In 2025, Canada’s housing market is feeling the pressure of new U.S. tariffs that are reshaping construction costs, material supply chains, investor behavior, and even buyer sentiment. These tariffs, aimed at protecting American manufacturing, are having unintended consequences north of the border—particularly in the real estate and homebuilding sectors. The result is a housing market in transition, defined by rising costs, delayed projects, and shifting investment strategies.

What the New U.S. Tariffs Include

The United States, under the Biden administration, implemented updated tariffs in early 2025 on a range of imported goods. These tariffs target materials critical to the Canadian housing industry, including steel, aluminum, HVAC systems, finished lumber, engineered wood, prefab components, and certain heavy machinery. The stated goal was to protect U.S. industrial jobs and reduce reliance on foreign supply chains—especially in sectors like energy, construction, and transport. However, Canada, as America’s largest trading partner, was immediately impacted.

Canadian developers and contractors who rely on U.S.-produced construction goods now face additional tariffs of 10% to 25%, depending on the product category. This has significantly increased material input costs, especially in cities with high-density development and tight construction schedules like Toronto, Vancouver, Ottawa, and Calgary.

How Tariffs Are Driving Up Home Construction Costs

The most immediate impact of the tariffs has been a steep rise in the cost of building materials. Builders across Ontario, Alberta, and British Columbia report double-digit increases in the cost of U.S.-sourced steel, aluminum frames, and electrical wiring components. These goods, which form the backbone of residential development, are now more expensive due to both tariffs and restricted cross-border volume.

In Ontario, developers estimate that the average cost to build a 2,000-square-foot home has risen by nearly $25,000 since January 2025. Steel framing, HVAC components, and aluminum windows—all of which were commonly imported from the U.S.—have seen price hikes ranging from 12% to 30%. Even locally produced materials are affected, as demand shifts domestically and drives up prices for Canadian alternatives.

This sharp cost escalation is forcing developers to delay projects or increase sale prices to protect margins. In high-demand areas like Mississauga and Oakville, this has translated into fewer active construction sites and reduced new housing inventory entering the market.

Delays and Disruptions in Housing Supply

Canada’s housing shortage is being made worse by project delays linked to tariff-related bottlenecks. Developers report difficulty sourcing key materials from U.S. partners, leading to months-long delays in project timelines. This is particularly evident in multi-unit developments and pre-construction condominiums, where specialized materials like energy-efficient glass, prefabricated balcony systems, and U.S.-branded HVAC systems are used.

The result is a growing backlog in construction completions. According to CMHC (Canada Mortgage and Housing Corporation), new housing starts have declined by over 8% in the first half of 2025, despite continued demand. In Toronto and Vancouver, thousands of units are stuck in mid-construction due to the unavailability of imported parts or the increased costs of finishing work. These delays ripple across the market, reducing inventory and driving up prices on the resale side.

Impact on Resale Market and Pricing Volatility

Resale prices have been less predictable in 2025 than in previous years. While high interest rates have helped cool demand slightly, the limited supply of new homes has kept upward pressure on prices, especially in family-friendly areas near Toronto, Hamilton, and Halifax.

However, volatility has emerged as a key trend. Homebuyers are wary of inflationary pressure, rising mortgage rates, and now the threat of prolonged trade disputes. In many urban centers, home prices have stabilized at a high level, but fluctuations of 3% to 5% month-to-month are increasingly common.

This uncertainty is making both buyers and sellers more cautious. Buyers are holding off in hopes that material costs will fall or interest rates will ease. Sellers, meanwhile, are reluctant to list if they believe they cannot afford new construction options due to higher build costs. This standstill has created a sluggish and unpredictable market dynamic.

Investor Strategies Are Evolving

One of the less visible but equally important effects of U.S. tariffs is the way they are influencing real estate investors. Both domestic and international investors are reassessing the profitability of new development projects in light of increased material and labor costs.

Foreign investors, especially those from Asia and the Middle East, are becoming more hesitant to fund large-scale residential developments in Canada due to thinner margins. Some are diverting capital to U.S. cities offering tax incentives for manufacturing or logistics developments, which appear more insulated from the current tariff risk.

Domestic investors, meanwhile, are turning to secondary markets and mid-size cities where land is cheaper and the cost of construction can be more easily managed. Places like London, Windsor, Saskatoon, and Moncton are seeing increased investor activity in 2025. The focus has shifted toward value-add projects—renovating or repurposing existing properties—rather than speculative new builds.

Developers Turn to Modular and Canadian-Made Solutions

In response to higher tariffs and unpredictable supply chains, Canadian builders are exploring domestic and modular construction alternatives. These include Canadian-sourced wood products, prefab building kits, and partnerships with local suppliers.

Modular construction—especially for bungalow communities and small-scale developments—is gaining popularity. These factory-built homes can be assembled faster, are less dependent on imported goods, and offer cost certainty. Builders in Ontario and Quebec are expanding modular capabilities to help fill the supply gap caused by delayed traditional construction.

Several Canadian startups are capitalizing on this shift, offering eco-friendly construction systems that reduce dependence on foreign supply chains. While these solutions won’t replace traditional construction overnight, they represent a promising trend in long-term resilience and cost control.

Short-Term Effects on First-Time Buyers

First-time buyers are facing a difficult environment in 2025. Higher material costs are pushing up prices on both new builds and resale homes. Mortgage rates remain high, and additional inflationary pressure from trade policy is eroding purchasing power.

Programs aimed at helping first-time buyers, such as the First Home Savings Account (FHSA) and government-backed down payment incentives, are offering some relief—but they haven’t fully kept up with rising costs. For many entry-level buyers, the dream of homeownership is moving further out of reach, particularly in urban centers.

To adapt, buyers are considering smaller homes, moving to more affordable provinces like Alberta or Nova Scotia, or pooling resources with family. Others are entering the market through shared ownership or co-living arrangements.

Policy Responses and Diplomatic Negotiations

Canadian policymakers are under pressure to negotiate exemptions or adjustments to the current U.S. tariff framework. Ottawa has already filed complaints with the World Trade Organization (WTO) and is engaging in bilateral talks to secure trade relief for critical sectors like housing and manufacturing.

At the provincial level, governments are increasing support for local manufacturers, accelerating zoning changes to allow modular and infill development, and funding innovation in the construction sector. In Ontario, incentives are being offered for developers who use 100% Canadian-sourced materials.

Still, meaningful resolution may take time. Analysts expect that the current tariff structure could remain in place until at least 2026, unless there is a major political or diplomatic shift.

Long-Term Outlook: Resilience Through Innovation

While 2025 has brought new challenges, the Canadian housing sector is also demonstrating resilience. Builders, investors, and governments are adapting in real-time—exploring local supply chains, adopting new technologies, and rethinking development strategies.

This transition will not be painless. Higher costs, fewer completions, and tighter margins are expected to persist through 2025. But over time, the industry could emerge stronger, less dependent on foreign imports, and more capable of meeting long-term housing needs with Canadian-made solutions.

If current trends continue, we may see the rise of a more localized, sustainable, and flexible housing market in Canada—one shaped not just by policy, but by necessity.

Final Thoughts

U.S. tariffs may seem like a trade issue, but their effects on Canada’s housing market are very real. From cost increases and construction delays to altered investment strategies and buyer behavior, 2025 is a year of transition. While short-term pain is undeniable, the long-term outcome could be a more self-reliant and efficient real estate system that is better equipped to serve Canadians in the years ahead.