Housing Starts Edged Lower in August — and Ontario Led the Decline

What CMHC actually reported

Canada Mortgage and Housing Corporation reported that the seasonally adjusted annual pace (CMHC's own shorthand: SAAR) of housing starts came in at 229,046 units in August, down slightly from 229,360 in July — a small monthly move, but one running in the wrong direction for a country CMHC itself says needs millions more homes built over the next decade.

The SAAR figure — CMHC's own shorthand for that pace — projects what a full year of construction would look like if August's pace held for twelve straight months; it is not a count of homes actually broken ground that month. The real, unadjusted figure for centres with a population of 10,000 or more was 17,691 starts in August, down from 18,112 in the same month a year earlier. CMHC separately estimated the annual pace of starts in smaller and rural areas at 11,224 units.

CMHC's own preferred way of reading the data — the six-month moving average of the seasonally adjusted annual pace, which smooths out the month-to-month noise a single figure can carry — came in at 244,149 units in August, down 1.3% from July. That trend line is the one worth watching over a headline monthly number that can swing on the timing of a handful of large apartment projects breaking ground.

Why Ontario is doing most of the pulling

CMHC deputy chief economist Kevin Hughes attributed the national slowdown directly to the provincial split: modest gains in Quebec and Alberta, he said, “only partially offset the decline in other provinces, most notably, Ontario.” Ontario is Canada's most populous province and, by CMHC's own estimate elsewhere, needs a disproportionate share of the up to 4.69 million additional homes the agency says the country requires by 2036 to restore affordability. A province carrying that much of the national supply gap and also driving the national decline in new starts is not a coincidence — it's the same structural story from two different data releases in the same month.

What actually slows a builder down

A housing start is a builder's decision, not a buyer's, and builders weigh a different set of numbers before breaking ground — land and servicing costs, development charges, labour and material availability, and how confident they are that units will sell or lease once finished. When financing for new construction costs more, or when a builder is uncertain that today's buyer demand will still be there eighteen months from now when a project completes, the rational response is to slow the pace of new starts rather than build into uncertainty.

That is part of why this figure and the softer resale sales data covered elsewhere on this site this month are connected, even though they measure different things. A resale market where sales cooled for a fourth straight month in August, described by the Canadian Real Estate Association, does not encourage a builder to accelerate a new project. The two data sets are reading the same underlying caution from two different sides of the market.

Ontario's own $1-billion answer

This is also the backdrop for the $1-billion infrastructure commitment the Ontario and federal governments announced in August, aimed specifically at unlocking new housing supply by funding the roads, water and sewer infrastructure that has to exist before a subdivision or apartment building can be built at all. Infrastructure funding does not show up in next month's starts figure — the lag between an infrastructure announcement and shovels in the ground for the housing it enables typically runs years — but it is a direct response to exactly the supply constraint August's starts data illustrates.

None of this changes what a buyer needs to qualify for a mortgage today. It is context for why supply-side pressure on pricing tends to be a multi-year story rather than something that resolves itself in a single housing market cycle.