A falling housing market can make new construction sound backwards.

Canadian Mortgage Trends, reporting on Bloomberg’s interview with Ana Bailão, the head of Build Canada Homes, lays out the tension clearly. Home prices have dropped roughly 20 per cent, thousands of newly built condos are sitting unsold, and developers are shelving projects because the numbers no longer work.

And yet the federal housing agency is saying this is exactly when Canada needs to keep building.

That may sound strange at first. If prices are falling and units are empty, why add more supply? The answer comes down to the kind of housing we have, the kind we are missing, and who the current market is actually serving.

The Problem Is Not Just Supply, It Is the Type of Supply

Canada does not simply need more doors on paper. It needs housing that matches real household needs.

Build Canada Homes is focused heavily on affordable and purpose-built rental housing, not the investor condo model that dominated parts of Toronto and Vancouver for years. That distinction matters.

A small condo bought by an investor can add to the rental pool, but it is not the same thing as a professionally managed rental building designed to stay rental long term. It also does not necessarily help a family looking for more space, or a renter trying to avoid being displaced every time an owner decides to sell.

According to the article, purpose-built rentals now make up about two-thirds of apartment starts in key markets. That shift is already showing up in rental conditions, with CMHC reporting higher vacancy rates and slower rent growth after years of very tight supply.

That is good news for renters, but it does not solve everything.

The Condo Slowdown Still Leaves a Gap

The condo market correction is real. Unsold inventory has piled up, especially in Toronto and Vancouver, and some projects that looked viable a few years ago no longer make sense with current rates, costs, and buyer demand.

There is a fair argument that part of this adjustment was overdue. CIBC economist Benjamin Tal told Bloomberg that the shakeout could remove weaker, undercapitalized developers and push future condo building toward larger units for families rather than tiny investor-focused layouts.

That would be a healthier direction.

But there is a risk on the other side too. Condos have traditionally been one of the more accessible entry points into ownership, especially in expensive markets. If condo construction falls too far, future buyers may have fewer options when demand eventually returns.

The same applies to ground-oriented housing, meaning detached homes, townhomes, multiplexes, and similar forms. Those starts have also weakened. For families who want to buy, not rent forever, that matters.

A better rental market helps. But it does not automatically create a better ownership market.

The Numbers Show How Big the Gap Still Is

Build Canada Homes has a large mandate, but the scale of the housing shortage is much bigger than any one agency.

The article says the agency has $13 billion in government funding and has committed support to about 19,000 affordable units so far, with roughly 2,300 already under construction.

That is meaningful. It is also small compared with CMHC’s estimate that Canada needs roughly 1.9 million to 2.4 million additional homes over the next decade to restore affordability closer to pre-pandemic levels.

That gap is why the agency’s position makes sense, even during a downturn. If Canada waits until prices are rising again before building, we end up repeating the same cycle: demand comes back, supply is short, prices jump, and buyers are left chasing the market.

The hard part is building through the ugly part of the cycle, when financing is harder, presales are weaker, and confidence is low.

That is where government financing, public land, municipal partnerships, and zoning changes can matter. They do not replace the private market, but they can help projects move forward when the private market stalls.

What This Means for Buyers and Homeowners

For buyers, this is a reminder not to read one headline too simply.

Yes, prices have fallen. Yes, some condos are sitting unsold. But that does not mean every type of housing is suddenly affordable, or that the long-term shortage has disappeared.

In the GTA, a benchmark Toronto home near $924,600 is still out of reach for many households. Lower prices help, but mortgage qualification, income, down payment, property taxes, condo fees, and renewal risk still decide what is realistic.

For renters hoping to buy one day, more purpose-built rental supply may reduce pressure and create breathing room. That can be valuable. A more stable rental situation can give households time to save, improve credit, use the FHSA properly, and avoid rushing into a purchase that does not fit.

For homeowners, especially those thinking about selling a condo, the message is more mixed. Investor-style units may face more competition and weaker demand than they did during the boom. Larger, more livable units may hold up better over time if the market shifts toward end-user buyers.

And for policymakers, the lesson is pretty clear: affordability is not fixed by one lever. Rental supply, ownership supply, financing rules, construction costs, immigration levels, and local approvals all feed into the same problem.

The Takeaway

Building during a housing downturn may feel counterintuitive, but stopping construction every time the market weakens is part of how Canada got into this mess.

The key is not just building more. It is building the housing the market has not been delivering well, especially long-term rentals and homes that real households can actually use.