Canada’s housing market has entered a sharp slowdown, with new-home sales and starts falling across major centres and developers pausing projects. The slump is raising a related concern for industry and policymakers: momentum on sustainable housing could stall just as governments push toward tighter codes and net-zero targets.
Sales and Starts Slide
Data presented at the Residential Construction Council of Ontario’s recent summit showed steep declines in activity. In Toronto, year-to-date sales were far below levels seen from 2021 to 2024, and starts across dozens of municipalities fell by about 40 percent.
Builders cite elevated borrowing costs, inflation and uncertainty around fees and tax policy. Many are delaying launches until financing conditions improve and buyer demand stabilizes.
Green Builds Face Financing Hurdles
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Sustainable projects often rely on higher upfront capital for features such as high-performance envelopes, heat pumps, onsite renewables and mass timber or modular construction.
In tighter markets, lenders and developers tend to favour lower-cost, conventional designs to preserve margins.
Investment in prefabrication capacity and off-site manufacturing has also cooled as investors look for clearer pipelines before committing to factories and specialized equipment.
Municipal Efforts Meet a Colder Market
Cities have moved to trim timelines and soft costs. Toronto’s pre-approved plans for garden and laneway suites, expanded online permits and greater reliance on drawings stamped by licensed professionals were designed to cut design expenses and shorten reviews.
These tools are still on the table, but whether builders use them depends on market confidence and whether the project’s finances make sense. If home sales slow, even faster approvals can’t offset the financial strain from higher interest rates and other carrying costs.
Industry Asks for Stability
Economists and industry leaders have warned that a mix of high interest rates, inflationary pressures and policy uncertainty is slowing construction activity across Canada. Developers are delaying or cancelling projects as financing costs rise and consumer demand softens.
Analysts also note that many potential buyers expect prices to drop further or for government incentives to arrive, which has created hesitation in the market.
At the same time, supply chain disruptions and shifting trade dynamics continue to keep construction costs unpredictable, adding another layer of complexity for builders trying to plan new developments.
Climate Targets at Stake
Buildings are central to Canada’s emissions goals. A prolonged downturn could delay code-driven upgrades, reduce orders for low-carbon materials and slow workforce training in heat-pump installation, airtightness testing and modular assembly.
Analysts say maintaining incentives for energy-efficient new builds and deep retrofits, while pairing them with predictable approval timelines, can keep pipelines alive until financing conditions ease.
The sector’s immediate challenge is cyclical, but the consequences could be structural if sustainable capacity is allowed to contract. Keeping green projects moving during the slowdown may determine how quickly Canada’s housing industry can meet demand once the market turns.
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