The Canada Mortgage and Housing Corporation’s Spring 2024 Housing Supply Report reveals that the construction of purpose-built rentals and condominiums reached record levels in 2023. In six major markets, purpose-built rental construction saw a significant increase, with rentals accounting for a historically high average share of new construction starts. Edmonton had the highest share of rentals among new constructions at 80%, while in Toronto, the rental share increased to over a quarter. Condo construction starts also reached historic highs in the same markets, with 57,121 units constructed in 2023 due to increased interest from pre-construction investors.
However, the CMHC is predicting a slowdown in condo construction starts in 2024. This is attributed to reduced pre-construction sales in 2023 and increased borrowing costs, which may hinder the growth of the condo market. The report also suggests that Canadians may start living in more dense accommodations in the future, as fewer single-detached homes are being built. Apartment starts surged by seven percent in 2023, reaching a record high of 98,774 units, while single-detached starts dropped by 20 percent, the most significant decrease among all housing types. This shift towards densification is in line with the federal government’s efforts to address the housing crisis through zoning changes and tax incentives.
In response to the housing affordability crisis, the federal government has been taking steps to encourage densification and increase the supply of purpose-built rental units. Prime Minister Justin Trudeau has emphasized the importance of densification in solving Canada’s housing crisis, and in September, he announced the removal of GST on purpose-built rentals. This move was part of the Housing Accelerator Fund initiative, which aims to accelerate the construction of affordable housing by providing incentives to municipalities to introduce zoning changes. This shift towards denser housing options is seen as a way to address the growing demand for affordable housing in Canada.
The report highlights the importance of purpose-built rentals in the current housing market, as they have been increasing in popularity and share among new construction starts. Rentals have accounted for a larger share of apartments breaking ground, with an average of 42% in 2023. This trend is expected to continue in the coming years, as the demand for rental units continues to grow. In the six major markets analyzed, purpose-built rentals have become a significant part of the construction landscape, especially in cities like Edmonton where rentals make up a majority of new constructions.
Despite the record levels of construction in the rental and condo markets in 2023, the CMHC is projecting a slowdown in condo construction starts in 2024. This is due to a combination of factors, including reduced pre-construction sales and increased borrowing costs. The report suggests that Canadians may need to adjust to living in denser accommodations in the future, as single detached homes see a decline in construction. The government’s focus on densification and increasing the supply of purpose-built rentals is expected to shape the future of housing in Canada, as efforts are made to address the affordability crisis and provide more housing options for Canadians.
