Canada's Housing Slowdown Is Quietly Building the Next Supply Shortage

Canada started 259,028 new homes in 2025, and in October 2026 CMHC's chief economist, Mathieu Laberge, warned that the slowdown now building behind that number could undo the affordability gains buyers have only just begun to feel.

That sounds backwards at first. Softer prices and fewer bidding wars are what everyone asked for. The idea worth holding onto is this: a slowdown in prices and a slowdown in construction starts are two separate signals, and the second one sets what housing will cost two or three years from now. If you plan, finance, approve or regulate housing, reading the first as success while ignoring the second is how relief turns into the next shortage.

When a cooling market really does help

The usual view has real merit. When high carrying costs push buyers to the sidelines, prices ease, sellers reset their expectations, and buyers get time to inspect, compare and negotiate. If demand dropped and stayed down, a matching drop in building would be perfectly healthy. Supply would simply be adjusting to fewer people needing homes.

Where that logic breaks

Demand hasn't dropped. Manitoba has a population of approximately 1.52 million as of mid-2026, with recent growth coming from both immigration and people moving in from other provinces. Winnipeg's rental vacancy rate remains low. People keep arriving and they need somewhere to live.

What fell was the building. Higher borrowing costs, and material and labour costs that have climbed sharply since 2021, made many projects stop adding up. The Bank of Canada began cutting rates in June 2024 and kept going through 2025, yet a project takes years to move from drawing board to move-in. In Winnipeg, shortages of skilled trades have stretched those timelines further.

So a home not started in 2026 is a home missing when today's newcomers start looking to rent or buy later this decade. CMHC's own numbers show the scale. Its 2023 estimate called for 3.5 million additional units by 2030. Its 2026 work puts Canada's need at up to 4.69 million homes by 2036, and flags that construction could slow.

Listings can mislead here. Inventory may look healthy on paper while sitting mostly in older condos, which does little for a family needing three bedrooms. Starts, permits and the mix of what's being built tell you more about 2028 than this month's active listings do.

Judge every measure by the shovels it moves

CMHC is urging a shift in how Canada builds and finances housing, with funding steered toward higher-density, multi-unit projects that get more homes from each piece of land. The federal GST rebate on new rental construction has helped, though it hasn't fully offset what developers pay to borrow. Manitoba has explored removing PST on new rental builds to match it. The Housing Accelerator Fund pushes municipalities to speed up zoning and approvals.

Each of these is worth having. A faster approval only matters, though, if the project pencils once it's approved. The practical test for any program, bylaw or financing decision is simple: does it get more projects in the ground this building season? If the honest answer is "eventually," it won't touch the gap that's forming now.

A shortage at the top shows up at the bottom

The slowdown also hits a part of the market that rarely gets attention. Many owners in their 40s and 50s would sell the family home if a well-located, right-sized place existed to move into. When those homes aren't built, those owners stay put. The house they would have sold never comes up for the next family, and that family keeps renting in a market with very few vacancies. Thin supply for move-up and downsizing buyers ends up squeezing first-time buyers and renters further down the line.

Next time prices soften, check what happened to starts before you call it progress. If people keep arriving and building is falling, you're looking at the early stages of the next shortage, and this is the window where policy and planning can still change it.