Shift from Condominiums to Rentals: A Double-Edged Sword for Canada's Housing Market

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A new report by Desjardins highlights the significant transition from condo developments to rental housing in Canada, revealing both benefits and risks for the housing market.

The Canadian housing landscape is witnessing a significant transformation as developers increasingly shift their focus from condominiums to rental properties. This change is underscored in a recent report by Desjardins, authored by economist Kari Norman, which highlights the challenges and opportunities arising from this pivot. The report notes that approximately 130,000 rental housing starts have been recorded over the last four quarters, while condo starts have dipped below the 50,000 mark for the first time since the global recession of 2009.
Norman's analysis points to a dramatic shift in market conditions, explaining that the viability of condo projects heavily relies on investor presales to secure necessary construction financing. However, as investor interest wanes, presales have decreased significantly, leading to a corresponding decline in condo starts. The increase in interest rates has further compounded the issue, making financing more expensive for both potential buyers and developers alike.
In contrast, the rental sector is benefiting from government-supported initiatives. Programs by the Canada Mortgage and Housing Corporation (CMHC) and the removal of GST on new rental construction have improved the economic feasibility of purpose-built rental projects. This uptick in rental construction is a positive development, especially considering Canada's long-standing deficit in purpose-built rental housing, which has persisted since the 1990s.
However, this shift away from condominiums is not without its drawbacks. It conceals a significant decline in the pipeline of homes intended for ownership. Research from Urbanation reveals that in the Greater Toronto Hamilton Area (GTHA), 11,424 condo units were cancelled between 2024 and the first quarter of 2026, with 4,064 of those being converted to rental units. Urbanation President Shaun Hildebrand noted that prior to 2024, it was uncommon for new condo projects to cancel and convert to rental, with only seven instances occurring over the previous decade. Now, nearly every condo project facing sales challenges is considering a rental conversion.
An illustrative example of this trend is Minto Communities’ recent revision of its Grand Park Village project, a mixed-use community near the Mimico GO station, where the proposed unit tenure has shifted from condo to rental. Although data on condo-to-rental conversions outside the GTHA is sparse, the trend appears to be widespread across Canada.
Norman emphasizes the need to consider the long-term implications of this shift. Condominiums have traditionally served as an entry point for aspiring homeowners, particularly in major urban centers where detached housing prices are prohibitively high. With weakening investor presales, condo starts in key markets like Montreal, Toronto, and Vancouver have fallen significantly below their 2019 levels.
The report warns that the current decline in condo starts may not fully manifest in completed supply until later in the decade, as large condo developments typically take several years to transition from presale to completion. While there may not be an immediate shortage of homes for sale, the risk remains that demand—whether from investors or prospective homeowners—could outpace the approval, financing, and construction of new projects. Even a gradual recovery in demand could coincide with a limited number of new ownership units, potentially leading to renewed upward pressure on housing prices.
Desjardins reports that Canada is already experiencing a deficit of 30,000 housing starts intended for ownership, with the ownership share of starts dropping from 70% to approximately 45% in the four quarters leading up to the second quarter of 2026.

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