Canada’s housing debate has become too much of a song with one verse: Build more homes and affordability will follow. That needs to change as governments renew the National Housing Strategy, set to expire in 2027.
There’s truth in the song. We need more “missing-middle” homes in established neighbourhoods, and many more non-profit and co-op options for both renters and first-time owners.
But here’s the problem with letting “build more” dominate the conversation: It masks the incremental affordability improvements already happening in B.C. and Ontario – even as new construction there falters. Rather than ignore that signal, Ottawa should learn from it. If the goal is lasting affordability, National Housing Strategy 2.0 must build on what is already helping cool housing costs and deploy the full set of policy levers that shape prices and rents – not simply pursue higher construction numbers.
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The Canada Mortgage and Housing Corporation shows that per-capita homebuilding has slumped sharply in Toronto and eased in Vancouver. Housing starts per 10,000 residents in Toronto fell to 17 in the first half of 2025 from 38 in the first half of 2023. That’s Toronto’s lowest per-capita homebuilding since 1996. Vancouver also declined to 40 starts per 10,000 residents in 2025 from 58 in the first half of 2023.
Despite the slowdown in construction, in Greater Toronto, the MLS Home Price Index benchmark was down 6.3 per cent year-over-year in December, 2025. In British Columbia, the provincial average MLS price was down 5.6 per cent over the same period.
Rents show a similar pattern. Asking rents for two-bedroom apartments fell year-over-year in both Toronto (down 3.9 per cent) and Vancouver (down 5.9 per cent).
If prices and rents can fall while per-capita building is weak in our most expensive markets, then the affordability conversation cannot be reduced to the “Build Canada Homes” construction slogan. That insight is reinforced by long-run data showing housing supply has grown faster than Canada’s population since the 1970s — even as affordability deteriorated dramatically over the last half century.
Together, these patterns make clear that building more is necessary but not sufficient, and that we must match efforts to accelerate construction with an equal commitment to address the demand-side forces and policy choices that have driven prices so far out of reach.
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Research by Martine August in the Cambridge Journal of Regions, Economy and Society helps explain why supply alone can’t fix what finance helped break. During the early pandemic, she shows Canadian banks steered lending toward residential mortgages rather than business loans, prioritizing households and firms already rich in real estate equity. With cheap access to credit, those borrowers upgraded or acquired additional property, bidding up home values in the process.
That pattern points to a clear policy opportunity. Given banks’ current preference for mortgage lending over business investment, the next National Housing Strategy should examine how to shift financial incentives so chartered banks lend less toward housing speculation and more toward productive enterprise. Done right, this would cool bidding-wars for already-built homes while helping to finance manufacturing and other industries that drive productivity growth.
Monetary policy also plays a role. The Bank of Canada’s mandate binds its 2-per-cent inflation target to a Consumer Price Index that understates housing inflation by focusing too much on continuing ownership expenses, and not enough on what it actually costs to buy a home. When housing costs surge but official inflation metrics don’t register it, interest rates stay lower for longer, unintentionally pouring fuel on real estate markets.
If we want a housing system that doesn’t reinflate with every cycle of cheap credit, NHS 2.0 must ensure the Bank’s 2-per-cent target reflects the true cost of housing — including the full purchase price of homes and land.
Tax policy matters too. Capital gains exemptions and property tax structures have sheltered enormous wealth accumulation in primary residences, reinforcing our cultural addiction to rising home values as a private retirement plan. We cannot reward housing speculation with tax breaks without expecting home values to outpace local earnings.
All of this points to the same conclusion: The next National Housing Strategy must sing more than a one-verse song, using every lever available, including bank lending, interest rates, tax policy and construction. Only then will we build a strategy equal to the task of restoring affordability.
Dr. Paul Kershaw is a policy professor at UBC and founder of Generation Squeeze, Canada’s leading voice for generational fairness. You can follow Gen Squeeze on X, Facebook, Bluesky, and Instagram, as well as subscribe to Paul’s Hard Truths podcast.
