Regional disparities
in new housing construction
By David Gargaro
Canada is facing a severe housing crisis. In 2022, the Canada Mortgage and Housing Corporation (CMHC) stated we would need to build 5.8 million new homes by 2030 to get housing back to more affordable levels. We are currently on pace to build 2.3 million new housing units in this time, which means another 3.5 million housing units (or 500,000 additional homes per year) will be needed to meet this goal. The federal government has pledged to double national home building by 2035. Based on the current rate at which homes are being built, this is unrealistic. Ontario is the primary reason why Canada won’t meet its housing development goals. In the first half of 2025, Ontario’s housing starts fell by 25 per cent compared to last year, while the rest of Canada had a 17 per cent increase over the same period. Canada’s inability to meet its housing goals is not the fault of one province or due to one key obstacle. Local policies, costs, and regulations have created deep regional disparities in housing development, adding to the challenges facing developers in getting more housing built.
Comparing Alberta and Ontario Alberta is experiencing a surge in new housing starts. According to Bank of Montreal data, over the first six months of 2025, Alberta had 27,902 new housing starts, an increase of 30 per cent compared to 2024. This puts it on pace for nearly 59,000 new housing starts, which would be a new record and nearly equal Ontario’s capacity. Calgary, Edmonton, Lethbridge, and Red Deer have seen significant increases in housing starts. The province also leads the country in housing construction, representing about one quarter of all Canadian housing starts. Conversely, over the first six months of 2025, Ontario had only 27,368 new housing starts, a
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25 per cent decline from 2024 and a 35 per cent decline from 2023. There were more housing starts in the first six months of 2020 (33,588), even though COVID-19 had shut down much of the industry. From 2022 to 2024, Ontario averaged 86,650 new housing starts per year, which is just more than half the 150,000 starts required to meet Premier Doug Ford’s target of 1.5 million new homes by 2031. Some cities (like Ottawa) are seeing significant growth, while others are experiencing significant declines. For example, new housing starts in Toronto have dropped by 44 per cent, while Guelph has declined by 76 per cent compared to last year.
Zoning differences across Canada Some provinces and municipalities make it easier for developers to get shovels in the ground for new housing projects. Let’s compare Toronto and Edmonton to understand the differences. Ontario has strict provincial and municipal zoning bylaws and design requirements. In some cases, land zoned for residential use may only allow single-family homes. Some zoning restrictions force developers to either build single-family homes or condo towers. This means “middle ground” developments (such as fourplexes and sixplexes) cannot be built. Even though Toronto has voted to permit these developments, city council has repeatedly stopped them from going ahead. These types of properties can add density and reduce costs for buyers, addressing a gap in the housing market. Many municipalities (particularly Toronto) have onerous permit approval processes, which increases the time and cost required to get projects built. Compare this with cities in Alberta. Edmonton is one of the fastest cities in Canada with respect to approving new housing developments. The city’s zoning regulations are less restrictive, which means a more streamlined development process and lower costs. Calgary and Edmonton have more available greenfield land (i.e., previously undeveloped land in rural or urban fringes). This supports the development of a broader mix of housing types, including ground-related homes, which tend to be more affordable. Approval timelines vary widely across Canadian municipalities. In 2022, it took an average time of seven months to get a development approved. In Toronto, the average approval timeline was 32 months, or almost three years. This backlog is due to a combination of stacked municipal and provincial development fees, zoning bylaws, building codes, official plans, and design guidelines.
Home building costs continue to rise Taxes, development charges, municipal levies, and other fees continue to increase the costs of building new homes. Housing is taxed at double the rate of the rest of the economy. Government taxes and fees can equal one third of the total cost of a new home, which is more than the cost of the land and more than 50 per cent of hard construction costs. Multifamily developers must increase rents to cover these costs, which makes it more difficult for tenants to find housing that meets their income levels.
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The federal government is trying to address the costs associated with building different types of housing projects. It has pledged $35 billion to finance new affordable and middle-income housing projects. The federal government has stated it will halve development charges for multifamily housing by providing municipalities with financial support on hard infrastructure costs (e.g., water, sewer, electrical). However, the provinces have allowed municipalities to add charges for soft infrastructure that should be funded through general revenues (rather than on the backs of developers, homebuyers, and tenants). One way to make the provinces take a hard line with municipalities is to force them to lower housing taxes to qualify for federal funding of local infrastructure. Comparing development charges in Edmonton and Toronto demonstrates the vast differences in the cost to build homes in these two cities. According to a 2022 municipal benchmarking study from the Canadian Home Builder’s Association (CHBA) and the Altus Group, development charges cost $6,599 per high-rise unit in Edmonton versus $99,894 per high-rise unit in Toronto (that’s a $93,000 difference). Toronto’s development fees have also increased by more than 900 per cent since 2010. In 2024, Altus Group published a guide on residential construction costs for high-rise buildings in Canadian cities. Costs ranged from $295 to $345 per square foot in Edmonton, compared to $340 to $425 per square foot in Toronto. Taxes increase the costs of developments and decrease developers’ margins, resulting in less return on investment and higher risk of return. According to a 2024 report by the Canadian Centre for Economic Analysis (CANCEA), developer margins have decreased from 14 per cent to 10.7 per cent in Ontario. Government taxes on new Ontario homes include income tax (8.1 per cent), corporate taxes (2.5 per cent), sales taxes (10.8 per cent), production taxes (12.3 per cent), and transfer taxes (1.8 per cent). These “taxes on taxes” increase new home development costs, raising the cost to purchase or rent a home while reducing the financial feasibility of new home building projects. High interest rates are another barrier to building multifamily housing. On July 30, the Bank of Canada announced it would be holding its policy interest rate at 2.75 per cent. Some analysts see this as a stabilizing move, particularly in the face of U.S. tariffs. However, many housing and mortgage experts argue it falls short. According to the Canadian Mortgage Brokers Association of Ontario (CMBA Ontario), holding rates stable will
make it more difficult for homeowners to purchase homes. Keeping the interest rate stable will also delay or cancel projects for developers seeking more affordable financing options.
Surety bonds and CMHC compliance CMHC’s MLI Select, a mortgage loan insurance program for multifamily buildings, supports the development, acquisition, and refinancing of multi-unit residential properties that meet specific criteria. It enables developers to access high-leverage financing, extended amortization periods, and low-cost capital. The program uses a point system to calculate the level of available insurance incentives. On November 15, 2024, CMHC changed the MLI Select program with respect to how it enforces the requirement for surety bonds, creating new challenges for developers. While bonding was technically required before the change, the requirement for surety bonds was rarely enforced when developers acted as general contractors. CMHC determined the developer’s financial stake and oversight reduced the perceived construction risk. Projects could proceed without securing formal bonds. CMHC is now enforcing the surety bonding requirement for almost every project, even if the developer manages construction internally. Many developers have been caught off guard by the change, often discovering the requirement later in the financing or planning stages. Securing a bond requires time, financial vetting, and underwriting, which can be a challenge for smaller or lessestablished builders. “For those unfamiliar with the qualification process or the level of financial disclosure required, the shift has been significant,” said Slava Kolmatskyy, Vice President, Surety, NFP Canada. “Projects structured as new corporations, often with minimal assets, face added hurdles. The learning curve is steep, leading to delays, higher costs, and, in some cases, risk to the project’s viability. Without the bond, CMHC funding is withheld, putting early investments in jeopardy.”
One solution: Building on existing land Rental property owners can overcome regional development obstacles by building new units on existing land. Intensification accelerates building timelines, makes use of in-place infrastructure, adds density to the property, and supports reinvestment into the existing buildings.
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In 2019, Beaux Properties built a 32-storey, 420unit condominium development on a surplus parking lot of a AAA property in midtown Toronto. The goal was to unlock dormant land value, as well as add value to the existing apartment building through proper site integration and improvements. They worked with an architect, consultants, and condo developer to move the process forward. “Start with a business plan and carefully consider your goals for the site,” said Jason Birnboim, President, Beaux Properties International Inc. “Maximizing the profit on paper should not be your number one objective if you can’t realistically achieve it. Today there are far more sites available for development than demand for new product. Only consider such an endeavour if you can afford to wait out the market cycle.” Hazelview Investments began with a 1970s-built tower in midtown Toronto and an underutilized surface parking lot. This two-phase, purposebuilt rental development resulted in the addition of 500 new rental homes. Building on pre-zoned land reduced entitlement risk and lowered soft costs tied to land acquisition and approvals. This enabled them to redirect capital into high-quality design, sustainability features, and resident-first programming, as well as reinvest in the existing buildings. “For property owners looking to replicate this approach, our advice is simple: start by looking inward,” said Michael Williams, Managing Partner, Head of Development, Hazelview Investments. “Many sites, especially older rental communities, hold untapped potential. By integrating ownership thinking, smart design, and collaboration with municipalities, we can collectively scale housing without waiting years for rezoning.”
Conclusion Canada’s housing crisis is a complex national issue shaped by deeply entrenched regional and municipal disparities. Alberta and other provinces have been able to accelerate homebuilding through streamlined zoning, lower costs, and supportive policies. However, some provinces (such as Ontario) are struggling under the weight of red tape, high development charges, and prohibitive taxes. Federal efforts to encourage multifamily property development and affordability are being undercut by provincial and municipal policies that drive up costs and delay progress. To close the housing gap and meet federal housing targets, all levels of government must align on a unified strategy that cuts red tape, lowers financial barriers, and treats homebuilding as an urgent national priority.