CMHC cuts its housing forecast as Toronto loses residents for the first time in decades
Ninety thousand people left the Greater Toronto Area over the past two years, trading the core for smaller towns across Ontario or moving interprovincially altogether. Not because remote work made it possible. Because staying became untenable.
Statistics Canada's recent demographic estimates confirm what real estate agents have been watching quietly: Toronto's population contracted in absolute terms for the first time in decades. The exodus isn't happening in a vacuum. It's happening alongside a CMHC forecast revision that cut projected housing starts well below what the federal government needs to hit its 3.87 million new homes target by 2031. The two stories share a root cause, housing supply can't keep pace with demand, and the gap is forcing people out.
Why the forecast dropped
The CMHC's downward revision hinges on trade policy. Tariffs on imported steel, aluminum, and specialized glass have added 25% premiums to multi-unit residential budgets in some cases. Projects that penciled at 4% returns in 2023 now look marginal or worse on the pro-forma, so developers shelve them. The result is fewer shovels in the ground, even as the Bank of Canada has cut rates four times since mid-2024.
Construction materials cost 35 to 40% more than they did in 2020. Tariffs account for a measurable chunk of that spike, particularly in the 2024-2026 window. The CMHC's housing market outlook treats this as a macroeconomic drag, which it is. But the mechanism is specific: a policy designed to protect domestic steel and lumber producers inadvertently taxes the one sector Canada needs to scale immediately.
The rate-cut paradox is this. Borrowing costs have fallen. Five-year fixed mortgages now sit in the 4.19 to 4.59% range, down from near 6% eighteen months ago. That should unlock demand. It doesn't unlock supply. The cost of building, materials plus skilled labor, is rising faster than the cost of borrowing is falling. So inventory stays flat, vacancy rates hover near zero in Toronto and Vancouver, and shelter inflation stays sticky in the CPI.
The missing middle moves out
Toronto's population loss isn't random attrition. Families are leaving. The "missing middle" housing gap, the shortage of townhomes, stacked flats, and duplexes priced between a condo and a detached house, has turned the city core into a luxury-only zone. A household earning $120,000 can't buy into the neighborhoods where jobs and transit converge. They move to Guelph, to Hamilton, to Barrie, and commute back.
The GTA as a region is still growing. International immigration hasn't slowed. But the city itself is hollowing out, shedding the demographic it needs to remain economically functional. The rental market absorbed some of this pressure initially. Now it's at capacity. Vacancy rates in Toronto sit below 1%, and asking rents for a two-bedroom average above $2,800 a month. For a family weighing $2,800 in rent against a mortgage on a house two hours away, the calculus is brutal but clear.
The lock-in effect compounds the problem
The secondary market isn't helping. Homeowners who locked in fixed rates between 1.79 and 2.5% in 2021 and 2022 are staying put. Moving means refinancing at 5.4% or higher. That gap, three percentage points on a $600,000 mortgage, is $18,000 a year in additional interest expense. So they don't list. The inventory shortage isn't just a construction problem. It's also thousands of households frozen in place by rate differentials.
This is the bind. Population growth continues. Housing starts fall. Existing owners can't or won't sell. And the people who need housing most are the ones leaving. The CMHC's forecast revision is the bureaucratic acknowledgment of what the market already knows: the math doesn't work, and no one has figured out how to fix it yet.
Ninety thousand people left the Greater Toronto Area over the past two years, trading the core for smaller towns across Ontario or moving interprovincially altogether. Not because remote work made it possible. Because staying became untenable.
Statistics Canada's recent demographic estimates confirm what real estate agents have been watching quietly: Toronto's population contracted in absolute terms for the first time in decades. The exodus isn't happening in a vacuum. It's happening alongside a CMHC forecast revision that cut projected housing starts well below what the federal government needs to hit its 3.87 million new homes target by 2031. The two stories share a root cause, housing supply can't keep pace with demand, and the gap is forcing people out.
Why the forecast dropped
The CMHC's downward revision hinges on trade policy. Tariffs on imported steel, aluminum, and specialized glass have added 25% premiums to multi-unit residential budgets in some cases. Projects that penciled at 4% returns in 2023 now look marginal or worse on the pro-forma, so developers shelve them. The result is fewer shovels in the ground, even as the Bank of Canada has cut rates four times since mid-2024.
Construction materials cost 35 to 40% more than they did in 2020. Tariffs account for a measurable chunk of that spike, particularly in the 2024-2026 window. The CMHC's housing market outlook treats this as a macroeconomic drag, which it is. But the mechanism is specific: a policy designed to protect domestic steel and lumber producers inadvertently taxes the one sector Canada needs to scale immediately.
The rate-cut paradox is this. Borrowing costs have fallen. Five-year fixed mortgages now sit in the 4.19 to 4.59% range, down from near 6% eighteen months ago. That should unlock demand. It doesn't unlock supply. The cost of building, materials plus skilled labor, is rising faster than the cost of borrowing is falling. So inventory stays flat, vacancy rates hover near zero in Toronto and Vancouver, and shelter inflation stays sticky in the CPI.
The missing middle moves out
Toronto's population loss isn't random attrition. Families are leaving. The "missing middle" housing gap, the shortage of townhomes, stacked flats, and duplexes priced between a condo and a detached house, has turned the city core into a luxury-only zone. A household earning $120,000 can't buy into the neighborhoods where jobs and transit converge. They move to Guelph, to Hamilton, to Barrie, and commute back.
The GTA as a region is still growing. International immigration hasn't slowed. But the city itself is hollowing out, shedding the demographic it needs to remain economically functional. The rental market absorbed some of this pressure initially. Now it's at capacity. Vacancy rates in Toronto sit below 1%, and asking rents for a two-bedroom average above $2,800 a month. For a family weighing $2,800 in rent against a mortgage on a house two hours away, the calculus is brutal but clear.
The lock-in effect compounds the problem
The secondary market isn't helping. Homeowners who locked in fixed rates between 1.79 and 2.5% in 2021 and 2022 are staying put. Moving means refinancing at 5.4% or higher. That gap, three percentage points on a $600,000 mortgage, is $18,000 a year in additional interest expense. So they don't list. The inventory shortage isn't just a construction problem. It's also thousands of households frozen in place by rate differentials.
This is the bind. Population growth continues. Housing starts fall. Existing owners can't or won't sell. And the people who need housing most are the ones leaving. The CMHC's forecast revision is the bureaucratic acknowledgment of what the market already knows: the math doesn't work, and no one has figured out how to fix it yet.
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