Canada’s housing agency is warning that policies aimed at helping buyers could end up making affordability worse if they are not paired with a meaningful increase in housing supply.
In a new analysis, the Canada Mortgage and Housing Corporation (CMHC) says demand-side measures, such as tax incentives or expanded mortgage access, can place upward pressure on home prices if they are not carefully targeted and offset with new construction.
The findings come as governments continue to roll out buyer-focused policies, including tax relief and changes to insured mortgage rules, in an effort to improve affordability ahead of a major mortgage renewal wave. Recent examples include Ontario’s HST rebate for new homes, the federal First-Time Home Buyers’ Tax Credit, and the First Home Savings Account, all aimed at reducing upfront costs or improving purchasing power for buyers.
“Demand-side interventions can increase house prices if not offset by additional supply,” said Mathieu Laberge, chief economist and senior vice-president, Housing Insights, at CMHC.
CMHC noted that “broad-based demand-side interventions have a larger impact on house prices,” since they affect a wider pool of buyers.
The supply required to offset demand
Using economic modelling, CMHC estimates that even targeted support programs would require a significant increase in housing construction to avoid adding to price pressures.
The report suggests that:
- Targeted demand-side measures would require roughly 7,800 additional housing starts per year
- Broad-based support could require closer to 28,000 additional units annually
CMHC said targeted measures tend to have a more limited effect on prices but still require additional supply to fully offset increased demand. Without that offset, demand-side measures can lead to higher home prices.
Supply response seen as key to outcomes
CMHC said the impact of demand-side measures ultimately depends on how quickly housing supply can respond.
“A basic principle of supply and demand shows that if demand increases without proportionate supply, prices will increase,” wrote Mathieu Laberge, chief economist and senior vice-president, Housing Insights, at CMHC. “Demand-side supports must be targeted and accompanied by sufficient supply.”
CMHC said its scenarios were designed to be generic and “do not represent forward guidance, financial advice or policy recommendations from CMHC.”
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Last modified: April 15, 2026