CMHC Cuts Housing Starts Forecast as Tariff Threat and Toronto's First Population Drop in Decades Collide

The softwood lumber duty sitting at 14.54% doesn't sound like much until you run the numbers on a 2,200-square-foot townhouse in Calgary. The framing package that cost $18,000 in early 2024 is now $21,200, and that's before the contractor adds their margin. Multiply that across 50,000 planned units and you see why CMHC just revised its 2026 housing starts projection downward for the third consecutive quarter.

The revision isn't dramatic, 240,000 starts instead of 265,000, but the direction matters more than the magnitude. Canada needs 3.5 million additional units by 2030 to restore anything resembling affordability, according to CMHC's own 2024 report. The trajectory is moving the wrong direction while the target stays fixed.

The Trade Barrier No One Priced In

U.S. duties on Canadian softwood doubled between late 2024 and mid-2025, jumping from 8.05% to the current combined rate. Builders absorbed some of it. They passed the rest to buyers. The third option, abandoning projects entirely, is showing up in permit data from peripheral markets where pro formas were already tight.

The predictable move would be sourcing domestic wood or switching to steel framing. The problem is capacity. Canadian mills can't scale fast enough to replace U.S. imports, and steel carries its own tariff exposure depending on the source. What looked like a temporary trade spat in 2024 is now hardwired into construction economics for the foreseeable cycle.

Developers building purpose-built rentals can claim the GST rebate, which helps. But the rebate doesn't cover provincial sales tax, doesn't offset municipal development charges, and does nothing about the 18-month approval timeline in Toronto or Vancouver. The math still doesn't work for most projects outside the top-tier urban cores.

Where Toronto's 90,000 Residents Went

Statistics Canada logged a net intraprovincial migration loss of over 90,000 people from the Toronto CMA in 2025. That's not international immigration, which remains high. That's Canadians already living in Toronto deciding to leave.

Some went to London, Ontario. Some went to Moncton. The common thread: they were chasing housing costs down the affordability ladder. A couple earning $140,000 combined can't qualify for a $750,000 condo in Toronto under OSFI's stress test, which requires them to prove they can service the mortgage at 7.24% even though the actual rate is 4.39%. Move to Barrie and the same couple qualifies for a detached house at $620,000.

Toronto isn't shrinking in absolute terms when you count newcomers from abroad. But the city is exporting its housing crisis to secondary markets faster than those markets can absorb the demand. London's benchmark home price climbed 11% in 2025. Moncton's rental vacancy rate dropped below 1.8%. The crisis doesn't disappear when people leave Toronto. It metastasizes.

The Condo Glut That Somehow Isn't Relief

Downtown Toronto has record active condo listings, investors liquidating units that generate $3,100 in rent against $4,200 in carrying costs. The mayor talks about a housing shortage. Developers point to 40,000 unsold units sitting in preconstruction inventory. Both are correct because they're measuring different problems.

The shortage is in housing people can afford to buy or rent at current incomes. The glut is in units priced for 2021 demand that no longer exists. A 520-square-foot one-bedroom listed at $689,000 might sit for four months because the only buyer pool that size serves, first-time singles, new immigrants, can't meet the stress test threshold and won't pay $2,850 monthly rent for it.

Fixed mortgage rates averaged between 4.19% and 4.59% in July 2026 for insured mortgages, down from the 5.8% peak but still 280 basis points higher than the 2021 trough. The Bank of Canada has cut four times. The market is waiting for the fifth. Waiting doesn't build houses.