Struggling like many others in Ontario, home builders are facing challenges due to the housing and cost of living crises. Housing starts in Ontario dropped by 16% in 2024, with some municipalities experiencing declines of over 35%.
Projects are being cancelled, going into receivership, or facing difficulties in closing once completed. Builders and developers are having trouble selling new homes, and the target of 1.5 million new homes by 2031 seems far from reach. This situation has serious implications for both the industry and Ontarians aspiring to own a home.
Over the past decade, housing prices have risen faster than wages, making homes unaffordable for many in Ontario, not just in the Greater Toronto Area (GTA), but throughout the province. The demand for real estate has surged, prompting industry and government efforts to increase housing supply in Ontario.
Development charges in the GTA have soared by 327% since 2009, making them the highest in North America
The focus is not just on building more homes but on constructing homes suitable for specific demographics. For instance, for young families or individuals transitioning to family life, increasing housing supply means building accessible single-family homes, semi-detached or townhomes, and condos with two or three bedrooms.
The goal of building more homes quickly faces numerous challenges, including exorbitant government fees and taxes that have risen significantly during the housing crisis. Development charges alone have shot up by 327% in the GTA since 2009, surpassing those in North America. Delays in permitting and approvals have also increased, along with the need for additional infrastructure to support new housing.
Three risks associated with tariffs
In addition to existing challenges, builders are now grappling with economic uncertainties like inflation driving up material costs, rising interest rates, and increased financing expenses. Tariffs are poised to exacerbate these issues.
The Ontario Home Builders’ Association (OHBA) is monitoring three key risks linked to tariffs and their impact on the housing sector: economic downturn, escalating construction material costs, and currency depreciation.
Risk of economic decline
A significant economic decline could shake investor confidence in the housing sector, leading to plummeting housing starts, stalled projects, and decreased investments in new developments. This would be detrimental at a time when the province urgently needs more housing.
Rising construction costs
The risk of construction costs rising poses a significant threat to the sector. Multiple products used in home construction cross borders several times during production, disrupting a supply chain deeply intertwined with the economies of Canada and the United States.
Counter-tariffs and increased prices could make construction materials more expensive, deterring investors from new projects already struggling due to high costs.
Currency depreciation
Currency depreciation would further inflate costs by making imported construction products pricier. A 10% drop in the Canadian dollar could result in a 35% premium due to counter-tariffs, posing unsustainable costs for most companies.
Indirect impact of tariffs on the housing market
Tariffs are also indirectly affecting the housing market by increasing the cost of necessary infrastructure to support new housing across the province, from water and wastewater to transit. Municipalities in Ontario anticipate higher infrastructure costs due to tariffs, which could pose challenges in delivering the necessary infrastructure to support new homes.
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