Canadian rental-apartment starts are expected to decline in all of 2026 as economic uncertainty, slower population growth, high borrowing costs and modest income growth weigh on overall housing demand, says a new report from the Canada Mortgage and Housing Corporation.

Rental construction will ease gradually from peak 2025 levels, said CMHC in a mid-year housing market outlook update.

“Maintaining a sustainable level of new rental supply will be important to meet future housing needs, particularly as economic conditions improve towards the end of the forecast horizon and more new renter households begin to enter the market,” said CMHC in the report.

Rising vacancy rates in larger centres such as Toronto, Vancouver and Montreal are expected to slow rent growth, while Prairie markets should continue to post modest rent increases.

According to the federal housing agency, Canada’s economy is expected to grow slowly in 2026, supported by consumer spending, government investment and exports. However, uncertainty stemming from geopolitical tensions, including the U.S.-Iran conflict, and ongoing Canada-U.S. trade uncertainty is expected to dampen business investment and hiring, keeping housing market activity subdued. Home prices are forecast to decline this year before returning to modest growth in 2027 and 2028.

Housing starts are projected to continue falling as builders respond to weak demand, elevated inventories and high construction costs. CMHC expects construction activity in Ontario and B.C., particularly in condominium markets, to remain below historical averages, while housing starts in the Prairie provinces and Quebec are forecast to moderate from recent highs.

“Price reductions have not yet been enough to bring demand back into the market as economic uncertainty, income growth and borrowing conditions all have played a role in sidelining buyers,” said Kevin Hughes, a CMHC deputy chief economist. “We expect conditions to improve over the medium-term; however, housing construction should remain suppressed as the industry factors in today’s elevated inventories and weaker demand.”

CMHC recently reported that housing starts in large Canadian markets declined 13% year-over-year in June to 20,265 units compared with 23,292 suites a year earlier. Toronto and Montreal bucked the trend, posting 25% and 10% increases, respectively, due to higher mult-unit starts.

On the other hand, Vancouver saw a 35% year-over-year due mainly due to a decline in multi-unit starts.

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