Uncertainty around the trade relationship between Canada and the U.S. could cause buyers of new homes in Ottawa to once again pull back from the market, one local official warns.
As recently as December, data indicated that the new home market in Ottawa was turning around. Jason Burggraaf, executive director of the Greater Ottawa Home Builders’ Association, told OBJ early this year that consumer confidence and sales were up and that construction activity was expected to increase in 2025.
But when U.S. President Donald Trump announced Monday that a 25 per cent import tariff on all steel and aluminum entering the U.S. from Canada would go into effect in early March, those predictions went out the window.
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“It’s hard to calculate if there’s, you know, going to be a 20 per cent increase in housing costs or anything, but the uncertainty alone could increase costs,” Burggraaf told OBJ Tuesday.
Lenders are likely to be more reticent, he added, saying they might increase pro formas for projects and establish contingencies to minimize risk, adding to overall costs for homebuilders.
But Burggraaf said he is most concerned about how tariffs could impact consumers’ perception of the market.
“The overriding concern that I have is what the impact on consumer confidence will be, especially in the Ottawa market. We’ve had a couple slower years of activity, but we’ve had some good signs. My concern is that all that momentum will be halted by concern about what tariffs might do to the economy.”
While steel is more commonly used in high-rises, aluminum is an essential material for home construction. Burggraaf said it’s the main material used for HVAC systems.
“If the supply chain of aluminum is really impacted, that’s not only going to have a cost impact, but the supply will run down,” he said. “Then we’re going to have effects on construction timelines, as well as simply the manufacturing of proper aluminum plates and other pieces that you need to do your ductwork.”
He added that even though businesses might not export materials to the U.S., it will be hard for most companies to avoid a setback of some kind once tariffs are in place.
“Inevitably, anytime there’s a disruption in the supply chain, whether you’re bringing it in or shipping it out, it’s going to affect you,” he said.
Even if tariffs never come to pass, Burggraaf said continued economic threats could lead potential buyers to return to the sidelines until things stabilize.
Less demand, he said, means fewer new homes, at a time when Ottawa is trying to build more.
If the construction pace slows, Ottawa could miss out on funding under the province’s Building Faster Fund, which requires the city to hit 80 per cent of its annual housing construction target. It’s a threshold Ottawa has already been struggling to reach.
“The province might be compelled to look at the current circumstances related to tariffs, related to economic uncertainty, and address those thresholds,” said Burggraaf.
Issues with the speed of housing construction also led the city to announce last month that it will be establishing a task force to find ways to cut red tape on the permitting process and shave as much as two months off application timelines.
Nationally, developers agree that U.S. tariffs on Canadian steel and aluminum could be detrimental to the housing sector due to higher costs of key construction materials.
The Ontario Home Builders’ Association, which represents more than 4,000 companies offering services such as development and renovation, said the tariffs could prompt an economic slowdown and lead to decreased investment in residential real estate.
The group’s CEO Scott Andison warned that could be “a brutal blow to the housing sector and therefore to housing affordability.”
“When you throw something as dramatic as trade tariffs into an environment that’s already suffering from low margins, high interest rates and high input costs, the potential for costs … going up makes builders quite nervous,” he said in an interview
“This is just something that puts the development market into a bit of chaos.”
Trump signed an executive order on Monday to levy 25 per cent tariffs on steel and aluminum imports to his country beginning March 12 — a move that Canadian Chamber of Commerce president and CEO Candace Laing called “wrong on so many levels.”
Laing said Trump’s decision “makes it clear that perpetual uncertainty is here to stay.”
It comes amid Trump’s threat of 25 per cent across-the-board tariffs on Canadian imports, with a lower 10 per cent levy on Canadian energy. Trump has delayed those until at least March 4 in response to border security commitments.
Data from the U.S National Trade Administration shows the U.S. is Canada’s largest market for aluminum, with over three million tonnes exported to the U.S. last year.
BMO economist Robert Kavcic said Canada’s total steel and aluminum exports to the U.S. last year were $35 billion, or roughly one per cent of GDP.
Andison said an increase in the cost of construction materials would raise Canadian home prices at a time when the sector is already struggling to keep up with rising costs due to inflation.
He said input costs for materials such as lumber rose during the pandemic and never returned to pre-COVID levels.
“When you start making Canadian products less of interest to other markets such as south of the border in the U.S., that reduces the amount being produced because markets have decreased outside of Canada,” said Andison.
“And when you start reducing the amount that’s being produced, the cost of domestic sales obviously goes up.”
Potential retaliatory tariffs could also play a role in making housing more expensive, he said, noting around $20 billion in Canadian steel and aluminum products are sent south of the border per year.
Andison said two-way tariffs on a broad range of construction materials beyond just steel and aluminum — such as cement, gypsum and lumber — could drive up costs “into a crazy level that makes any construction unviable.”
“Right now, our builders can build homes, but the problem is that they would have to build them at a price that consumers cannot afford, particularly first-time homebuyers,” he said.
“They’re looking at numbers that are just in many ways outside of their scope.”
— With files from The Canadian Press
