Prefabricated modular modules assembled on site as cranes work overhead; a coastal spaceport is visible in the distance.
Canada, August 19, 2025
Canada’s housing sector is at a pivot point as affordability pressures persist despite modest productivity gains and faster modular build times. Builders report improved outcomes from AI, BIM and digital twins while offsite methods cut completion times and costs. At the same time, purpose-built rental development is cooling as institutional returns fall and financing tightens. Regional activity is uneven—Montreal and prairie centres see multi‑unit growth while Toronto and Vancouver face slumps. Atlantic provinces are refocusing immigration on key occupations, and a private spaceport project in Newfoundland signals new industrial investment alongside housing policy efforts to boost supply.
The housing picture in Canada is shifting in several directions at once. Affordability remains a major problem in big cities even as modest productivity gains and wider use of modular building shorten build times. At the same time, some large rental developers are pulling back because returns have fallen, while overall starts jumped in July led by multi-unit work in parts of the country. The federal housing plan, changes to Atlantic immigration, and a newly under-construction Atlantic spaceport in Newfoundland and Labrador all add to a complex mix that will shape housing and construction through this decade.
The national productivity index shows modest improvement: the Canada Construction Labour Productivity Index reached 92.47 in March 2025, up 2.15% from a year earlier, with 2007 as the base year. Despite gains, Canada still trails the U.S. on construction productivity, a gap made worse by slow uptake of advanced tools and a fragmented landscape of small and medium builders.
Surveys of industry leaders show strong support for technology. Most construction leaders see tools like AI, Building Information Modelling and digital twins as essential to better efficiency, and a majority of firms report measurable gains after recent tech investments. AI-driven design checks, IoT sensor networks and digital twin platforms are reducing costly rework, enabling predictive maintenance and lowering reliance on on-site labour. Government programs that back modular construction are also producing faster outcomes: modular and offsite methods helped complete a major project in Regina in 12 months, and build-to-occupancy times have fallen by up to 40% in projects supported by initiatives such as the Rapid Housing Initiative.
Early adopters of productivity-enhancing tech and modular techniques are likely to outperform peers. A model from a major bank suggests that a 1% fall in unit labour costs could lower home prices by about 1.2%. The federal government’s $129 billion housing plan, which includes a Build Canada Homes component and targets doubling construction to 500,000 units a year by 2030, prioritizes modular construction and mass timber—policies aimed at making technology-led scale more common. Some provinces are also using incentives such as halving development charges for multi-unit housing and removing GST on homes under $1 million in certain cases.
Several rental developers and institutional investors are rethinking new projects. A major developer that launched a rental division in 2018 to pivot into purpose-built rental towers recently announced plans to sell its existing rental buildings and largely exit residential development, shifting to a model where outside investors provide most capital while the company supplies land and development expertise. The move follows a period of weak returns—industry experts point to annual yields as low as 4.5%—and a tougher financing market that has been weighing on commercial real estate since interest rates moved higher in 2022.
Public figures on rental starts can be misleading. While national figures suggest rental housing starts are flourishing, those counts often include projects already rising above ground. Consultants tracking earlier-stage activity say rental starts have fallen by about 60% recently as developers shelve or delay projects. Falling rents in Toronto and Vancouver and a sudden wave of condo completions have damped demand and made it harder to hit return targets. Two-thirds of recent rental buildings in the Greater Toronto Hamilton Area now offer incentives like two months free rent and free parking.
Nationally, housing starts rose sharply in July to a seasonally adjusted annual rate of 294,100 units, up 3.7% from June. In centres with 10,000 people or more, starts rose 4% for the month, totaling 23,464 units. Montreal saw a dramatic spike in starts, led by multi-unit work, while Toronto experienced a big slump with overall starts down about 69% year-over-year. Economists say strong national numbers largely reflect decisions made months or years earlier, and that near-term cooling is possible as population growth slows and asking rents fall in some areas.
With a reduced allocation in 2025, Atlantic provinces are prioritizing certain occupations and sectors under the employer-driven Atlantic Immigration Program. Healthcare, construction, manufacturing and a handful of other sectors are often given priority. Provinces are using different approaches: one province paused new AIP endorsements when its allocation was used up; Prince Edward Island limited endorsements to a few high-demand sectors; Nova Scotia prioritized workers already in the province with expiring permits and those in healthcare and construction; and Newfoundland and Labrador moved to an Expression of Interest model while listing in-demand occupations for priority processing. The AIP remains an attractive pathway because it offers shorter processing times, settlement services and LMIA-exempt work permits that let approved applicants begin work while permanent residence is processed.
Construction has started on the Atlantic Spaceport Complex in Newfoundland and Labrador. Built with Canadian-sourced equipment and parts, the complex will host two orbital pads in its introductory phase and a suborbital pad and tracking infrastructure. The site supports orbital inclinations from 46° to 100°, offering flexibility for a broad range of missions. The first flight from the site will be a low-altitude suborbital test of a small vehicle, part of a staged program that aims for orbital launcher flights in later years and the launch of a company-built test satellite on a rideshare mission. The project is expected to create hundreds of jobs and contribute to billions in economic activity through 2035. A correction notes this site is not the country’s first commercial launch facility and that another Atlantic launch firm has an active site under development.
Canada’s housing future looks set for transformation driven by technology, policy changes and diverging regional demand. Investors and builders who back productivity-led solutions, target high-growth regions and pursue public-private partnerships may capture long-term value, but they will need to manage risks such as regulatory delays, sticky municipal development charges and ongoing labour shortages. Workforce programs, apprenticeships and diversity and inclusion efforts will be key to maintaining productivity momentum in the years ahead.
A: Overall affordability remains strained in major cities even as productivity and construction starts show signs of improvement in some regions. Policy moves and technology are expected to change the picture over time.
A: The Canada Construction Labour Productivity Index was 92.47 in March 2025, up 2.15% year over year. Adoption of AI, BIM, digital twins and modular construction is helping to raise productivity.
A: Some major players are pausing or exiting residential development after returns tightened. Public statistics show strong starts in some categories, but earlier-stage activity and new starts have slowed sharply in many cases.
A: Housing starts rose to an annualized pace of 294,100 units in July, led by multi-unit starts in some regions and a strong spike in Montreal. Toronto experienced a major decline in starts year over year.
A: With reduced allocations in 2025, Atlantic provinces have prioritized occupations such as healthcare, construction and manufacturing in many cases, and some provinces are prioritizing workers already in Canada.
A: A Canadian-built spaceport in Newfoundland and Labrador designed to support suborbital and orbital launches, housing multiple pads and tracking infrastructure, and intended to support domestic launch capability and research initiatives.
| Topic | Key facts |
|---|---|
| Productivity | Index 92.47 (March 2025), +2.15% y/y; tech and modular reduce build times up to 40% |
| Federal plan | $129 billion housing plan; target 500,000 units/year by 2030; favors modular and mass timber |
| Rental market | Institutional returns as low as 4.5%; earlier-stage rental starts down ~60%; incentives common in GTHA |
| Regional starts | July starts at 294,100 annualized; Montreal multi-unit surge; Toronto large slump |
| Atlantic immigration | 2025 reprioritization by provinces; focus on healthcare, construction, manufacturing; AIP remains employer-driven PR route |
| Aerospace | Atlantic Spaceport Complex under construction; first suborbital test launches planned; site supports wide range of inclinations |
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