Why Housing Market Easing Hasn’t Pulled More Households off the Sidelines

Despite a shift in housing market conditions in 2025, measures of housing activity have not rebounded proportionately, particularly in Canada’s highest priced markets. One possible reason is that affordability is still too far out of reach for many people, preventing many from moving out on their own.

Evidence suggests that this suppressed household formation was substantial in Canada—reflecting years of accumulated affordability constraints—even prior to the recent large influx of newcomers that outpaced homebuilding completions.

At face value, easing housing market conditions in 2025 could be interpreted as evidence that Canada’s housing shortages have cleared. However, aggregate market statistics aren’t the best indicator of new household formation. Instead, we need to look at price points, locations and unit types accessible to suppressed households rather than in aggregate market statistics alone.

In the rental market, even as headline indicators improved, lower‑cost units remained scarce, potentially limiting the ability of some suppressed households to form.

In the ownership market, affordability remained stretched by historical standards, while elevated rents in recent years may have limited down payment accumulation for many renters. Economic uncertainty in 2025 likely reinforced delayed household formation.

Recent policy initiatives have helped support new supply, particularly in purpose‑built rental construction. However, important gaps persist in how affordability is addressed and assessed.