Altree Developments is an industry leader in the innovative housing movement sweeping across Canada. …fearing that the current trade war between Canada and the U.S. could reduce their total appropriations by 3 to 5%. It’s not just sending out alarm bells – Zev Mandelbaum, the president and CEO of the company, has voiced very alarming concerns. He thinks the current trade conflict is hurting the construction industry. Eighty-seven percent of builders are worried about the future of their own businesses over the next 12 months. The negative effects of tariffs and supply chain disruption are more evident by the day.
The trade war has also caused severe disruptions to the residential construction environment in Canada. A recent member survey from the National Association of Homebuilders found that nearly a third of builders have, or plan to, let workers go. Alarmingly, they have not plans to bring them back any time soon. Canada’s national housing agency, the Canada Mortgage and Housing Corporation (CMHC), anticipates a deceleration in new housing completions in the coming years. This unfortunate development further compounds the myriad challenges facing today’s housing market.
Declining Housing Starts Amid Increased Costs
Mathieu Laberge, CMHC’s chief economist, uncovers a striking pattern. Provinces with economies that are most exposed to a slowdown in housing activity due to tariffs are experiencing a larger impact as housing activity plunges. Just recently, Ontario announced that it was experiencing a 26% housing starts year-over-year decrease, and British Columbia is reporting an 8% decrease. As of June, year-to-date housing starts reached 114,411 in areas of 10,000 or more population. That is a small four percent increase over the first half of 2024.
Mandelbaum said that Altree Developments has taken a $1-million hit to its revenue over the last half-year. This decline is mostly a function of increasing costs and unpredictability. He was firm that even as the company changes course that they are experiencing serious challenges.
“It’s difficult to pinpoint what exactly is the cost impact, but we certainly can say that there is an impact in terms of business confidence and … having materials when they need them in a timely manner.” – Cheryl Shindruk, executive vice-president of Geranium Homes
The construction industry stands at a precipice. Our local builders are already adjusting their strategies to mitigate risks associated with materials shortages and rising costs.
Builders Adjust Strategies to Cope with Tariffs
Geranium Homes is meeting the challenges of tariffs head on. In response, they’ve begun procuring materials domestically and from South Korea, Portugal, and China to avoid additional expenses associated with American steel. Shindruk noted that this shift demonstrates their commitment to maintaining production levels while managing expenses effectively.
“I would say that’s been borne out.” – Cheryl Shindruk
Shindruk pointed out some great challenges that come with this transition. She highlighted the challenge of redoing sourcing for products that used to be made in the U.S. She stressed it’s not that simple as turning on a switch.
“It’s not like switching on a switch and all of a sudden those materials that used to be sourced from the U.S., which are significant, can now be produced in Canada.” – Cheryl Shindruk
The direct trade war ramifications go beyond added cost. They have permanently changed builder material choice to favor substitutes and less expensive materials.
“Where somebody might have been getting carpet in the past, they’re saying ‘You know what, we can move to vinyl plank.’” – Kevin Lee, CEO of the Canadian Home Builders’ Association
These adaptations are a testament to builders finding ways to keep costs down during an up-in-the-air supply chain. These changes, while well intentioned, drive up overhead when companies have to store materials for future projects.
“They’re taking advantage of the availability of acquiring it and then having it available for future, which then increases the overhead because you’re holding on to that material, rather than acquiring it when you need it.” – Cheryl Shindruk
Economic Concerns Loom Over the Industry
Using monthly data that precedes the trade war’s effects on housing starts, alarms have been sounded throughout the industry. Kevin Lee’s words about the urgency with which we need to address these concerns should ring in our ears.
“The big problem now is we’re just not getting the kind of starts we need and there’s a lot of concern in the industry now.” – Kevin Lee
Lee further noted that the impact of the trade war has not been regionally uniform. Things are not looking good for Ontario and British Columbia. At the same time, we are beginning to see indications of a cooling, especially in Atlantic Canada and the Prairies.
Laberge was perhaps the most striking in his expression of this discontent. He noted that while we have yet to observe tangible impacts on housing starts or resales, a lagging filter-through is unavoidable.
“This is a slow filter through, but it’s a real one. We see it happening — although maybe not in the housing starts or resales yet.” – Mathieu Laberge
As builders confront rising material costs, layoffs, and uncertainty surrounding future projects, many express concern over their ability to sustain growth in an increasingly volatile environment.
