Is Today’s Rental Construction Boom Setting Up Tomorrow’s Homeownership Shortage?

Canada’s housing market is undergoing one of its most significant structural shifts in decades. For years, condominium construction outpaced purpose-built rental development, supported by strong investor demand, rapid population growth and rising home prices. Today, that model has largely broken down. Developers are increasingly pivoting away from condo projects in favour of purpose-built rentals. Rental starts totalled about 130,000 units over the past four quarters, while condo starts fell below 50,000 for the first time since the aftermath of the Global Financial Crisis (graph 1). But the two forms of supply aren’t interchangeable. Purpose-built rentals remain part of the dedicated rental stock, whereas condos may be purchased to be owner-occupied or to form part of the secondary rental market. Although the shift helps ease Canada’s longstanding shortage of dedicated rental accommodation, it also raises an important question: could today’s rental boom become tomorrow’s homeownership shortage?

This pivot reflects a dramatic change in market conditions. Condo projects depend heavily on investor presales to secure construction financing, but those presales have fallen sharply as investors retreat from the market. Higher interest rates have eroded affordability External link. and made financing more expensive for both buyers and developers. Slower population growth External link. resulting from recent federal immigration policy changes has softened asking rents External link. and weakened expected investor returns. At the same time, elevated construction costs External link. and government fees External link. on homebuilding have further squeezed already-thin margins, leaving some condo projects too expensive to build at current selling prices.

By contrast, targeted Canada Mortgage and Housing Corporation financing programs and the removal of the GST on new rental construction have significantly improved the economics of purpose-built rental projects. The shift meets a genuine market need following decades of underbuilding. But increased rental construction doesn’t appear to be driving the condo downturn. Rather, collapsing presales have made many condo projects unviable, prompting some developers to shift toward rental construction that are better supported by current market and policy conditions. In doing so, rental construction is helping sustain development activity during the ownership market downturn.

However, the longer-term implications need to be considered. Many aspiring homeowners see condos as the first rung on the property ladder, particularly in major cities where the high price tag of detached housing is beyond their reach. With investor presales weakening, condo starts in Montreal, Toronto and Vancouver are all now well below their 2019 levels (graph 2).

The decline in ownership-oriented construction extends beyond condos. In the four quarters ending in Q2 2026, total housing starts were 43,000 units higher than in 2019, driven by a 73,000‑unit surge in rental starts. Yet this increase masks a 30,000‑unit slump in starts intended for ownership. As a result, the ownership share of housing starts plunged from more than 70% to about 45%. Simply put, Canada is building more homes, but fewer of them are being built for purchase.

With large condo developments taking several years to move from presales to completion, today’s sharp decline in starts may not become fully visible in completed supply until later this decade. Currently, there isn’t a shortage of homes for sale. But there’s a risk that demand—whether from investors or prospective owner-occupiers—could grow faster than new projects can be approved, financed and built. Even a gradual recovery in demand could coincide with relatively few new ownership units coming to market, renewing upward pressure on prices.

None of this suggests that policies supporting purpose-built rental construction should be reversed. Canada needs substantially more dedicated rental supply, and recent policy changes have helped correct decades of underinvestment. But strong rental construction may obscure a deteriorating ownership pipeline in the headline housing starts numbers. Housing policy should recognize that rental and ownership markets are complementary rather than interchangeable, preserving momentum in rental construction while addressing the separate barriers preventing condo projects from proceeding. Ultimately, a balanced housing system can only be achieved by maintaining a robust pipeline of both rental and ownership construction.