U.S. Tariffs Usually Raise Costs — So Why Does CMHC Think They Could Help Canada Build Some Homes for Less?

Tariffs and cheaper housing are not two ideas that normally appear in the same sentence.

Trade restrictions usually increase costs. Builders pay more for materials, businesses face greater uncertainty, and those expenses can eventually reach consumers.

But a new analysis from Canada Mortgage and Housing Corporation presents an unexpected possibility.

CMHC says U.S. tariffs on Canadian lumber and transformed wood products could leave more Canadian wood available in the domestic market. If Canada can make greater use of that supply—and move it efficiently to the housing markets that need it—some types of homes could potentially become less expensive to build.

The biggest opportunity is not expected to be high-rise Condos.

It is:

Detached homes and townhouses.

CMHC estimates that under its modelling scenario, construction costs for some ground-oriented housing could be as much as 17% lower in certain Canadian markets, while annual ground-oriented housing starts nationally could be around 3.5% higher, equivalent to close to 4,000 additional starts per year.

For Toronto, CMHC estimates ground-oriented housing starts could be about:

4.3% higher

under the lower-cost scenario.

But before buyers start expecting 17% cheaper new homes, there is an important distinction to understand.

CMHC Is Not Predicting That Home Prices Will Fall 17%

This is probably the most important point in the entire report.

CMHC is not saying:

“Tariffs will make Canadian houses 17% cheaper.”

And it is not forecasting that a $1 million townhouse will suddenly sell for $830,000.

The 17% figure comes from a modelling exercise.

CMHC looked at what could happen if costs for wood, plastics and composite materials across major Canadian markets had grown at rates similar to those seen in Vancouver and Montréal.

Under that scenario, construction costs for ground-oriented housing could be up to 17% lower in some locations.

That is very different from saying the entire selling price of a home would decline by 17%.

The final price of a new home includes much more than lumber:

• land;
• labour;
• financing;
• municipal development charges;
• permits;
• infrastructure;
• taxes;
• marketing;
• professional fees;
• other construction materials;
• and the developer’s required return.

CMHC has separately shown how substantial municipal development charges can be in the GTA. For example, its 2026 analysis cited development charges of more than $180,000 for a single-detached home in Toronto, illustrating why cheaper materials alone cannot solve new-home affordability.

So the real takeaway is:

Lower material costs could improve the economics of building certain homes—but they are only one part of the final price.

Why Wood Matters So Much for Detached Homes and Townhouses

The potential benefit is concentrated in ground-oriented homes because they use far more wood than high-rise buildings.

CMHC found that the share of construction costs directly attributable to wood, plastics and composites is roughly:

16 times larger

for ground-oriented housing than for high-rise apartments.

That matters for the GTA.

Toronto has spent decades adding large numbers of high-rise Condo units, but many families still want housing such as:

• townhouses;
• semi-detached homes;
• detached homes;
• low-rise family housing.

Those are exactly the types of homes where wood costs can have a larger effect on construction economics.

If Canadian wood becomes more readily available domestically and builders are able to use more of it efficiently, the benefit could therefore be much greater for a townhouse development than for a 50-storey concrete Condo tower.

Toronto Has Already Experienced a Huge Construction-Cost Increase

The new CMHC analysis also helps explain why building homes has become so difficult in the first place.

Across Canada’s major housing markets, CMHC says residential construction costs have increased by approximately:

74% since 2019.

The pandemic period was particularly difficult for low-rise construction.

Between the first quarter of 2020 and the first quarter of 2023, CMHC’s analysis found Toronto construction-cost increases of approximately:

That difference is significant.

It helps explain why many new low-rise communities became increasingly expensive to build even before considering the cost of land.

If a developer’s materials, labour, financing and municipal costs all increase at the same time, eventually some projects simply stop making financial sense.

And when the numbers no longer work, developers may:

• delay launches;
• reduce the number of units;
• redesign projects;
• change housing types;
• or decide not to build at all.

That ultimately affects supply.

What Changed After the Tariffs?

CMHC’s analysis shows an interesting shift in what has been driving construction inflation.

During the pandemic, wood products were among the biggest sources of cost increases.

From early 2020 to early 2023, the cost index for wood, plastics and composites rose 147% across the major markets included in the analysis.

But more recently, that pattern changed.

Between the end of 2024 and the second quarter of 2026, CMHC found essentially no increase in the wood, plastics and composites category.

Meanwhile, costs continued rising in tariff-exposed or manufactured categories such as:

• utilities;
• plumbing;
• HVAC;
• metal fabrication;
• structural steel.

So tariffs are certainly not making construction cheaper across the board.

In fact, CMHC explicitly notes that trade measures can hurt the Canadian economy, employment and many businesses involved in home construction.

The potential opportunity is narrower:

If Canadian lumber becomes harder to export to the United States, more of it may remain available in Canada.

That additional domestic supply could help put downward pressure on wood-material costs.

So Why Doesn’t Canada Simply Use More Canadian Lumber?

This sounds obvious:

Canada produces a lot of wood.

Canada needs more homes.

So why not simply move the wood to where homes are being built?

The answer is that Canada’s geography and internal transportation network matter.

CMHC identifies east-west transportation infrastructure as one of the obstacles to moving more domestic wood products efficiently across the country. It also points to internal trade barriers as an area where further improvements could help.

Producing lumber in one region does not automatically make it inexpensive to deliver to a construction site thousands of kilometres away.

For the opportunity to become meaningful, Canada needs:

available material + transportation + building systems + builder adoption.

CMHC also points to greater use of technologies such as mass timber as another possible way to expand the role of Canadian wood in residential construction.

Why Toronto Could Benefit

CMHC estimates that if the lower-cost scenario were realized, annual ground-oriented housing starts in Toronto could increase approximately:

4.3%.

Nationally, the increase would be about 3.5%, while Calgary could see a much larger effect at around 8%.

A 4.3% increase is not enough to solve Toronto’s housing shortage.

But in a market where new construction is already under pressure, even a modest improvement in project economics can matter.

CMHC’s broader 2026 outlook says Ontario is experiencing particularly weak construction conditions, with high costs, weaker demand and unsold inventory causing builders to pull back on new projects. The slowdown is particularly visible in the Condo sector.

That makes the ground-oriented opportunity interesting.

Toronto and the GTA do not only need more high-rise units.

They also need housing choices between:

a 600 sq. ft. Condo

and

a $2 million detached house.

Townhouses, low-rise housing and other family-oriented formats can help fill that gap.

Could This Make GTA Townhouses More Affordable?

Potentially—but buyers should keep expectations realistic.

Suppose a builder can reduce the cost of lumber and other wood-based components.

That could:

• improve the project’s profit margin;
• help an otherwise unviable project proceed;
• allow more units to be built;
• reduce the amount by which prices need to rise;
• or create greater flexibility in pricing and incentives.

But it does not mean every dollar saved by the builder automatically becomes a dollar removed from the selling price.

Housing markets are still affected by supply and demand.

If a new townhouse project is in a highly desirable part of Markham with limited competing supply, pricing will still reflect what buyers are willing to pay.

Likewise, if land and municipal charges remain very expensive, cheaper lumber may only offset part of those other costs.

So a better way to think about it is:

lower construction costs can make new supply easier to build.

And over time, more supply can help improve housing choice and affordability.

What Could This Mean for Pre-Construction Buyers?

For pre-construction buyers, the story is particularly relevant.

The last several years have shown that a project being announced does not necessarily mean it will proceed immediately.

Developers need the numbers to work.

That includes:

• land acquisition;
• construction costs;
• labour;
• financing;
• municipal fees;
• projected selling prices;
• and enough buyer demand.

If construction costs can be reduced, even modestly, some projects that previously sat on the edge of financial viability may become easier to launch or build.

This does not mean buyers should purchase a project simply because its developer uses more Canadian lumber.

But it does reinforce an important lesson:

The health of the pre-construction market depends on construction economics, not just buyer demand.

When evaluating a new project, buyers should look at the developer, location, product, deposit structure and local resale alternatives—not simply assume every project will appreciate because housing is scarce.

Could More Wood Construction Help the “Missing Middle”?

This may be one of the more interesting long-term implications.

Toronto and other GTA municipalities are trying to create more housing options between detached houses and high-rise apartments.

That can include:

• multiplexes;
• townhouses;
• stacked townhouses;
• small apartment buildings;
• infill developments;
• other low- and mid-rise housing.

Many of these building forms can make substantial use of wood-frame or mass-timber construction.

If domestic wood becomes more cost competitive, it could improve the economics of exactly these kinds of developments.

That would not transform the GTA housing market overnight.

But it could support a broader shift away from relying almost exclusively on high-rise Condos for new urban housing supply.

Buyers Should Not Wait for a “17% Discount”

This report should not become a reason for buyers to say:

“I’ll wait. New homes might be 17% cheaper next year.”

That is not what CMHC is predicting.

The 17% figure describes a potential construction-cost difference under a specific modelling assumption.

Whether any savings ultimately appear in the price paid by an individual buyer depends on many other factors.

The better question is:

Could improving Canadian construction economics eventually allow more homes to get built?

CMHC’s analysis suggests the answer could be yes—particularly for detached homes and townhouses.

What Does This Mean for Sellers?

For resale homeowners, the effect would be indirect and long term.

If Canada eventually builds more family-oriented housing, buyers may have more alternatives.

A family comparing a resale townhouse in Richmond Hill might also have access to:

• a new townhouse in Markham;
• a multiplex unit in Toronto;
• or a new low-rise development elsewhere in York Region.

More supply can create more competition.

But that process takes years, not months.

Existing homes still have advantages that new construction cannot easily replicate, including:

• established neighbourhoods;
• larger lots;
• mature landscaping;
• completed infrastructure;
• immediate occupancy;
• and known community characteristics.

So the story should not be read as:

“New construction will replace resale.”

It is about potentially giving buyers more choices.

What Does This Mean for Developers and Investors?

For developers, the implication is much more direct.

A lower material-cost structure can affect whether a project reaches the minimum return needed to proceed.

In today’s market, this is especially important because developers are already dealing with weaker sales and high financing costs.

CMHC’s latest market outlook expects Ontario housing starts to remain under pressure as builders respond to high construction costs and existing unsold inventory.

For investors, this is another reminder that future GTA housing supply may not look exactly like the last cycle.

The previous decade was heavily dominated by investor-oriented high-rise Condos.

The next wave of development may increasingly include:

• purpose-built rental;
• townhouses;
• infill housing;
• multiplexes;
• and other lower-rise formats.

Which property type has the strongest long-term demand may therefore vary considerably by community.

JDL Realty Perspective

The most interesting part of CMHC’s new research is not really the tariff story.

It is what the research says about Canada’s housing problem:

We do not only need more buyers to be able to afford homes. We also need it to make financial sense to build those homes in the first place.

Toronto construction costs increased dramatically over the last several years.

At the same time, land, financing and municipal costs remain significant.

That combination has made it increasingly difficult for some new projects to move forward.

If greater use of Canadian lumber can reduce one part of the cost equation, that could help.

But it is not a complete solution.

For GTA buyers, the practical takeaway remains the same:

Compare the actual choices available today.

A new townhouse may compete with a resale townhouse.

A Condo may compete with a smaller freehold farther from Toronto.

A pre-construction property should be compared with resale—not evaluated in isolation.

At JDL Realty, we help buyers compare new developments, resale properties, neighbourhoods and different housing types across Toronto and the GTA based on current market conditions and real alternatives.

Because the most important question is not:

“Will construction become cheaper?”

It is:

“Given today’s market, which option makes the most sense for me?”

Frequently Asked Questions

Did CMHC say Canadian home prices could fall 17%?
No. CMHC’s 17% figure refers to potential reductions in construction costs for certain ground-oriented housing in some markets under a modelling scenario. It is not a forecast for a 17% decline in home selling prices.

Why could U.S. tariffs leave more lumber in Canada?
If tariffs make Canadian lumber more expensive or less competitive for U.S. buyers, more supply could remain available domestically. CMHC says greater use of that supply could potentially reduce the cost of some Canadian construction.

Which homes could benefit the most?
CMHC identifies ground-oriented homes—particularly detached homes and townhouses—as having the greatest potential because they use significantly more wood products than high-rise apartments.

What could the impact be in Toronto?
Under CMHC’s scenario, annual ground-oriented housing starts in Toronto could be approximately 4.3% higher.

Will cheaper lumber automatically mean cheaper new homes?
No. Lumber is only one part of the total development cost. Land, labour, financing, development charges, taxes and market demand also influence the final selling price.

The Bottom Line

At first glance, the idea sounds contradictory:

U.S. tariffs could somehow help Canada build some homes for less.

But CMHC’s argument is not that tariffs are good for housing.

Its analysis acknowledges that tariffs can hurt Canada’s economy and increase costs in other areas.

The opportunity is more specific:

If tariffs leave more Canadian wood available domestically, and Canada can actually move and use that material efficiently, some detached homes and townhouses could become less expensive to build.

That could make more projects financially viable.

And CMHC estimates it could support modestly more housing starts, including approximately 4.3% more ground-oriented starts in Toronto under its scenario.

For buyers, that does not mean waiting for a 17% discount.

For the GTA housing market, the bigger question is whether Canada can turn lower material costs into:

more homes actually being built.

That is where the long-term impact could matter most.

Thinking about buying a new home, resale property or pre-construction project in Toronto or the GTA? Contact JDL Realty to compare the options currently available in your preferred area and budget.

Source: CMHC

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