Canadian home builders are working overtime adding housing stock to ease what has being called a housing crisis in Canada.
Last year, the federal government said 3.87 million homes needed to be built by 2031, which is two million homes more than the Canada Mortgage and Housing Corporation (CMHC) is forecasting will be built in the next six years.
Based on new home starts in Canada in January (February figures are not yet available) CMHC says builders are on pace to build about 192,000 homes in markets with populations 10,000-plus this year.
At that pace, the CMHC’s target of an additional two million new homes is unlikely to be met.
The US tariffs on Canada make it impossible.
The Canadian Home Builders Association (CHBA) CEO, Kevin Lee said on Tuesday the tariffs will have a “muted” impact on the industry, adding an expected slowdown in the economy tied to tariff impacts would hold the national housing market back, dragging down housing starts.
Lee said consumer confidence is already at a low, and fears about job insecurity tied to tariffs are likely to filter into the housing market, dampening investment demand, dashing industry hopes for a rebound this spring.
The majority of new home starts are pre-sold before shovels go into the ground, the exception being townhome projects that might have one or two units available for sale after construction is completed. On larger multi-family projects, such as apartment towers, construction does not start until at least 50% of the units have been sold.
“We still have a bit of a slow market despite the fact that interest rates are coming down and we would expect that’ll continue to worsen as the trade war continues, if it does,” Lee said.
Meanwhile, Conservative Party of Canada leader Pierre Poilievre said Tuesday the construction sector is one industry Trump “does not control in Canada.” He said it should be leveraged against the impact of the trade war.
Speaking to reporters, Poilievre said Canada should cut sales taxes on home sales and municipalities should remove red tape on new construction to “unleash the biggest homebuilding boom this country has ever seen.”
Lee agreed that reducing or eliminating the GST charged on new homes would help to offset the impact of tariffs on builders.
Canada responded to Trump’s tariffs with retaliatory tariffs targeting $30 billion worth of US goods, with billions more in counter-tariffs set to follow in three weeks.
Lee said if tariffs and the retaliatory tariffs hit critical construction materials coming from the US, the cost to builders would rise and be passed along to buyers.
Lee added CHBA has asked the federal government to limit the scope of counter-tariffs to either skirt construction materials entirely or focus on products that builders can more easily source outside the US.
On Tuesday, the CHBA released its third annual Municipal Benchmarking Study, which tracks various programs and plans to reduce homebuilding barriers across Canada.
In the study, cities in Ontario and British Columbia were tagged as the worst offenders when it comes to delaying new home construction approvals and failing to reduce costly development charges.
Reducing these barriers is a key to addressing Canada’s housing shortage in the long run, said Lee, adding municipalities could also “more than offset” higher construction costs tied to tariffs by cutting development charges and speeding up approvals.
Speaking to reporters on Tuesday, Lee acknowledged the CHBA has seen “pretty dramatic changes” in some municipalities’ development procedures, such as the elimination of restrictive zoning.