Canada’s federal housing strategy just took another major hit. According to a new report from the Parliamentary Budget Officer (PBO), Ottawa is set to cut housing spending by 56% over the next few years, even as affordability hits historic lows. The PBO also warns that the CMHC is facing deep funding reductions that could affect its ability to maintain existing social housing, let alone create new units.
Here’s what Ontario buyers, renters, and investors need to know.
Ottawa Plans to Cut Housing Funding by 56%
The biggest finding in the report is the government’s plan to significantly shrink its housing budget. When Build Canada Homes (BCH) was announced, it sounded like a major expansion of federal housing efforts. Instead, the PBO says actual funding is set to drop from $9.8 billion in 2025 to just $4.3 billion by 2029, a decline of 56.1%.
Why the massive pullback?
- Expiring legacy programs
- Phasing out various social housing supports
- Ending the Canada Housing Benefit
This amounts to a broad shift away from affordability-focused programs, even as Canadians face record rental and ownership costs.
CMHC Faces Major Cuts That Could Undermine Social Housing
The Canadian Mortgage and Housing Corporation, Canada’s national housing agency, is also on track for major reductions.
Between 2026 and 2030, CMHC will see $2.4 billion cut from its expenditures. The PBO warns these cuts are so deep they could affect CMHC’s ability to maintain the social housing stock already under management.
Since some housing agreements are legally locked in, the cuts are expected to fall on other social housing programs that lack the same protections.
In other words: programs that support vulnerable Canadians are the most exposed to reductions.
BCH Expected to Achieve Just 2% of Its Housing Goal
The Build Canada Homes initiative is positioned as a plan to double housing construction, but the PBO’s projections tell a different story.
According to the report, BCH is expected to help deliver 26,000 net new homes over 5 years, including:
- 13,000 homes deemed affordable for low-income households
- 13,000 market-rate units
But here’s the key issue: this number represents only a 2.1% increase in projected housing completions. The agency tasked with doubling output is only delivering a fraction of the target.
Cost to Taxpayers: $500,000 Per Home
The PBO estimates that if BCH did not exist, taxpayers would save $13 billion, but Canada would also lose the 26,000 homes that would have been supported through the program.
That works out to an average cost of $500,000 per home, much of it used to subsidize private developers, often on public land.
For comparison:
- The CREA benchmark price for a Canadian condo is $479,000
- Most of these subsidized units are not owned by end-users, but become part of private rental portfolios
This raises questions about whether funding is addressing affordability or simply boosting developer economics.
Only Half the Units Are Affordable
Of the 26,000 projected units, only half are defined as affordable for low-income households. This suggests the private market would likely build many of the market units regardless, calling into question how much new supply BCH is genuinely adding.
The report also clarifies that its numbers do not reflect potential further reductions caused by CMHC cuts, meaning actual output could end up even lower.
The PBO Has Raised These Concerns Before
This isn’t the first time the PBO has raised red flags. In 2021, it warned Parliament that Ottawa’s multibillion-dollar housing plan might not create any truly new supply, since many projects being counted were already in development pipelines.
Loans and financing incentives, the PBO argued, have limited ability to generate construction that would not otherwise occur.
The underlying structural issues remain unchanged:
- Incentives can inflate construction costs
- Cheap credit pushes prices higher
- Banks are absorbing more risk to support elevated property values
- Doubling housing output may not be feasible given labour and material constraints
Repeating the same model under a new agency does not resolve these core limitations.
What This Means for Ontario
For Ontario’s strained housing market, this report signals several concerns:
- Less federal support for affordability programs
- Fewer new social and non-market units
- Limited progress toward meaningful supply increases
- Higher pressure on provincial and municipal governments to fill the gaps
With Ontario already facing severe affordability challenges, declining federal investment could make it even harder to address rising rents, low supply, and growing population needs.
Source: Canada Cuts Housing Budget 56% Despite Crisis, Defunds CMHC: PBO – Better Dwelling
Canada Housing Market 
Leave a comment