Canada Cuts Housing Budget 56% Despite Crisis, Defunds CMHC: PBO

The Canadian Parliament’s non-partisan, independent budget watchdog just gave a reality check for the latest housing plan. The Parliamentary Budget Officer’s (PBO) latest report warns despite ballooning deficits, Ottawa is slated to slash funding for housing by 56% in the coming years. They expressed direct concern for the CMHC, where planned cuts will impact its ability to even maintain existing social housing. Surprisingly, it gets worse—the PBO estimates the plan will accomplish just 2% of its goal. 

Canada Slashes Housing Funds 56%, Pivots Away From Affordability 

The point that jumps out of the report is the planned reduction in spending on housing. When Build Canada Homes (BCH) was announced with overlapping duties with the CMHC, it sounded like another unprecedented investment into housing. However, the PBO estimates funding will fall 56.1%—from $9.8 billion in Budget 2025 to $4.3 billion by 2029. 

The cuts are largely due to the expiration of legacy programs, phasing out social programs, and the end of the Canada Housing Benefit. If this seems like a structural pivot away from affordability support, that would be an accurate read.

“Federal planned spending on housing programs is set to decline 56 per cent, from $9.8 billion in 2025-26 to $4.3 billion in 2028-29 due to the expiry of funding for existing programs and cuts set out in Budget 2025.” (p. 1)

CMHC Defunded: Canada’s National Housing Agency Faces Big Cuts

Source: PBO; CMHC. 

Canada’s national housing agency is on the chopping block. The agency will see $2.4 billion cut from expenditures between 2026 and 2030. The PBO warns these cuts are so deep they will impact the CMHC’s capacity to simply sustain social housing units, let alone build any new ones. 

“Given the non-discretionary nature of spending to support existing housing under the social housing agreements, to achieve the targeted spending reductions will likely require more significant cuts to funding for social housing outside of the social housing agreements,” explains the PBO. 

Translation? Since Ottawa is locked into funding certain social housing agreements, cuts will fall on other social housing programs without the same legal protections. 

Not a problem, since it’s all a part of the plan to double housing construction, right? About that… 

Canada Spending $500k Per Home to Deliver 2% of Housing Goal

The BCH is tasked with doubling housing production, but the PBO appears to have some doubts. The report estimates the agency will help produce 26,000 additional homes (net), of which 13,000 will be “affordable” to low-income households, over 5 years. That may sound like a lot to some people, as big numbers are hard to appreciate—but context is everything. 

The PBO estimates this will represent “a 2.1 per cent increase in housing completions relative to our baseline projection.” The agency tasked with doubling housing production is on track to provide just 2% of the goal. That’s a mindboggling gap. If you made 2.1% of a baby, both you and your partner would still be wearing pants… flirting at a bar. 

Had the agency not been created, taxpayers would save $13 billion at the expense of 26,000 homes over 5 years. That’s an average cost of $500k per home, with the vast majority of that cost going towards subsidizing private construction—often on public lands. Considering the CREA benchmark price of an apartment across Canada is $479k, it feels a little steep. Especially considering these units aren’t being given to the end users, but built as financial assets.

It’s also worth noting the PBO’s estimate of 26,000 homes is a generous estimate. Only half will be considered affordable, meaning at least half will be market housing, implying the private market has a business case to create them anyway. At the same time, the PBO’s estimates don’t account for any reduction resulting from CMHC cuts, but it makes it clear the outcome is likely. 

PBO Previously Warned Housing Plan Didn’t Create New Supply

None of this should be a surprise after the PBO’s breakdown of the federal housing plan back in 2021. The agency warned Parliament it wasn’t clear if the “$70+ billion plan” creates any new housing, suggesting it may be taking credit for existing projects already in the pipeline.  

“… loans have a much more limited ability to induce the creation of units that would not otherwise have been created,” warned the PBO at the time. 

Repeating the same plan with new players and more bureaucracy doesn’t change these issues. These plans fail to address simple realities—such as induced construction amplifies costs, making it difficult for price normalization. Or the credit-based price inflation that now has banks accepting unreasonable risks to recognize overstated prices to avoid stress. But most importantly, even if there were no additional barriers that were overlooked, some of the country’s best-performing, non-partisan economists are warning that doubling housing output isn’t viable in any version of reality. No matter how many times policymakers repeat it.