Regulatory barriers and structural factors have constrained Canada’s housing-supply responsiveness for almost two decades, according to new analysis from the Canada Mortgage and Housing Corporation.

As result, housing starts have not kept pace with demand, and the roadblocks have contributed to higher home prices, CMHC Chief Economist Mathieu Laberge wrote in the report.

CMHC found that if Canada’s housing industry had been as responsive as the U.S. housing sector between 2006 and 2024, housing starts could have been nearly 30% higher while home prices could have been close to 10% lower. Laberge said restrictive land-use policies, zoning constraints and slower approval processes have limited the sector’s ability to react quickly to changing market conditions.

CMHC also identified structural factors that have reduced housing-supply responsiveness, including geographical constraints and Canada’s concentration of economic activity in a limited number of major urban centres. The report noted that many Canadian cities face physical barriers to expansion, such as coastlines, waterways and mountains, while fewer large urban alternatives leave households and workers concentrated in expensive housing markets.

Cities with more restrictive land-use rules tend to experience higher prices and lower levels of homebuilding, with challenges most acute in high-demand markets where rezoning approvals are more difficult to obtain, the report says.

CMHC said improvements in housing-supply responsiveness would take time to materialize even if reforms are implemented immediately, but pointed to recent policy initiatives as steps toward improving long-term housing outcomes.

The agency highlighted measures such as the federal Housing Accelerator Fund, launched in 2023 to reduce municipal red tape, as well as broader infrastructure and economic development initiatives under the federal government’s Build Canada Strong agenda. According to CMHC, these moves could gradually improve housing market responsiveness and support a more agile homebuilding sector over time.

CMHC previously reported that housing starts in Canada’s large population centres rose 6% year-over-year in 2025 after some of the new measures were implemented.

Photo: TD Economics