Harpinder Virk

Increasing the use of Canadian wood products may facilitate up to a 17% decrease in ground-oriented housing costs and about 3.5% more housing starts annually.

Key Highlights

• Since 2025, residential construction costs have increasingly been driven by tariff-affected products such as steel, aluminum and manufactured building components. Before that, wood, plastics and composites products largely drove cost price inflation.
• U.S. tariffs on Canadian lumber and transformed wood products may leave more wood available in Canada, creating an opportunity to better use our domestic resources to lower the cost of building homes.
• Ground-oriented housing (detached houses and townhouses) stands to benefit the most. These homes use far more wood products than high-rise apartments and have become increasingly difficult to build in many markets.
• Realizing this opportunity will require better east-west transportation links and continued efforts to reduce internal trade barriers.

What if the latest U.S. tariffs ended up lowering housing construction costs in Canada? While this may sound counterintuitive, new CMHC analysis suggests that tariffs on Canadian lumber and transformed wood products could create an opportunity to build some homes more affordably.

If more Canadian wood products stayed in Canada and were used more consistently across the country, construction costs for ground-oriented housing could fall by as much as 17% in some centres. This would include costs for detached houses and townhouses. Such a change in building habits may lead to an increase of 3.5% in annual ground-oriented housing starts across the country, or close to 4,000 more starts annually. In centres like Calgary, the increase would be close to 8%, while in Toronto and Ottawa it would be about 4.5%.

https://www.cmhc-schl.gc.ca/observer/2026/when-served-with-tariff-lemons-lets-make-housing-lemonade