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Ontario housing projections plummet again, hurting 1.5M goal | Globalnews.ca

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  Published in House and Home on Thursday, November 6th 2025 at 19:00 GMT by Global News

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A Broader Context: The Canadian Housing Landscape

While Ontario is the most populous province and accounts for roughly 40% of Canada’s new home starts, the downward trend is mirrored across the country. CMHC’s national housing starts fell from 32,400 units in January to 31,600 units in February, an 8.1% decrease. Nationwide, the housing construction industry has been grappling with rising input costs, a shortage of skilled labor, and an increasingly cautious mortgage market.

The Bank of Canada’s monetary policy, which has kept the overnight rate at 4.75% since September 2023, has also played a role. Higher borrowing costs have dampened demand for new homes, and many potential homebuyers are now postponing purchases, which in turn reduces the incentive for builders to launch new projects.

Drivers of the Decline in Ontario

The Global News piece notes three primary forces behind Ontario’s housing start slowdown:

1. Rising Construction Costs – The price of lumber, steel, and other key building materials has surged since the pandemic, with the Canadian Construction Association reporting a 15% rise in lumber prices in the last six months alone. These cost inflations are passed on to consumers, leading to higher selling prices that may deter buyers.

2. Labor Shortages – The construction industry continues to face a deficit of skilled tradespeople. CMHC reports that the province’s workforce has shrunk by 5% over the past year, while demand for construction labor has increased by 9%. This mismatch drives up labor costs and delays project timelines.

3. Mortgage Rate Volatility – While the Bank of Canada has been maintaining a steady stance, the market’s perception of future interest rates remains uncertain. This has resulted in a cautious approach from mortgage lenders, with tighter underwriting standards for new buyers.

These factors have converged to create a situation in which builders are more cautious about committing to new residential projects, resulting in the observed decline in housing starts.

Industry Reaction and Economic Implications

The article includes commentary from several industry stakeholders. David Miller, a senior analyst at the Ontario Builders’ Association, notes that the current trend “could lead to a slowdown in the overall construction economy, impacting jobs and local supply chains.” He added that many projects that were slated for launch in the spring have either been delayed or canceled entirely.

For the broader Ontario economy, the decline in housing starts could mean a modest contraction in GDP growth. Construction contributes roughly 2.3% to Ontario’s GDP, and a 6% drop in starts could translate into a measurable slowdown in the sector’s contribution. Additionally, a reduced housing supply might exacerbate existing affordability pressures, especially in the Greater Toronto Area, where demand remains strong.

Government Response and Policy Measures

The Global News article also highlights recent policy discussions aimed at countering the downturn. The Ontario Ministry of Housing has announced an extension of the “Affordable Housing Initiative” for the next fiscal year, allocating an additional $300 million to support the development of 10,000 affordable rental units. This initiative, the ministry said, will also offer tax credits to builders who incorporate affordable units into their new developments.

Meanwhile, the federal government’s Housing Infrastructure Program has earmarked $5 billion for affordable housing projects across Canada, with a focus on low‑to‑moderate income households. The program is expected to flow into Ontario projects over the next 12 months, providing a potential counterbalance to the private sector slowdown.

Looking Ahead

Industry experts are divided on the long‑term trajectory of housing starts in Ontario. Some predict that as construction costs moderate and labor supply improves, builders may gradually resume new projects. Others warn that continued high mortgage rates and persistent cost pressures could keep the market subdued for the rest of 2025.

The Global News article’s data suggests that the most immediate response will come from policy interventions designed to stimulate affordable housing. Whether these measures will be sufficient to offset the decline in new home starts remains to be seen.

In summary, Ontario’s housing construction industry is experiencing a notable decline in new starts, driven by a confluence of rising costs, labor shortages, and a cautious mortgage environment. The resulting slowdown has ripple effects on employment, the provincial economy, and housing affordability. While government initiatives aim to mitigate the downturn, the outlook for a robust rebound remains uncertain until macroeconomic conditions—particularly interest rates and construction inputs—begin to improve.