Kevin Lee, CEO of the Canadian Home Builders’ Association, on a Cardel Homes worksite in Ottawa, on March 28, 2025.Jess Deeks/The Globe and Mail
On the roller coaster that is Canada’s national economy, the home building industry rides the front-most car. First to see the drop coming, first to feel the bottom fall out, first to start the slow climb back. For a dozen years, as CEO of the Canadian Home Builders’ Association, Kevin Lee has championed the interests of everyone on that car. And it’s a sizable group, with 880,000 jobs, $182 billion in economic investment and $62 billion in wages paid last year alone. After a tough 2024 for many in the industry, 2025 was looking a good deal brighter. And then came Donald Trump, swinging tariffs like sledgehammers to knock the rails out from under the economy. Where does that leave home builders now, other than hanging in mid-air? To find out what the industry is dealing with and how it hopes to survive, we spoke to Lee from his office in Ottawa.
To start, I want to look back at 2024. How bad a year was it for the Canadian home building industry?
It depended on where in Canada you were, because it actually wasn’t bad everywhere. Alberta had a really good year in 2024, as did Quebec. Conversely, Ontario was down about 16% in housing starts. B.C. was down about 9%. And those are places where we desperately need more housing, so it was really tough. The obvious reason is higher interest rates. Rates started to come down through 2024, but they didn’t come down enough. You had dramatic increases in construction costs through the pandemic, and those haven’t really abated. We can’t deliver housing in those places at a rate that people can afford, so we’ve seen take-up plummet.
Things seemed poised to turn around in 2025, and then in February home sales in the GTA collapsed by 28.5% from the month before, hitting the lowest level since the 2008 crisis.
That really comes down to the whole tariff situation and lack of consumer confidence. It was already a very struggling market—a lot of uncertainty, extreme lack of sales, especially in the high-rise market, but in low-rise, as well. And then on top of that, you layer in the fear of tariffs and what that’s gonna do, and sales completely dried up.
What’s the bigger worry around tariffs for your industry: the possibility of a recession or the rising cost of materials?
When you have a slowdown, you have people losing their jobs, general uncertainty and increased costs for other things, so people just feel they don’t have enough money. It automatically results in fewer people buying new houses and fewer people renovating their houses. That’s the biggest concern. Close on its heels are construction costs. We often get asked, “How are Trump’s tariffs going to affect the cost of construction in Canada?” The short answer to that is some, but not a lot, because those are tariffs on Canadian goods going to the United States. Now, some of those are raw materials that get turned into product and come back to us, so there is a bit of an impact there. But the bigger impact is on whatever countervailing tariffs get put on by the Canadian government in this trade war. If they’re on construction materials, and they’re at 25%, then those construction materials would go up by 25%, and it becomes a cost for us if we can’t source them from other places in Canada or from other countries.
Jess Deeks/The Globe and Mail
Canada’s brewers are hurting right now because even though we have lots of aluminum, we have no rollers. So beer cans made with Canadian aluminum have to come from the U.S. Are there construction materials, maybe made from steel, aluminum or wood, that you can only get from the States?
Steel’s an odd one. We ship billions of dollars of steel back and forth between Canada and the U.S. Most of those companies are multinationals, but the foundries and factories are specialized. So we’ll create a certain kind of beam and send it south. They’ll create a certain kind of beam and send it north. So we do have some instances where even though we have the raw material capacity, and even the production capacity, it makes no sense to retool, at least in the short term. Fortunately, most of the tariffs that are coming in are on things where we’re not 100% reliant on the U.S. So the question’s gonna be, how fast can the supply chain adjust?
What’s happening to pre-construction sales? My understanding is that prices are falling, and buyers are trying to get out of their contracts.
When you’re talking about high-rise, we have to sell 70% to 80% of the units before we can even start construction, right? So that is drying up big time. You mentioned the abysmal numbers in Toronto; that’s reflecting very directly on what it is possible to build. Our housing market index, which measures builders’ sentiment looking ahead to the next six months, is a scale out of 100. When things were going really well in 2021, we were up near 89 or 90. A very robust number. Fifty would be neutral. The multifamily number right now in Ontario is six. That projects really poorly on what housing starts will be.
Beyond looking for new suppliers, what other adjustments can you make to survive this period?
We’re an industry that’s built to weather the storm, and we’re in one right now. The industry is built typically with smaller companies, fewer employees, a lot of subcontracting. And so companies tend to be able to scale back and wait it out. It’s gonna be challenging for sure, but one of the things you do is you build less, quite literally. And you hope that the investments and other things you put in place for a rainy day—well, here’s the rainy day—have put you in a position to survive.
When you think of a boom-bust industry, you think about the ebbs and flows of supply and demand. But Canada is underhoused. Why isn’t demand constant?
Even though we have this underlying demand, demand also comes from the ability to afford the price. That’s where it’s come off the rails to a degree. The other thing is the places where we’ve seen the most rapid price escalation also happen to be the places with the most inelastic markets. If rates come down and everything’s good, we can’t suddenly build a whack more units. It takes years. In Toronto, a typical permit approval takes 29 months. And in these places where prices have skyrocketed, you’ve seen the cities in the GTA and the Lower Mainland increase development taxes at exorbitant rates. Development charges in big cities can be $200,000, versus, say, Edmonton, which is booming—its average DC is $22,000.
You’ve talked for a long time about getting governments to eliminate or reduce those taxes and charges. But housing is a big industry, and that’s a lot of revenue. If you cut those taxes, what suffers?
What’s happened in these cities with extreme development taxes is they’ve placed all the burden on the buyers of new homes. Why? ‘Cause it’s politically okay to do, ‘cause that’s not your big voting base. Where are those costs covered in other cities that don’t have that? They’re covered in property taxes. They’re covered in user fees. In some places, like in Quebec, municipalities are able to debt finance some of their infrastructure so it gets borne by the entire community over a long period, which is how infrastructure should be funded. We recognize there’s a role for the right level of small DCs to help support some of that new infrastructure, but we need to help these cities get back to a reasonable level, which means spreading those costs across the entire tax base. At the federal level, we’ve talked for a long time about the need to change the GST and the way that’s applied to new houses.
You pushed for changes to mortgage rules to encourage more first-time buyers, and the government responded, allowing smaller down payments on homes up to $1.5 million and 30-year amortizations. What difference has that made?
That was part of the reason for the optimism at the end of 2024. It definitely enables young families to better afford getting into the market. We were hearing from the mortgage insurance companies that their books were shifting to more and more first-time buyers. We still think the stress test was implemented in a way that wasn’t dynamic, and when we had the high interest rates, it really prevented people from getting into the market who should have been able to. We do think there’s opportunity to change that. And there’s even some opportunities to encourage longer-term mortgages.
Two years ago, the government placed a ban on foreign buyers in an effort to improve affordability. How has that worked out?
The fact of the matter is, the right kind of foreign investor has actually been healthy for creating more supply. You don’t want the foreign investor that’s just parking money and leaving units vacant. But if we’re gonna build the number of units we need to fill this gap, we’re gonna need trillions of dollars of investment. Historically, some of that has come from foreign investors. Finding a way to allow them to bring in the kind of dollars it takes is important. Because with a condo, a lot of people who are buying their first home don’t want to put down a deposit now for a unit that’s going to be available in five years. The more patient capital often comes from investors and foreign investors.
The government also made some changes to the rules around rental construction recently. What effect has that had on supply?
It’s definitely supported supply, and what we’ve seen over the past three years is an increase in purpose-built rental construction. So we’ve seen starts for ownership dropping, starts for rental going up. It’s not the ideal trade-off, because that just contributes to falling home ownership rates in Canada. What you want is to create affordability so that you get more rental units, ‘cause we need them, but you’re also getting more units for home ownership.
Jessica Deeks/The Globe and Mail
Let’s talk about construction labour. We don’t have the workers we need to build the homes we need. Why is that?
The biggest reason is demographics. Over the next decade, 22% of our industry is set to retire. And for quite a long time, we’ve not supported the trades in terms of a career choice for young people. We took shops out of high schools in the 1990s because it was time for the knowledge economy and this new thing called the World Wide Web. All of a sudden we didn’t have enough people carrying on into the trades. I think that’s starting to change a bit. But we’re way behind the 8-ball, and our immigration system is not set up to bring in people to build houses. The points system brings in highly educated, highly qualified, highly certified people. We’re pretty good at developing those in Canada. But we can’t bring in construction labourers and entry-level framers.
How many workers do we need to solve the problem?
We need to hire about 130,000 workers over the coming decade just to maintain the status quo. If we want to increase our housing starts, we need a lot more than that. And if you couple that with the need to renovate the housing stock and do the necessary energy retrofits, the numbers start to get really big, which is why we also bring in that third pillar of productivity: more factory-built construction.
You anticipated my question, because I was going to ask what role prefabrication could play in solving this problem.
It can play a very good role. Robotics holds some interesting potential. But it’s not cheaper. You can build houses way faster. There’s some big benefits in quality, and there’s less waste. It’s very good for energy-efficient construction and air sealing. But it’s not cheaper, and it requires big investment. We want to be able to move in this direction, but because it’s so risky, we need to create a better environment where people can afford and buy more houses. Then we need to de-risk the investments so we can encourage our companies to invest.
Is there any place in the Western world where they’ve gotten it right—where the industry is perfectly in sync with the needs of that market?
I’m active in the international housing association, so I do work with other countries pretty regularly. I think we all face similar challenges. I can’t think of anybody who’s been able to nail it. It’s complicated. The rapid price escalation in large urban centres has happened everywhere. I would say there are some countries that have done a better job with public transit, and that really changes the dynamic. It opens up different places. Investing in infrastructure and transit creates new opportunities that can enable more affordable housing. That’s a breakthrough opportunity for Canada.
Jess Deeks/The Globe and Mail