U.S. Lumber Tariffs Could Cut Canadian Home-Building Costs by Up to 17% and Add Nearly 4,000 Starts a Year: CMHC

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U.S. tariffs on Canadian lumber are normally discussed as a threat to jobs, exports and economic growth. But new analysis from Canada Mortgage and Housing Corporation points to a surprising potential consequence at home: if more Canadian wood stays in the country and builders make greater use of it, some types of housing could become significantly cheaper to construct.

CMHC estimates that construction costs for ground-oriented homes, including detached houses and townhouses, could be as much as 17% lower in some markets under its modeled scenario. The agency says that could translate into roughly 3.5% more ground-oriented housing starts nationally, or close to 4,000 additional homes every year. The finding does not mean tariffs themselves make housing cheaper. Instead, it identifies an opportunity Canada could capture if trade disruption leaves more domestic wood available and the construction industry can put it to work.

What CMHC Is Actually Saying

The headline numbers are significant, but CMHC’s analysis comes with an important condition. The agency is not forecasting that Canadian construction costs will suddenly fall 17% because Washington has imposed tariffs. Its model asks what could happen if wood, plastics and composite costs across major Canadian markets behaved more like they have in Vancouver and Montréal, where increases have been considerably smaller. Under that scenario, some ground-oriented construction costs could be up to 17% lower.

CMHC then estimates how lower construction costs could affect builders’ decisions to launch projects. Nationally, ground-oriented housing starts could increase by approximately 3.5%, equivalent to nearly 4,000 additional starts a year. The estimated response varies sharply by city. Calgary could see an increase of about 8%, Edmonton 6.1%, Ottawa 4.5% and Toronto 4.3%. Those differences reflect local construction costs and market economics. The potential gain is therefore less a universal discount on Canadian housing than a demonstration of what cheaper inputs could unlock in markets where projects have become difficult to finance.

Why U.S. Tariffs Could Leave More Lumber in Canada

Canada’s lumber industry is unusually tied to the American market. Statistics Canada reported that in 2024 the country produced nearly 47.9 million cubic metres of softwood lumber and exported more than 58% of that production to the United States. Natural Resources Canada has similarly described the forest sector as highly export-oriented, with the United States overwhelmingly its largest foreign customer. That means major changes in U.S. trade policy can quickly alter the economics facing Canadian mills.

Those pressures have intensified. The United States imposed an additional 10% Section 232 tariff on affected imports of softwood timber and lumber beginning in October 2025. That measure sits alongside longstanding anti-dumping and countervailing duties on Canadian softwood lumber. Global Affairs Canada currently lists a combined anti-dumping and countervailing cash-deposit rate of 35.16% for the broad “all others” category under the sixth administrative review, although individual producers face different rates. If those trade barriers make Canadian lumber less competitive south of the border, CMHC’s argument is that more supply could remain available domestically, potentially putting downward pressure on Canadian material costs.

The Construction-Cost Shock Was Already Enormous

The possible savings matter because Canadian builders are starting from a dramatically more expensive cost base than they were only several years ago. CMHC calculates that home-building costs across Canada’s largest housing markets have risen by about 74% since 2019. The pandemic-era surge in lumber and other inputs was especially severe, turning material procurement from a routine part of construction into one of the biggest uncertainties facing developers.

Between the first quarter of 2020 and the first quarter of 2023, CMHC’s analysis of Statistics Canada data found that costs associated with wood, plastics and composites increased 147% across the 15-market composite it examined. Metal fabrications, the next-largest increase among the categories highlighted, rose 66%. Those numbers help explain why projects that appeared financially viable before the pandemic could become difficult to build only a few years later. Developers generally need revenues from a project to cover land, construction, financing and other costs while leaving an acceptable return. When construction inputs climb dramatically, a project can be postponed or cancelled even when a city badly needs more housing.

Detached Homes and Townhouses Have the Most to Gain

The potential benefit is concentrated in ground-oriented housing because these buildings are much more dependent on wood than high-rise towers. According to CMHC, the share of construction costs directly associated with wood, plastics and composites is roughly 16 times greater in ground-oriented homes than in high-rise apartments. That makes detached houses and townhouses particularly sensitive to major swings in lumber-related costs.

The pandemic illustrated that exposure. Between the first quarter of 2020 and the first quarter of 2023, input costs for both single-detached houses and townhouses increased by about 59% across CMHC’s 15-market composite. High-rise apartment construction costs rose by a smaller, though still substantial, 37%. The distinction matters for housing supply because an improvement in lumber economics will not affect every project equally. A 40-storey concrete-and-steel tower has a very different material profile than a subdivision of wood-framed houses or a row of townhomes. CMHC therefore sees the clearest immediate opportunity in the part of the housing market where wood already represents an important share of the construction bill.

Wood Costs Have Behaved Very Differently Since the Tariff Fight Intensified

One of the strongest pieces of evidence behind CMHC’s argument is the change in which construction materials are now driving inflation. During the pandemic, wood-related products were among the most volatile and rapidly rising inputs. More recently, that pattern has largely reversed. From the fourth quarter of 2024 through the second quarter of 2026, CMHC calculates that its wood, plastics and composites category recorded essentially zero growth across the 15-market composite.

Other construction inputs moved in the opposite direction. Over the same period, CMHC reports increases of about 15% for utilities, 14% for plumbing, 13% for heating, ventilation and air conditioning, 13% for metal fabrications and 8% for structural steel framing. Statistics Canada’s latest quarterly data reinforce that divergence: in the second quarter of 2026 alone, wood, plastics and composites prices fell 0.3%, while metal fabrications rose 2.1% and structural steel framing increased 1.8%. It is an important reminder that tariffs can simultaneously create pressure in some parts of the construction supply chain while potentially easing conditions in another.

Vancouver and Montréal Show Why Geography Matters

CMHC’s scenario relies heavily on the experience of Vancouver and Montréal because construction costs there did not accelerate as quickly as in several other major markets during the pandemic. Across all residential building types, construction prices rose approximately 33% in Vancouver and 37% in Montréal between the first quarter of 2020 and the first quarter of 2023. Toronto, by comparison, recorded a 70% increase, while Calgary reached 62% and Edmonton 55%.

The difference becomes even more striking for single-detached houses. CMHC’s figures show an 82% increase in Toronto and 66% in Calgary, compared with roughly 37% in Vancouver and Montréal. CMHC suggests proximity to major lumber-producing regions may have helped some markets maintain better access to wood products, although it presents that explanation as a possibility rather than a proven single cause. Its 17% savings scenario essentially asks what construction economics elsewhere might look like if wood-related costs behaved more like those lower-cost markets. That is why transportation and distribution are just as important to the argument as the amount of lumber Canada produces.

Nearly 4,000 More Starts Would Help, but Canada Needs Far More

An additional 4,000 ground-oriented housing starts a year would represent real new supply, especially because the increase would come from homes that have become increasingly difficult to make financially viable in expensive markets. It would also arrive when Canada’s overall building pace has been struggling to accelerate. CMHC reported that the six-month trend in national housing starts slipped 1.3% in August 2026 to 244,149 units. Actual year-to-date starts in centres with at least 10,000 residents were down 4% from the same period in 2025.

Still, 4,000 additional homes should be kept in perspective. CMHC’s broader Housing Supply Report estimates Canada would need roughly 417,000 to 469,000 housing starts annually by 2036 to restore affordability to 2019 levels. Its business-as-usual projection is about 231,000 starts a year, leaving an estimated annual supply gap of between 187,000 and 238,000 homes. Cheaper lumber therefore cannot solve Canada’s housing shortage on its own. What the analysis demonstrates is how reducing one major construction cost can turn at least some marginal projects from financially unworkable into buildable ones.

Mass Timber Could Expand the Opportunity Beyond Traditional Houses

CMHC also points to mass timber and advanced wood-building technologies as another possible outlet for Canadian wood. Rather than relying only on conventional light wood framing, mass-timber construction uses engineered structural products such as cross-laminated timber in larger buildings. That can extend wood use into projects that traditionally depend more heavily on concrete and steel, creating another potential domestic customer for Canadian forest products.

Canada already has a base to build from. Natural Resources Canada’s mass-timber database identifies more than 750 completed or under-construction projects from 2007 through 2022, covering more than 2.9 million square metres, along with 20 solid-wood manufacturing facilities. Federal research also helped support changes to the 2020 National Building Code that permitted encapsulated mass-timber buildings up to 12 storeys, where those code provisions are adopted by jurisdictions. Mass timber remains a relatively small part of the overall Canadian construction market, and it is not an instant replacement for steel or concrete. But expanded production and familiarity could create another domestic destination for wood that might otherwise be exported.

Turning Cheaper Lumber Into Cheaper Homes Is the Hard Part

Having lumber available inside Canada does not automatically put it on a construction site at the right price. CMHC says industry stakeholders have identified limited east-west transportation infrastructure as an obstacle to moving wood efficiently between producing regions and the housing markets that need it. Standards, approval processes and differences between jurisdictions can also affect how quickly new building materials and construction methods are adopted across the country.

There has been movement on those barriers. Federal legislation that came into force in 2026 created a framework for recognizing comparable provincial requirements in areas of interprovincial trade, while federal, provincial and territorial governments have also committed to greater consistency in approving new building materials and prefabricated homes. Those efforts could make domestic construction supply chains easier to scale. Yet the broader tariff dispute remains costly: construction-industry groups have warned that tariffs and counter-tariffs on other materials are adding thousands of dollars to some projects. CMHC’s finding is therefore not that a trade war is good for housing. It is that Canada may be able to capture a narrow domestic advantage from an otherwise damaging disruption—if lumber that loses access to the U.S. market can be moved, approved and used efficiently enough to lower the cost of building homes.

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