Could lumber market chaos deepen Canadians' housing affordability woes?
Canada’s homebuilding outlook was gloomy even before Donald Trump returned to the White House in January and vowed huge tariffs on a wide range of Canadian imports.
The country was already staring at a shortfall of millions of homes required to restore housing affordability, according to Canada Mortgage and Housing Corporation (CMHC).
But Trump’s new spate of charges on Canadian lumber has triggered what British Columbia premier David Eby described as an “existential threat” to mills and heaped even more pressure – and potential price strain – on builders.
Trump imposed an extra 10% tariff on Canadian lumber starting this week, adding to the 35% levy already in place, and also slapped a 25% tariff on Canadian wood products including furniture.
Canadian buyers will be spared those extra charges directly, but Trump’s measures are likely to put upward pressure on prices for builders in Canada because the North American lumber market is highly integrated with price movement in the US often influencing Canadian costs.
That’s not to mention the jobs in the lumber and construction industries under threat from the tariffs. Mills had reeled from whipsawing lumber prices since the COVID-19 pandemic before facing the fresh shock of Trump’s trade war.
Royal Bank of Canada CEO Dave McKay said Canada must act decisively to restore investor confidence, warning that fear of mistakes and long approval delays are costing growth opportunities. He urged collaboration to drive national prosperity.https://t.co/f2OaBEFoby
— Canadian Mortgage Professional Magazine (@CMPmagazine) October 13, 2025
A new complication for the federal government as it navigates housing crisis
The fiasco adds another challenge on the housing file for Prime Minister Carney’s government, which has pledged to turbocharge the pace of home construction across the country and earmarked billions of dollars to boost building.
In the US alone, tariffs on Canadian lumber could spike homebuilding costs by $14,000 (USD) by 2027, according to a Canadian Chamber of Commerce report.
It’s not clear how much costs could spike in Canada. But the mortgage industry has long identified construction challenges and spiralling building costs as a huge barrier to Canadians’ hopes of owning an affordable home.
The government, according to Toronto mortgage agent Kalson Jang (pictured top), “needs to make it easier and less costly for developers to build homes.
“And I’m also sure there’s a lot of red tape and [more] that builders have to go through to build. If it’s going to be that costly, it’s tough for a builder to start a project now when the market’s slower because with all those costs, they might not feel like the odds of making a profit are high enough to make them want to build.”
Government also needs to address affordability to boost construction, says agent
Homebuilder sentiment across Canada unsurprisingly remained muted in the second quarter of 2025 as trade concerns, economic uncertainty and construction costs pummelled the sector.
A sluggish housing market hasn’t helped the outlook either, with demand staying low throughout the opening half of the year thanks to stubborn mortgage rates and fears of a recession due to that trade turmoil.
Efforts to boost homebuilding are one thing, but Jang also highlighted the need for the government to help buyers with affordability in other ways – and in turn, spur demand for the construction of new homes.
A few recent moves have been well received, not least a couple of tweaks made by the Trudeau government towards the end of last year.
“Some positive changes that the government made were to insured mortgages,” Jang said. “Increasing the max purchase price from $1 million to $1.5 million was a huge change. I think that was definitely very helpful.”
The government also allowed first-time buyers and those purchasing a preconstruction property to extend amortizations to 30 years – a welcome change, with a caveat.
“I feel they should extend the 30-year amortization privilege to all insured buyers, not just first-time homebuyers and not just buyers purchasing the construction properties,” Jang said.
“At the end of the day, you’re just giving people the opportunity to borrow a little more with the same payment amount. I think that would make a lot of sense.”
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