OTTAWA — Canada must build 3.2 million new homes over the next 10 years to meet demand and close the housing gap, but the country is not on track to reach that target, according to a new analysis from the Parliamentary Budget Officer (PBO).
The report projects an average of 227,000 new homes will be completed annually through 2035, totalling roughly 2.5 million new units. That leaves a shortfall of nearly 700,000 homes compared to what is needed to stabilize the housing market.
While housing construction is expected to pick up in the short term, the PBO predicts building activity will taper off to historical averages after the next three years. At the same time, demand will remain elevated due to the surge in household formation — a record 482,000 new households were created in 2024 alone. Looking ahead, the PBO expects an average of 159,000 new households to form annually between 2025 and 2035.
Immigration reductions may modestly ease pressure, but historically low vacancy rates remain a major driver of affordability challenges. Canada’s vacancy rate was 3.3 per cent in 2024, well below the pre-2020 average of 6.4 per cent. The PBO estimates that closing the housing gap would require about 290,000 homes a year for the next decade — more than Canada has ever built in a single year. The country set a record in 2024 with 276,000 housing completions.
The findings diverge from those of the Canada Mortgage and Housing Corporation (CMHC), which in June said Canada needs between 430,000 and 480,000 new homes annually to restore affordability. The PBO argues that level of construction would overshoot, potentially pushing vacancy rates to an “abnormally high” 13 per cent by 2035.
For now, the PBO projects that increased construction combined with slightly lower demand will gradually ease the housing crunch — but without a historic building push, the gap will remain.