The pace of housing construction in Canada is picking up, but the country’s most populous province is pulling down the pace, new analysis shows.

Housing starts have been the strongest ever in Canada in the last four years and remain robust in much of the country this year, said a new report by the Royal Bank of Canada that analyzes the latest housing start numbers from the Canada Mortgage and Housing Corporation (CMHC).

However, while the rest of the country saw a bump in housing starts, Ontario saw a steep decline, with the decline centred in the Greater Toronto Area.

“This divergence is concerning, because it threatens to perpetuate severe affordability problems that exert social and economic hardship on Canadians in these regions,” the report by RBC economist Robert Hogue said.

The report said Ontario’s lag in construction was at “the root of the housing crisis” in Canada.

Nationally, Canada saw construction start on 263,000 units in July, a jump of 3.7 per cent compared to the previous month.

Get daily National news

Get the day’s top news, political, economic, and current affairs headlines, delivered to your inbox once a day.

Experts say this is not the case in Toronto.

“High development costs continue to choke new rental supply in Toronto, where housing starts plunged 69 per cent in July compared with a year earlier and are down 49 per cent year-over-year. Without policy reform, the downward spiral is likely to continue,” said Nicole Lechter, senior real estate analyst at RSM Canada.

Alberta, Saskatchewan, Manitoba, Quebec and Atlantic Canada all saw higher housing starts. While B.C. saw some moderation, it is not as stark as it is in Ontario, the RBC report said.

“Ontario’s six-month average has fallen to the lowest level in a decade — trending in the opposite direction of what’s needed to achieve the provincial government’s ambitious goal of building 1.5 million new homes over 10 years,” Hogue said in his report.

“It’s a similar, albeit less pronounced, situation in B.C.,” he added.

High development and construction costs were to blame for Ontario’s slow pace of housing starts, the report said.

“Builders saw a rapid escalation of expenses for land, labour, and materials, compounded by municipal development charges and other fees in the past several years,” it said.

Ontario’s housing slump is exacerbated by the slowing pace of condo construction, which has “plummeted with no end in sight.”

“The full impact of the current slowdown in housing starts won’t be felt for years in Ontario. It can take two, three or more years to complete a large multi-unit project once the foundation has been poured,” the report said.

“Indeed, the GTA market is still absorbing the wave of condo units completed in 2024 started during the pandemic or even earlier.”

The ripple effects of the current downturn will be felt well into next year, the report said.

“The downturn in Ontario’s housing construction pipeline could have dire consequences for 2026 and beyond if not addressed.”

&copy 2025 Global News, a division of Corus Entertainment Inc.