Homebuilders navigate higher material costs, uncertain supply chains amid trade war

Yahoo

7 days ago

As a tariff storm blew in from south of the border earlier this year, many industries in Canada, including the home building sector, feared the unknown ahead of them.
With stakeholders already keenly aware of the need to rapidly scale up housing supply and improve Canada's housing affordability gap, blanket tariffs and more targeted material-specific levies meant additional unwelcome obstacles to overcome.
That included a potential need to slow down the pace of construction as supply chains shifted and key construction parts became more expensive.
"I would say that's been borne out," said Cheryl Shindruk, executive vice-president of Geranium Homes, a residential developer in southern Ontario.
"It's difficult to pinpoint what exactly is the cost impact, but we certainly can say that there is an impact in terms of business confidence and ... having materials when they need them in a timely manner."
About six months after U.S. President Donald Trump's return to the White House, many in the home construction sector say unpredictability persists around the cost and timing of obtaining the materials they need.
For Geranium, that's meant having to pivot on the fly when it comes to the supply chains it's long relied on.
Shindruk said the firm is now increasingly sourcing materials made in Canada, such as brick and stone, and doubling down on products typically imported from other countries besides the U.S. That includes steel, which it sources from countries including South Korea, Portugal and China — allowing it to avoid surtaxes on American steel in response to Trump's tariffs.
But she said some materials simply can't be replicated in domestic or other international markets. For instance, a component in the layered glass windows used by Geranium continues to be sourced from the U.S. due to patent issues. The company has essentially decided to eat the extra costs.
"It's not like switching on a switch and all of a sudden those materials that used to be sourced from the U.S, which are significant, can now be produced in Canada," she said.
"Where that's not realistic, then items are continuing to be sourced from the U.S. and (we're) paying the tariff."
Among products hit hardest by the trade war, Canadian Home Builders' Association CEO Kevin Lee highlighted appliances, interior doors and carpeting.
In some cases, he said builders have looked for substitutions to their typical input materials.
"Where somebody might have been getting carpet in the past, they're saying 'You know what, we can move to vinyl plank,'" he said.
Others are getting creative by stockpiling materials to avoid potential shortages later on.
"They're taking advantage of the availability of acquiring it and then having it available for future, which then increases the overhead because you're holding on to that material, rather than acquiring it when you need it," Shindruk said.
With early concerns about the effects of the trade war, Greater Toronto Area-based Altree Developments had forecast a three to five per cent hit to its overall budget, said the company's president and CEO Zev Mandelbaum.
That figure has since decreased due to more Canadian material being available than first anticipated, said Mandelbaum. But he said the roller-coaster of tariff developments — from the latest threat of additional levies to hope that ongoing negotiations will soon lead to a new trade deal — has made it "impossible" to plan ahead.
He added his company has seen a far greater impact on the revenue side of the business over the past six months, as economic uncertainty drove down buyer demand.
"It was more the fear of just ... economic instability in Canada that stopped house buying and stopped people from wanting to invest, whether it be locals looking for homes or foreigners looking to invest in the country," he said.
"That alienation caused us to have less sales, and because of that, that put even more pressure on construction costs."
In its housing forecast for the year, published in February, Canada Mortgage and Housing Corp. predicted a trade war between Canada and the U.S. — combined with other factors such as reduced immigration targets — would likely slow the economy and limit housing activity.
The national housing agency had also said Canada was set for a slowdown in housing starts over the next three years — despite remaining above the 10-year average — due to fewer condominiums being built, as investor interest lags and demand from young families wanes.
As of June, year-to-date housing starts totalled 114,411 across regions with a population of 10,000 or greater, up four per cent from the first half of 2024.
Despite that boost in new construction, a regional analysis shows provinces with industries more exposed to tariffs are experiencing a slowdown, said CMHC chief economist Mathieu Laberge. He noted Ontario's housing starts have dropped around 26 per cent to date year-over-year, while B.C. has seen an eight per cent decline.
In Ontario, five of the 10 most tariff-impacted cities also recorded an increase in mortgage arrears during the spring. Laberge said the trade war, or associated macroeconomic factors, likely prompted layoffs in those regions which meant people couldn't pay their mortgage.
He said he expects that will eventually translate to a lower number of homes being built.
"This is a slow filter through, but it's a real one. We see it happening — although maybe not in the housing starts or resales yet," Laberge said.
Lee said the industry is already noticing those effects.
"The big problem now is we're just not getting the kind of starts we need and there's a lot of concern in the industry now," Lee said.
Before tariffs, he said some regions, such as Atlantic Canada and the Prairies, had started to see housing starts rebound from a national lull that was fuelled by previously high interest rates. Other provinces, such as Ontario and B.C. — where houses remain the most expensive — hadn't yet reached similar levels of new construction.
"What's happened with the trade war is that it's made things worse in Ontario and B.C. and we are seeing things slow down a little bit in Atlantic Canada and the Prairies," said Lee.
"So it's having a dampening effect everywhere."
His association's second-quarter survey of its membership found 87 per cent of builders stated they have concerns about the well-being of their business over the next 12 months.
Around 35 per cent said they have had to recently lay off workers and have no current plans to rehire — up from 21 per cent a year ago.
"It's getting quite serious," said Lee.
"There's just a great deal of concern in the market."
This report by The Canadian Press was first published July 27, 2025.
Sammy Hudes, The Canadian Press