,000 in 2024.

TD Economics now estimates that Canada could be short over 300,000 housing units from 2023-2025 as population growth collides with a slower pace of homebuilding after this year's very healthy rate.

How are governments responding?

Governments at all levels have taken steps in the right direction. One major example is the aforementioned federal government's decision to remove GST on purpose-built rentals. Ontario, Newfoundland and Labrador, Nova Scotia, and Prince Edward Island (PEI) have followed suit (while Manitoba has pledged to), by relieving the provincial taxes on these projects. Reports suggest this could help increase the number of available units by 5,000-10,000 over the course of a year.

Regionally, municipalities like Vancouver and Toronto have changed zoning regulations to allow for more so-called "gentle" density, which is, for example, allowing multiplexes to be built on land that was previously zoned for single-detached housing only. Vancouver has also made strides in purpose-built rental construction through its housing strategy.

In a 2022 report, The Canadian Mortgage and Housing Corporation estimated that an additional 3.5 million units above what's already planned would be required by 2030 to restore affordability to 2003/04 levels (a time of peak affordability). This is a tall order. Although that lofty target doesn't need to be met to make a real difference in terms of affordability, it's clear there's more that needs to be done to increase supply.

Read more about this and other Canadian real estate topics in Rishi Sondhi's latest TD Economics report.

Want to learn more about your money?
Some advice on what early RRSP withdrawals could mean for your taxes
Advice on how to protect yourself from romance scams
Five tips for setting your small business up for success

See you in a bit

You are now leaving our website and entering a third-party website over which we have no control.

Continue to site Return to TD Stories

Neither TD Bank US Holding Company, nor its subsidiaries or affiliates, is responsible for the content of the third-party sites hyperlinked from this page, nor do they guarantee or endorse the information, recommendations, products or services offered on third party sites.

Third-party sites may have different Privacy and Security policies than TD Bank US Holding Company. You should review the Privacy and Security policies of any third-party website before you provide personal or confidential information.