Ontario Faces 550,000-Home Shortfall as Business Group Warns U.S. Trade War Could Cost Canada Talent

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Ontario’s housing shortage is increasingly becoming an economic competitiveness problem, not simply an affordability problem. A new Toronto Region Board of Trade report says the province is on course to fall more than 550,000 homes short of the pace required by 2029 to reach its goal of 1.5 million new homes by 2031. The warning comes as Canada faces a prolonged tariff conflict with the United States and governments try to strengthen domestic industries and attract investment. The Board argues that those ambitions become harder if workers cannot find suitable housing near employment. Importantly, its warning is not that U.S. tariffs themselves will cause people to leave Canada. Rather, the concern is that an already-constrained housing system could make it harder to attract and retain the skilled people needed to adjust to a more uncertain North American economy.

The 550,000-Home Figure Shows How Far the Building Pace Has Slipped

The headline number needs some context. Ontario’s target is to build at least 1.5 million homes over the decade ending in 2031. The Toronto Region Board of Trade compared the annual pace required to stay on that trajectory with housing-start projections contained in Ontario’s 2026 budget. By the end of 2029, the Board calculates that the cumulative gap will exceed 550,000 homes. In other words, the figure is not an estimate that Ontario suddenly needs 550,000 additional homes this year. It represents how far projected construction is expected to trail the province’s own target pace over several years.

The underlying forecast illustrates the challenge. Ontario recorded approximately 65,400 housing starts in 2025, while the Ministry of Finance projects about 64,800 in 2026. Starts are then forecast to rise to 70,300 in 2027, 76,800 in 2028 and 80,500 in 2029. The target trajectory used by the Board rises to 175,000 homes annually from 2026 onward. Even with construction gradually recovering later in the decade, that forecast remains far below the pace envisioned when the 1.5-million-home goal was established.

Lower Prices Do Not Necessarily Mean the Supply Problem Has Been Solved

Ontario’s housing market has cooled considerably from its pandemic-era extremes. Provincial data show home resales fell 5.6 per cent in 2025, reaching their lowest annual level in more than two decades, while the average resale price declined 4.4 per cent. Higher inventories and weaker buyer demand have provided some relief after years in which affordability deteriorated rapidly. But fewer bidding wars and softer prices can hide a different problem: when developers cannot sell enough units to finance projects, fewer new homes enter the construction pipeline.

CMHC’s latest supply analysis makes that distinction particularly clear in Toronto. It estimates that the region would still need to increase its current annual rate of housing starts by at least 50 per cent over the next decade to restore affordability to roughly 2019 levels. Population-adjusted starts during the first half of 2026 were among the weakest since the mid-1990s, and the inventory of permitted units waiting to begin construction had fallen by roughly half from its 2023 peak. That creates the possibility of a delayed shortage: demand may be weak today, but the homes needed when demand recovers are not necessarily being started now.

The Talent Concern Is Already Visible in Toronto’s Migration Patterns

The Board’s argument about talent is rooted partly in the movement of working-age residents. Using Statistics Canada demographic data, it estimates that roughly 240,000 people aged 25 to 44 left the Toronto census metropolitan area for other parts of Ontario between 2014 and 2025. That age group includes a large share of people forming families, advancing through careers and looking for larger homes. Housing is not necessarily the sole reason for every move, but the pattern matters when employers are trying to recruit and retain workers in one of the country’s largest employment centres.

Affordability provides important context. According to the Board’s analysis, the Toronto-area composite home price index increased approximately 187 per cent between 2006 and 2025, compared with about a 51 per cent cumulative increase in consumer prices. Separate CMHC research has also found a measurable connection between housing costs and geographic mobility: its modelling suggests that a 1 per cent increase in home prices in a destination city is associated with a decline of slightly more than 1 per cent in the number of people moving there. That turns housing into a labour-market issue as well as a household-budget issue. 

The U.S. Tariff Conflict Raises the Stakes for Keeping Skilled Workers

The housing warning is arriving during an unusually difficult period for Ontario’s trade-exposed economy. Ontario government estimates say about 285,000 provincial jobs, equivalent to roughly 3.5 per cent of employment, are linked directly to exports to the United States. Manufacturing communities are particularly exposed because automotive, steel, aluminum and related supply chains frequently cross the border several times before a finished product reaches a customer. Ottawa says new U.S. tariffs applied to $27.6 billion of Canadian goods in August were subsequently met with Canadian counter-tariffs covering an equivalent value of U.S. imports beginning September 8.
Governments are consequently spending more to retain and redeploy workers. A Canada-Ontario program announced this year provides $228.8 million over three years and is intended to help as many as 27,000 Ontario workers retrain or upgrade their skills, including people in automotive manufacturing, steel and softwood lumber. That puts the Board of Trade’s housing argument into perspective. Training workers for emerging industries is only part of the equation; regions also need housing those workers can realistically afford. A skilled tradesperson, engineer or technician deciding between locations considers housing costs alongside wages, commuting time and career prospects.

A Housing Slowdown Can Also Shrink Ontario’s Ability to Build Later

Housing construction is itself a major Ontario industry. The Board’s report, drawing on official economic and labour data, says construction accounted for approximately 6.4 per cent of Ontario’s GDP in 2024 and employed roughly 586,000 people. Statistics Canada separately reported that Ontario construction activity contracted 2 per cent in 2024, with residential construction declining for a third consecutive year. That means a prolonged housing downturn has effects beyond buyers and developers: carpenters, electricians, engineers, suppliers and businesses serving construction sites can all feel the slowdown.

The longer-term concern is capacity. When projects disappear, experienced tradespeople may switch industries, developers can reduce staff, suppliers may cut production and capital can be deployed elsewhere. Restoring that ecosystem later is more complicated than simply approving a new subdivision. The Board argues that Ontario therefore risks entering a cycle in which weak construction today makes it harder to respond when housing demand strengthens again. CMHC has expressed a similar concern nationally, noting that multi-year construction timelines mean a slowdown in new starts can produce future shortages even while the current resale or rental market appears relatively balanced.

The Board Wants Ontario to Make Local Zoning More Consistent

One of the report’s central recommendations involves something rarely noticed by people until they try to build: Ontario effectively operates through hundreds of municipal zoning frameworks. Local zoning bylaws determine permitted land uses as well as rules covering density, height, parking, setbacks and building dimensions. Those powers serve important local planning functions, but the Board argues that dramatically different terminology and standards make it difficult for builders to reproduce the same townhouse, multiplex or small apartment design in several municipalities.

Its proposed solution is a provincial zoning framework that would establish more common terminology and minimum permissions while leaving municipalities significant authority over where different zones apply. Among the ideas is a “five for five” approach limiting the number of zoning categories for residential buildings of five storeys or less. The report also recommends wider use of as-of-right approvals, under which projects that meet published rules would avoid a separate rezoning process. Ontario already uses province-wide as-of-right rules in limited circumstances, including provisions allowing up to three residential units on many existing urban residential properties. The new proposal would take standardization considerably further.

Missing-Middle Housing Is at the Centre of the Building-Code Debate

The Board also wants Ontario to reconsider building rules that affect housing between a detached house and a high-rise tower. Duplexes, townhouses, multiplexes and small apartment buildings are often described as “missing middle” housing because many established neighbourhoods contain relatively little of it. These buildings can add family-sized units without requiring the land, financing and lengthy development timelines associated with large towers, but the Board argues that some existing code requirements make smaller projects difficult to design economically.

Among its recommendations is allowing single-stair residential buildings of up to six storeys when additional safety measures, such as sprinklers and pressurized stairwells, are incorporated. It also suggests allowing smaller elevators in appropriately sized buildings when accessibility and safety requirements are still met. Another proposal would use successful projects approved through Ontario’s existing alternative-solutions process as evidence for future code amendments, allowing innovative designs to become easier to replicate. These are recommendations rather than current province-wide permissions. Ontario’s present building regulation adopts the National Building Code of Canada 2020 with Ontario-specific amendments, and any substantial changes would require formal provincial action.

Toronto’s Condo Slowdown Shows Why Today’s Market Can Be Misleading

Few statistics demonstrate the change in the housing pipeline as sharply as Toronto condominium construction. CMHC says only 156 condominium units were started in the City of Toronto during the first half of 2026. For comparison, the city averaged about 7,000 condominium starts annually over the previous decade. Weak presales, higher construction costs, reduced investor demand and a substantial inventory of resale condominiums have made it much harder for developers to meet the sales thresholds typically required to finance new projects.

Rental construction has moved in the opposite direction. Purpose-built rental apartment starts in Toronto increased 82 per cent during the first half of 2026 compared with the same period a year earlier, and rental starts surpassed condominium starts for the first time since 1994. That growth is important, but CMHC says it has not been enough to offset the decline in ownership-oriented construction. The agency estimates Toronto needs roughly 21,000 to 26,000 additional starts each year to achieve sustainable affordability improvements. The result is an unusual market in which renters may see improving choice today while a weakened construction pipeline creates new affordability risks several years from now.

Expensive Housing Can Make It Harder for Workers to Follow Better Jobs

The economic connection between housing and talent goes beyond Toronto. CMHC research concludes that high housing costs can discourage workers from relocating to cities where better-paying or more productive jobs are available. For an employee considering a move, a salary increase matters less if most of that additional income disappears into a substantially larger mortgage or rent payment. Employers can face the reverse problem: companies operating in very expensive regions may need to offer higher compensation simply to overcome the cost of living, increasing the expense of hiring.

Recent OECD research reaches a similar conclusion. Its work on Canadian productivity identifies housing affordability as a constraint on geographic labour mobility and argues that expensive housing can make it harder to match workers with productive firms. The OECD cites international evidence associating a 10 per cent rise in regional home prices with a reduction of more than 3 per cent in worker inflows. Those findings do not mean housing determines every relocation decision. Careers, family connections, taxes and lifestyle also matter. They do show why a business organization would view housing supply as part of economic strategy rather than a separate social policy question.

Housing Is Becoming Part of Ontario’s Broader Competitiveness Test

The challenge for Ontario is that housing pressures are converging with trade uncertainty, investment decisions and skills shortages at the same time. The Ontario Chamber of Commerce’s 2026 business report found that 65 per cent of surveyed organizations expected U.S. tariffs, trade policies and related economic uncertainty to negatively affect their operations. Twenty-five per cent reported raising prices in response, 22 per cent were diversifying suppliers and 12 per cent said workforce reductions were among their responses. The findings came from a Leger survey of 1,660 respondents conducted between October and November 2025, so they measure business sentiment rather than a forecast of inevitable economic outcomes.

There are still signs Ontario remains attractive to investors. Forty-nine per cent of businesses headquartered outside the province told the Chamber they would be likely to expand in Ontario, compared with 45 per cent considering U.S. expansion. At the same time, respondents identified business costs, trade uncertainty and skilled-talent gaps as concerns. That is the larger point behind the Board of Trade’s housing warning. Zoning reform alone cannot resolve tariffs, finance projects, provide serviced land or train construction workers. But if Ontario wants to add industries, diversify trade and compete for investment, the ability to house the people doing that work becomes part of the same economic equation.

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