The federal government has been inundated with unfavourable news regarding housing. Despite a promise to double housing starts, the Canada Mortgage and Housing Corporation (CMHC) has forecasted that starts will decline for three consecutive years, and by 2027, will be 20 percent lower than they were in 2021. The news is particularly grim for the Greater Toronto Area, as new single-family home sales are down 71 percent from their 10-year averages, and new condominium sales are down a whopping 90 percent. To top it all off, newly released Statistics Canada data reveal that multi-family building permits were down over $1 billion in the second quarter of 2025. Even Alberta was not left unscathed, as single-family permits were down by $200 million.
In the backdrop of this doom and gloom, on Monday, the federal government released details on its signature Build Canada Homes plan. Described by the government as a plan to “build affordable homes, support builders with financing, and encourage better building methods,” the initiative accounts for half of all new government spending on housing. While highly ambitious, the plan will take too long to implement to address the immediate crisis, and the sheer number of moving parts risks the plan collapsing under its own weight.
The plan’s Market Sounding Guide articulates the plan’s two somewhat contradictory objectives. The first objective for Build Canada Homes (BCH) is to “build affordable housing at scale.” Through the use of loans, equity investments, risk mitigation instruments, and contributions, BCH would collaborate with for-profit and not-for-profit groups to develop affordable housing, including projects with wraparound services to support the needs of vulnerable populations and those experiencing homelessness. To achieve maximum impact, BCH will focus on a “small number of large deals,” with projects of 300 units or more, which will allow for building quickly and keeping costs down through scale. BCH would not build homes itself, but either directly contract private-sector builders or act as a facilitator to bring together non-governmental actors to, in their words, “move projects forward.” The second objective of BCH is to “build faster, better, and smarter” by accelerating the adoption of new technologies and prioritizing the use of domestically produced building materials. Through the use of standard innovation policy tools, including equity-sharing agreements and procurement, the federal government would help innovative start-ups and scale-ups in 3D-printed construction, mass timber, and modular and prefabricated housing technologies reach their full potential. Both of these objectives have merit, and it is worthwhile for the federal government to help build affordable housing and support the growth of innovative companies. The challenge for BCH is that its two objectives are largely in conflict. If the objective is to build a large number of homes relatively quickly and cost-effectively, then they will need to work with large, established players and use tried-and-true technologies, which are typically the most cost-effective. If the objective is to help innovators reach scale, then they must work with start-ups that currently have relatively low production capacity and utilize technologies that are more expensive than current methods, as they have yet to achieve scale. Eventually, these innovations, along with the companies behind them, will be able to produce faster and more cost-effectively than the incumbents. But in the short term, there is a massive tradeoff between the two goals. The creation of BCH creates the risk that the federal government crowds out provinces and municipalities that have their own initiatives to either build affordable housing or help innovative companies grow. The federal government’s guide on BCH does not indicate how its programs will interact with initiatives already in place by other governments and only states that “strong partnerships” will be necessary. Canadian housing may not see a net increase in government spending on housing innovation and affordable housing, but rather a simple uploading of provincial initiatives to the federal government. There is an old joke in product design that a “camel is a horse designed by a committee,” which would seem to apply to BCH. The initiative has too many moving parts and is attempting to simultaneously achieve multiple goals, many of which are in direct conflict with each other. The federal government would do well to simplify BCH, consider the trade-offs between scale and supporting start-ups, and design its programs to help amplify the good work being done by provinces and municipalities, rather than crowding it out. Even a perfectly designed and implemented BCH will take years to get shovels into the ground, and homebuilding in Canada continues to decline. Ottawa needs a plan to help bridge the gap between now and when BCH starts to yield results, for both economic and political reasons; can Mark Carney really afford to go into his second election with housing starts down 20 percent after promising to double them? Ontario Premier Doug Ford has suggested a combined federal-provincial effort to eliminate the HST on homebuilding for two years to help kickstart the industry. It is an offer that the prime minister should take seriously, while also finding other ways to reduce the cost of homebuilding to get construction starts moving in the right direction.
