In a housing market closely watched for signs of recovery, Canada’s residential construction activity showed a marginal decline last month, raising questions about the country’s path toward addressing its persistent housing shortage. The Canada Mortgage and Housing Corporation (CMHC) reported today that housing starts in May 2025 decreased by 0.2 percent compared to April figures, a statistically minor shift that nonetheless continues a pattern of construction volatility.
The seasonally adjusted annual rate of housing starts settled at 243,560 units in May, down from 244,050 in April, according to the federal housing agency’s latest report. This fractional decline comes amid growing pressure on developers and policymakers to accelerate residential construction as affordability concerns continue to plague major urban centers across Canada.
“While the month-over-month change appears insignificant, we’re closely monitoring these trends against our national housing targets,” said Marcus Chen, CMHC’s Chief Economist. “Even small fluctuations can impact our trajectory toward addressing the structural housing deficit that has accumulated over the past decade.”
Urban housing starts, which represent the bulk of new residential construction, decreased by 0.3 percent to 222,780 units. The decline was primarily driven by a 1.2 percent reduction in single-detached urban starts, which fell to 59,840 units. Meanwhile, multi-unit urban starts – including apartments, condominiums, and townhouses – showed resilience with a minimal 0.1 percent increase to 162,940 units.
Regionally, Ontario and British Columbia recorded the most significant declines at 2.3 percent and 1.8 percent respectively, raising concerns about housing supply in the country’s most expensive markets. Alberta bucked the trend with a 3.4 percent increase in housing starts, continuing its streak as one of the most active construction markets in the country.
Industry experts point to several factors contributing to the stagnation in housing starts, including persistent labor shortages, elevated construction costs, and uncertain economic conditions. Jennifer Wong, Director of Economic Research at Toronto-based RealData Analytics, told CO24 Business that “developers continue to face significant headwinds despite government incentives to boost supply.”
The federal government’s National Housing Strategy, which aims to add 3.5 million new homes by 2031, has intensified focus on monthly construction data. May’s slight decline puts additional pressure on summer construction activity to accelerate if annual targets are to be met.
“We need to average approximately 290,000 housing starts annually to meet our national housing goals,” noted Federal Housing Minister David Thompson. “While we’ve seen improvement from historical averages, we’re still not building at the pace required to meaningfully address affordability.”
The housing starts data comes on the heels of Statistics Canada’s latest inflation report, which showed shelter costs rising at 4.6 percent annually – significantly outpacing the overall inflation rate of 2.8 percent. This persistent gap continues to strain household budgets across the country and has become a central focus of political debate.
Market analysts suggest that the coming months will be crucial for gauging whether Canada’s construction industry can overcome its challenges and accelerate building activity. With interest rates having stabilized following the Bank of Canada’s recent policy shifts, some economists predict a potential uptick in development planning.
“The slight pause we’re seeing may be temporary as developers adjust to the new interest rate environment,” explained Priya Singh, Senior Economist at National Bank. “The critical question is whether we’ll see a meaningful acceleration in the second half of 2025, particularly as labor and supply chain constraints gradually ease.”
As Canadians continue to grapple with housing affordability challenges in communities large and small, the fundamental question remains: can our construction industry overcome its structural limitations to build the homes needed for current and future generations, or will incremental progress leave us perpetually behind the curve in addressing our national housing crisis?
