Sean's Market insight Volume #15 May 19th, 2025
Canada’s Housing Crisis Is a Five-Alarm Fire — Will Ottawa’s Bold New Plan Extinguish It or Fuel It?
Canada’s housing market is sounding alarm bells — again. But this time, the sirens are louder, and the symptoms more complex. The latest data from Urbanation paints a sobering picture: in the first quarter of 2025, new condo sales in the Greater Toronto and Hamilton Area (GTHA) dropped to just 533 units. That figure represents a staggering 62% year-over-year decline and marks the lowest sales volume in nearly 30 years — not seen since the mid-1990s.
The slowdown isn’t limited to just condos. Across major cities, sales of new homes are sluggish, pre-construction projects are being paused or cancelled, and builders are facing a triple threat of elevated interest rates, supply chain disruptions, and soaring construction costs. Developers are hesitating. Buyers are on the sidelines. The market is frozen at the very moment when Canada is desperate to build.
Against this backdrop, Prime Minister Mark Carney’s government has launched the most ambitious federal housing plan in half a century. But will it be enough to turn the tide — or is this simply a bold vision bumping up against the immovable reality of Canada's housing system?
Rebuilding Confidence: The Birth of Build Canada Homes
At the center of the Liberal plan is a new federal agency: Build Canada Homes (BCH). This is no symbolic gesture — it marks a return to large-scale federal involvement in housing not seen since the postwar era. BCH is designed to act as a public-sector developer and financier, tasked with building hundreds of thousands of homes annually, particularly affordable and rental units.
The agency will leverage federal land — much of it currently underused or surplus — to build at scale. Combined with $25 billion earmarked for prefabricated and modular construction firms and $10 billion in low-cost financing for purpose-built rentals, the initiative is an aggressive push to boost supply quickly.
It’s an unmistakable shift from decades of relying primarily on private developers and provincial housing ministries. For Carney, whose economic approach emphasizes long-term investment and counter-cyclical spending, this is an example of the federal government stepping in where markets have failed. It reflects his broader belief that Canada’s housing shortfall is not just a market problem, but a national productivity and generational equity issue.
Federal Land, Municipal Headaches
One of the most touted elements of the plan is the Public Lands for Homes initiative, which aims to unlock 250,000 housing units by repurposing government land — from shuttered military bases to unused postal service sites. The logic is simple: if land is one of the most expensive inputs to housing, using what the government already owns could cut costs and reduce project delays.
But while the idea sounds straightforward on paper, real-world implementation is fraught with challenges. Local municipalities hold significant power over zoning and permitting. Many have historically resisted high-density developments, especially in established residential areas. Community opposition, infrastructure constraints, and environmental reviews can delay or derail even the most well-intentioned projects.
As one Toronto-based planner put it, “The headlines sound great — but these homes don’t get built until city councils say yes.”
Homebuyer Incentives: Relief or Risk?
To ease affordability pressures — particularly for first-time buyers — the plan introduces targeted tax changes. The most significant is the elimination of the GST on new homes purchased by first-time buyers, potentially saving them tens of thousands of dollars. Additionally, changes to the Home Buyers’ Plan allow greater use of RRSP savings (increased from $35,000 to $60,000) and offer longer repayment grace periods.
These measures are designed to stimulate demand for new construction, especially entry-level housing. However, critics worry they could backfire by increasing demand without a corresponding supply response, pushing prices even higher in the pre-construction market. Canada has tried demand-side support before — and it has rarely led to long-term affordability gains without simultaneous supply expansion.
Carney, known for his cautious monetary philosophy, understands the inflationary risks of such policies. The hope is that this time, the incentives are carefully targeted and paired with enough new housing starts to avoid reigniting bidding wars.
Who’s Going to Build All This?
Even if land is unlocked and financing flows freely, there’s a more fundamental question: who will actually build these homes? The construction industry is facing a critical labor shortage. Apprenticeships are down. Retirements are up. And immigration pathways for skilled trades have been historically underfunded and slow.
The federal plan attempts to address this with $90 million in skilled trades training, new high school pathways for construction careers, and $50 million to accelerate the recognition of foreign credentials. But most experts agree: this is a long-term fix.
“You don’t solve a generational skills gap in 18 months,” said one Ontario developer. “We need 10,000 new tradespeople, not 1,000 students starting programs in two years.”
For Carney, who views labor market reform as integral to economic competitiveness, this is a critical — but not quick — battle.
A Green Twist: Timber, Retrofit, and the Future
In keeping with the government’s climate agenda, the housing plan includes a green building strategy. The Liberals are investing in mass timber construction and Canadian lumber production, aiming to reduce costs, cut emissions, and foster a domestic building materials industry. A further $1 billion has been committed to home energy retrofits, covering heat pumps, insulation, and efficient HVAC systems.
These moves align with Carney’s belief in “climate as economic strategy” — the idea that the green transition should be treated not as a burden but as an opportunity for innovation and growth.
However, insurers and lenders are still catching up. Not all municipalities have building codes ready for tall timber construction, and questions remain about cost parity, safety, and fire resilience.
Bold Vision Meets Bureaucratic Reality
There is no doubt that the federal government has shown real ambition. In contrast to previous years of incrementalism and pilot programs, Carney’s cabinet is treating housing as a national emergency that demands bold federal leadership. The use of public land, modular innovation, and direct financial support signals a shift in political will — from managing the problem to actually trying to solve it.
But the real question isn’t whether the plan looks good on paper — it’s whether it can survive contact with reality.
Municipal opposition. Labour shortages. Regulatory delays. Market volatility. Every element of the plan depends on a best-case scenario: that cities cooperate, workers appear, materials are available, and prices stay stable. The risk is not just that the plan fails — but that it overpromises, underdelivers, and further erodes public trust.
Final Verdict: The Clock Is Ticking
Canada’s housing crisis is no longer just about affordability — it’s about national productivity, family formation, economic growth, and political stability. The status quo is untenable.
Carney’s plan is bold, comprehensive, and — perhaps most importantly — aware that inaction is no longer a political option. But boldness alone doesn’t build homes. Execution, local coordination, and labor force transformation will determine whether this becomes a turning point or just another missed opportunity.
In the end, the question is simple: Can the Liberals build fast enough — and smart enough — to restore hope to an entire generation locked out of the housing market?
Time, and housing starts, will tell.
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