Ontario is currently grappling with an unprecedented housing and cost of living crisis, a reality keenly felt across all sectors, including the crucial home building industry. The provincial housing market is under immense pressure, with recent data revealing a significant downturn in housing starts, plummeting by 16 percent across Ontario in 2024. Alarmingly, some municipalities have experienced even more drastic reductions, exceeding 35 percent. This severe contraction signals profound challenges for home builders, who are witnessing an increasing number of projects being cancelled, entering receivership, or struggling to finalize sales upon completion. The fundamental issue is that new homes, once constructed, are not selling at the pace required, placing Ontario far behind its ambitious target of delivering 1.5 million new homes by 2031. This trajectory portends grave consequences not only for the residential construction industry but also for countless Ontarians who aspire to achieve the dream of homeownership.
Over the past decade, the rapid escalation in housing prices has dramatically outstripped wage growth, rendering homes increasingly unattainable for a broad segment of the population. This issue isn’t confined to the Greater Toronto Area (GTA) but extends its reach across the entire province. The demand for real estate has soared, creating a significant imbalance with the available supply. In response, both industry stakeholders and government bodies have intensified their focus on strategies aimed at substantially increasing the housing supply throughout Ontario to address this critical shortage and restore affordability to the market.
Ontario’s Unprecedented Development Charges: A 327% Surge Since 2009 in the GTA
Addressing the housing crisis effectively means more than simply constructing additional houses; it necessitates building homes that genuinely cater to the diverse needs of target demographics. For instance, young families or individuals anticipating family formation require more spacious living environments. For these groups, increasing housing supply translates into creating attainable single-family homes, semi-detached properties, townhomes, and condominiums featuring two or three bedrooms. This strategic approach ensures that new developments align with the evolving lifestyle requirements and affordability parameters of Ontario residents.
The imperative to build more homes, and to do so with greater speed, has been met with a complex array of formidable challenges. Foremost among these are the exorbitant government fees and taxes, which have seen a remarkable increase precisely at a time when the province is battling a severe housing crisis. These rising costs significantly impede the progress of housing development, making it harder and more expensive for builders to bring new homes to market. This exacerbation of costs directly contributes to the unaffordability crisis, placing an undue burden on prospective homeowners.
Consider the staggering impact of development charges: these fees alone have surged by an astounding 327 percent since 2009 in the Greater Toronto Area, positioning them as the highest in North America. This trend is not isolated to the GTA; it mirrors the situation in municipalities across Ontario, where development charges can exceed $200,000 for a single-family home. These substantial costs are ultimately borne by consumers, directly inflating the final price of real estate. Compounding these financial burdens are the increasing delays in permitting and approvals—bureaucratic bottlenecks that have grown significantly in recent years, adding further time and cost to projects. Moreover, the urgent need for robust infrastructure development is critical to support new housing, yet it remains a persistent challenge, often lagging behind the pace of construction.
Navigating the Storm: Three Critical Risks Posed by Tariffs to Ontario’s Housing Sector
Even before the recent introduction of tariffs, home builders were already contending with a challenging economic landscape. Persistent inflation had driven up the costs of essential construction materials, while rising interest rates significantly increased financing expenses for development projects. Now, the imposition of new tariffs threatens to exacerbate these existing struggles, potentially pushing an already strained industry to its breaking point. This additional layer of financial pressure and uncertainty could severely impede the progress needed to address Ontario’s housing crisis, making it even harder for builders to deliver affordable homes.
At the Ontario Home Builders’ Association (OHBA), we are meticulously monitoring three specific risks that tariffs pose to the housing sector. Each of these risks carries the potential for significant disruption and further destabilization of an already vulnerable market. The first and most immediate concern is the risk of a broader economic downturn, a trend already discernible in volatile stock markets and the unfortunate rise in layoffs across various affected industries. Secondly, there is the palpable threat of escalating construction material costs, which would inevitably lead to higher home construction expenses. Finally, we are closely watching the risk of currency depreciation, a factor that could compound the financial burdens on builders and ultimately on homebuyers.
Economic Decline: A Looming Threat to Housing Investment and Development
A significant economic decline, fueled by the uncertainties and direct costs introduced by tariffs, would have devastating consequences for Ontario’s housing sector. Such a downturn would inevitably lead to a substantial loss of investor confidence, a critical component for driving new construction and sustaining existing projects. As investors become wary, housing starts would plummet dramatically. Ongoing projects would face delays or even complete halts, while completed projects would struggle to secure buyers and close sales. Crucially, potential investors would be deterred from pursuing new developments, choosing instead to wait out the economic instability. At a time when Ontario desperately needs an acceleration in housing supply, this scenario would be catastrophic, deepening the housing crisis and prolonging the struggle for homeownership across the province.
Rising Construction Costs: Tariffs and the Strained Supply Chain
The risk of rising construction costs poses a particularly acute threat to the residential building sector. The intricate supply chain for home construction in Canada is deeply integrated with that of the United States, with dozens of essential products crossing the border multiple times during their manufacturing and assembly processes. Tariffs directly disrupt this highly efficient and interdependent system, adding layers of cost and complexity at every stage. This disruption is not confined to imports; Canadian suppliers, whose revenues often rely heavily on access to the American market, may be compelled to raise their domestic prices to offset losses or avoid insolvency, further escalating costs within Canada. Moreover, the implementation of counter-tariffs will invariably make imports to Canada more expensive, amplifying the problem and creating a vicious cycle of increasing expenses. If the price of construction materials continues to climb, so too will the overall cost of home construction. This situation will inevitably deter investors from initiating new projects, especially when many are already struggling to sell existing homes due to previously high costs, thereby reducing the crucial supply of new housing.
Currency Depreciation: Exacerbating Import Costs and Project Viability
Currency depreciation, particularly a weakening Canadian dollar, would only serve to worsen the already precarious situation, making the importation of virtually all products related to home construction significantly more expensive. In a scenario where the Canadian dollar drops by 10 percent, and coupled with counter-tariffs of 25 percent, this could result in an astonishing 35 percent premium on imported materials. Such an increase represents an unsustainable cost burden for most construction companies, severely eroding profit margins and jeopardizing the financial viability of new projects. This combination of factors would make it exceedingly difficult for builders to source materials affordably, inevitably leading to higher home prices or, in many cases, the cancellation of much-needed housing developments, further deepening Ontario’s housing crisis.
The Indirect Ripple Effect: Tariffs’ Impact on Infrastructure and Housing Development
Beyond their direct influence on construction costs and materials, tariffs are also casting an expansive shadow over the housing market through a series of indirect but equally critical effects. The province of Ontario requires substantial investments in infrastructure to adequately support the growth of new housing across all its regions. This encompasses a vast array of essential services, ranging from robust water and wastewater systems to efficient transit networks and other vital community amenities. However, alarming reports are already emerging from Ontario municipalities indicating that they anticipate a significant increase in the cost of planned infrastructure projects directly attributable to the tariffs. Should these costs surge substantially, municipalities will face immense challenges in delivering the necessary infrastructure that is fundamental to supporting new homes. The inevitable outcome will likely be a reduction in infrastructure development, which in turn will directly constrain the number of new homes that can be built, further exacerbating the existing housing shortage and impeding the province’s growth objectives.
Advocacy for Affordability: Reducing Delays and Optimizing Land Use
Our advocacy priorities at the OHBA are sharply focused on enhancing housing attainability in Ontario, and these strategies would simultaneously help mitigate the adverse impacts of tariffs on the home-building sector. A key area of focus is reducing pervasive delays at the municipal level. These bureaucratic bottlenecks are not merely inconvenient; they translate into significant financial burdens for builders, costing anywhere from $2,400 to $5,000 per day per unit in holding and financing costs. Streamlining these processes would instill much-needed confidence in the market, encouraging builders to undertake new projects with greater certainty.
Likewise, a critical component of our strategy involves reducing the exorbitant development charges that inflate home prices. Exploring innovative ways to decrease the cost of land, primarily by making more suitable land available for development, would also have a profound and positive impact on housing costs. These measures would significantly incentivize builders and developers to continue their vital work, especially during these challenging economic times. While such fundamental changes would undeniably be meaningful for both affordability and housing supply in Ontario, their positive results would unfortunately take time to materialize. The impacts of tariffs, however, are immediate and severely detrimental. Simply put, these tariffs are transforming an already dire situation into an even worse crisis, placing Ontario’s housing sector at significant and immediate risk.
“In the short term, however, we will all feel the burn—and the residential construction industry may feel it more than others.”
The timing of these tariff impacts could not be more unfortunate for Ontario’s beleaguered housing market. One might naturally ask, “Is there any silver lining to this escalating trade war?” While the immediate outlook appears bleak, one potential positive outcome is the fostering of greater unity and resilience within Canada’s economy. This challenging period could serve as a powerful catalyst, encouraging a renewed focus on building and buying Canadian products, thereby strengthening domestic industries and reducing reliance on external markets. Furthermore, it highlights the urgent need to actively remove interprovincial trade barriers, which currently hinder the free flow of goods and services within Canada, preventing our economy from operating at its full potential. Simultaneously, striking new trade deals with a wider array of international partners is crucial to diversify Canada’s economic ties and reduce its disproportionate reliance on the United States. While these strategic shifts will undoubtedly benefit Canada in the long run, yielding a more robust and self-sufficient economy, the short term will undoubtedly be marked by significant economic pain. This burden will be broadly felt across many sectors, but the residential construction industry, already under immense pressure, is poised to experience the brunt of this impact more acutely than others, grappling with increased costs and heightened uncertainty.