Kelly Rhodenizer, senior vice-president of development at Colonnade BridgePort, said Tuesday that with U.S. tariffs imposed on Canadian goods expected to trigger a retaliation from Canada, the cost of everything from appliances to steel rebar will likely go up.
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A trade war with the United States threatens to slow the pace of new housing construction to a crawl just as falling interest rates and lower inflation were poised to kickstart the industry, Ottawa real estate developers warn.
Kelly Rhodenizer, senior vice-president of development at Colonnade BridgePort, said Tuesday that with U.S. tariffs imposed on Canadian goods expected to trigger a retaliation from Canada, the cost of everything from appliances to steel rebar will likely go up.
That could prompt developers like Colonnade BridgePort and others to rethink projects in their pipelines, she said.
Rhodenizer pointed to the firm’s proposed 22-storey, 244-unit rental complex at 1950 Scott St. as an example. Shovels are slated to go into the ground on Scott Street in June, but Rhodenizer said if tariffs drive up the cost of materials and components too much, the economics of such a build might be affected.
“All the budgets and everything that we have assumed no tariffs,” she explained. “It’s going to (affect) the bottom line.”
Rhodenizer said tariffs “will definitely, I think, slow down development for sure. Investors are going to want more cost certainty.”
Taggart Realty Management president Jeff Parkes said tariffs on steel and aluminum products will likely have the biggest impact on the development industry.
“Many steel and aluminum building components are sourced in the United States, so a tariff on these metals would impact everything from structural steel building materials to kitchen appliances to HVAC equipment and electrical system components,” Parkes said in an email to OBJ on Monday.
Real estate developers were “already in a difficult position” even before tariffs due to soaring inflation in the wake of the pandemic, “so any further cost increases caused by tariffs will make it even harder to make projects economically viable,” he added.
“So, I think tariffs could have the potential to stall a lot of new construction in the industry should they persist for any length of time.”
Their comments echoed those from major industry groups.
Canadian Home Builders’ Association CEO Kevin Lee said in Ottawa on Tuesday that the U.S. tariffs on Canada will have a "muted" impact on the industry on their own.
But he said an expected slowdown in the economy tied to tariff impacts could hold the national housing market back, dragging down housing starts.
Lee said that, after weeks of U.S. President Donald Trump threatening to impose tariffs on Canadian exports, consumer confidence is already taking a hit.
He said fears about job insecurity tied to tariffs are likely filtering into the housing market, chilling investment demand and limiting hopes for a rebound this spring.
Canada has responded to Trump's trade salvos with retaliatory tariffs targeting $30 billion worth of U.S. goods, with billions more in counter-tariffs set to follow in three weeks.
Lee said that if these retaliatory tariffs hit critical construction materials coming from the U.S., they could drive up costs for builders.
The Ontario Home Builders’ Association, meanwhile, said Tuesday the trade battle will have “severe repercussions” for the province’s housing sector.
Trump’s tariff threats have “already created considerable uncertainty and hurt the industry,” which will likely cause investors to be “extremely cautious before starting any new projects,” the association said in a news release.
“The market is already in a bad place, and there’s no saying how bad the fallout from this additional threat will be,” OHBA chief executive Scott Andison said.
The CHBA has asked the federal government to limit the scope of counter-tariffs to either skirt construction materials entirely or focus on products that builders can more easily source outside the U.S., Lee said.
Rhodenizer said she’s already looking for workarounds to tariffs, such as buying appliances made in Canada or Europe. But that’s easier said than done, she added.
“Even if they’re made in Canada, there are still pieces that could come from the U.S.,” she said. “So they could be tariffed as well. The uncertainty is really hard when construction pricing is so tight right now. It’s really hard to make a project work.”
Rhodenizer has hired a third-party construction manager to help track material costs and what items will likely be hit by tariffs. Assessing the potential impacts of a trade war and how to mitigate them is a daunting task, she said.
“How do we de-risk it? Do I buy a bunch of stuff right now and store it somewhere? I don’t know if we can. I’m trying to use all the tools in my toolbox to figure out how to manage the uncertainty,” Rhodenizer said.
“I have a really big (construction) pipeline and we’re in uncharted territory right now. We don’t know how to manage those costs.”
Bruce Thomas, president of Ottawa-based Ron Eastern Construction, said he and his suppliers have been looking for potential alternatives to U.S.-made appliances and other materials since January.
“The question is, is the premium to buy Canadian or European going to be smaller than the impact of the tariffs on the American product?” Thomas said. “I think that’s our challenge right now.”
Developers say the tariff war is one more hurdle the industry has to face as builders continue to run up against roadblocks such as rising development charges and increases in other costs levied by municipalities, such as fees in lieu of parkland.
Lee said that while reducing these barriers is key to addressing Canada's housing shortage in the long run, municipalities could also "more than offset" higher construction costs tied to tariffs by cutting development charges and speeding up approvals.
Parkes said he remains hopeful the tariff dispute will not last long.
“I can’t see American stock markets reacting well to a lengthy trade war with Canada, and I believe Trump will pay attention to this,” he said.
Looking for a silver lining, Thomas said tariffs could prompt the Canadian construction sector to become more resilient in the long run.
“I think it’s our industry's opportunity to get better at looking to many other sources (of materials) and seeing different ways of doing things, hopefully to mitigate the impact of these tariffs.”
– With additional reporting from The Canadian Press
