Trade tensions mean cost of new homes will spike

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Builders worry about the effect tariffs will have on residential home construction

There is one guarantee should the U.S. impose a 25 per cent tariff on aluminum and steel on March 12: The cost of building a high-rise complex or single family residence will surely rise.

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Builders in Canada will likely look to alternative sources such as domestic Canadian companies or suppliers from other countries, but the disruption along with increased costs could lead to delayed or cancelled projects in new home construction as supply chains adjust, which in turn will make the existing housing shortage worse and further drive-up prices.

According to Andrew Dinsmore, chief financial officer at luxury real estate firm Engel & Völkers Americas Inc., there is a “high level of uncertainty in both the manufacturing sector and also in the residential homebuilding sector.”

He said that should the tariffs come into being from the Trump administration, developers could end up facing an assortment of challenges that they will “need to work around.” It is, Dinsmore added, the “the uncertainty that is really killing folks.”

And while the increased cost of materials will impact builders of multi-unit buildings, Dinsmore noted that in any new home built, steel and aluminum are used.

Last month, the Ontario Home Builders Association (OHBA) warned that the potential for economic slowdown due to tariffs may be most impactful to the housing sector.

Scott Andison, CEO of the OHBA said “we’re at a turning point, not only for the Canadian economy, but specifically for the housing sector in Ontario. I’m worried about the effect that these new tariffs will have on residential construction. The potential impact of an economic slowdown, job loss, and decreased investment in residential real estate, could be a brutal blow to the housing sector and therefore to housing affordability for Ontarians.”

Increasing construction material costs, a release stated, “means increased construction costs overall, and therefore an increase in the price of new homes for potential purchasers. This would only compound the effects of decreased investment in housing, a sector that is already struggling to keep up with rising costs due to inflation.”

The new tariffs, the OHBA said, “will likely result in a weaker Canadian dollar, which would again further contribute to increasing construction costs in Ontario. Retaliatory tariffs, that may be necessary for political reasons, would exacerbate the effects described above.”

Dinsmore summed up the situation this way: “I believe in free trade” and that the current United-States-Mexico-Canada Agreement, which first came into effect in 2020, is both efficient and works well, however the addition of new tariffs “really throws a wrench into it.

“Free trade amongst all three countries has been a huge benefit overall. Obviously, some sectors, some individuals or groups of people, have been affected adversely by it, but overall, it’s been a benefit to all.”

Should the steel and aluminum tariffs be introduced, he said, the actual cost of a building a home is going to be more expensive, the result of “not having sufficient supplies in the right places. … It

forces people to stay in the rental market longer than perhaps they wanted to, it may put off dreams of growing a family or such further down the line. It just is not a good thing.”

A homebuyer today, said Dinsmore, may need to redefine their “desires, wants and needs. As for location, they may have to look further out then they may have had to do before.”