Toronto Housing Supply Gap: Why Canada Still Needs More Homes

The Toronto housing supply gap remains one of the biggest challenges facing the GTA real estate market, even as lower home prices have recently provided some relief for buyers.

New estimates from Canada Mortgage and Housing Corporation (CMHC) show that Canada needs between 417,000 and 469,000 housing starts every year to restore housing affordability to pre-pandemic levels by 2036.

Under current trends, CMHC expects approximately 231,000 housing starts annually — leaving a substantial gap between what is expected to be built and what would be required to meaningfully improve affordability.

For Toronto, the situation is particularly interesting.

The city’s housing supply gap has narrowed somewhat since CMHC’s previous estimates, but that doesn’t mean Toronto suddenly has enough homes.

In fact, CMHC says Toronto still needs to increase annual housing starts by at least 50% over the next decade to restore affordability to pre-pandemic levels.

Toronto’s Housing Supply Gap Has Narrowed — But There’s a Catch

There has been some improvement in housing affordability across the Toronto market.

Declining home prices and slower rent growth have reduced some of the pressure on household budgets, which has helped narrow Toronto’s estimated housing supply gap.

But CMHC cautions that these improvements are largely the result of softer current market conditions rather than a long-term solution to affordability.

That’s an important distinction.

A slower real estate market can temporarily make homes more affordable. But if housing construction also slows dramatically during that period, Canada risks creating another supply problem when buyer demand eventually strengthens.

CMHC describes underbuilding during the current market downturn as a key risk to future housing affordability.

Toronto Needs Thousands More Homes Every Year

CMHC estimates Toronto would produce approximately 42,000 housing starts annually under its business-as-usual scenario.

To restore affordability to approximately 2019 levels by 2036, Toronto would instead require roughly 62,000 to 68,000 starts per year.

That represents an annual housing supply gap of approximately 20,000 to 26,000 homes.

And there’s another issue hiding beneath those numbers: the type of housing being built.

Rental Construction Is Growing While Ownership Supply Struggles

Toronto isn’t simply facing a question of how many homes are being constructed.

It’s also about what kind of homes are being built.

Purpose-built rental housing has become the largest source of new housing supply in the Toronto market.

According to CMHC, rental apartment starts were the only major housing segment to increase during the first half of 2026, surpassing condominium apartment starts for the first time in decades.

Meanwhile, construction of ownership-oriented housing has weakened considerably.

That includes both condominiums and ground-oriented homes such as detached, semi-detached and townhouse properties.

CMHC reports that ground-oriented freehold housing starts are at record lows following more than two decades of decline.

Condominium construction has also fallen sharply as weaker presales, reduced investor demand and elevated resale inventory make new projects more difficult to launch.

In the City of Toronto, only 156 condominium units began construction during the first half of 2026, compared with an average of approximately 7,000 units annually over the previous decade.

That’s a dramatic change in the development pipeline.

Why Today’s Construction Slowdown Matters Later

Real estate supply doesn’t respond instantly to demand.

Large housing developments can take years to move through planning, approvals, financing, presales and construction.

That means decisions being made by developers today can influence the number of homes available several years from now.

Canada currently has softer population growth and more cautious buyers than it experienced during the post-pandemic housing boom.

But CMHC expects housing demand to strengthen over the longer term as household formation continues, incomes grow and affordability improves.

If construction falls too far before that demand returns, the market could once again find itself without enough available housing.

What Does This Mean for Toronto Buyers?

For buyers, today’s market may provide opportunities that weren’t available during periods of intense competition.

More inventory in portions of the resale market and lower prices in certain property segments can give buyers additional negotiating power and more time to make decisions.

However, today’s softer conditions don’t necessarily tell us what Toronto’s housing market will look like several years from now.

If new ownership housing continues to decline while demand eventually recovers, competition for existing homes could strengthen again.

Buyers should therefore focus on their own finances, housing needs and timeline rather than trying to perfectly time the broader market.

What Does This Mean for Toronto Sellers?

For sellers, the current supply picture reinforces the importance of understanding local conditions.

Toronto isn’t one single real estate market.

Conditions can vary significantly depending on neighbourhood, property type and price point.

A condominium downtown may face completely different competition than a detached home in Etobicoke or another GTA community.

Pricing based on today’s comparable properties, active competition and buyer behaviour remains essential.

Long-term housing shortages don’t automatically translate into immediate price growth, particularly when buyers have more choice in the resale market.

Toronto’s Housing Challenge Isn’t Going Away

The latest CMHC numbers highlight an unusual moment in Toronto real estate.

Housing affordability has improved somewhat as prices and rents have softened, yet construction of new ownership housing is also weakening.

That creates a potential longer-term problem.

The Toronto housing supply gap may be smaller than previously estimated, but CMHC’s analysis shows that significantly more homes still need to be built to create lasting affordability.

Toronto needs tens of thousands of additional housing starts each year, and increasingly, the missing supply is housing intended for ownership.

For buyers, sellers and homeowners, the takeaway is that today’s softer market represents only one part of a much longer housing story.

Understanding what’s happening in your specific neighbourhood and property type remains far more useful than relying solely on national headlines.

Thinking about buying or selling in the GTA?

Market conditions are changing differently across neighbourhoods and property types. If you’re considering a move, reach out to discuss current sales, inventory and pricing in your specific area.

Primary source: CMHC Fall 2026 Housing Supply Report