Could Canadian Lumber Help Make Ottawa Homes More Affordable?

Published: September 24, 2026
By: Dave Robertson, Broker/Team Leader, LIFE Real Estate Group
Reading Time: 7 min read

Housing affordability discussions usually focus on home prices, mortgage rates and how much buyers can borrow.

But there is another part of the affordability equation that receives far less attention:

How much does it actually cost to build a home?

New research from Canada Mortgage and Housing Corporation (CMHC) offers an interesting—and somewhat counterintuitive—look at that question.

U.S. tariffs on Canadian lumber are generally bad news for the Canadian economy. But CMHC believes they could also create an unexpected opportunity: if more Canadian wood remains in Canada rather than being exported to the United States, greater domestic supply and greater use of Canadian wood products could potentially reduce the cost of constructing certain types of homes.

For Ottawa, that could be particularly relevant.

CMHC estimates that changing how Canadian wood products are used could reduce construction costs for ground-oriented housing by as much as 17% in some Canadian markets. Its modelling suggests this could support approximately 3.5% more ground-oriented housing starts nationally—and roughly 4.5% more in Ottawa and Toronto.

That doesn’t mean Ottawa homes are suddenly about to become 17% cheaper.

But the research highlights an important part of Canada’s housing affordability problem: we need to find ways to make homes less expensive to build.

The Cost of Building a Home Has Changed Dramatically

One of the most striking findings in CMHC’s analysis isn’t actually about tariffs.

It’s about what has happened to construction costs over the past several years.

According to CMHC, the cost of building homes across Canada’s largest housing markets has increased by approximately 74% since 2019, substantially outpacing overall inflation.

The pandemic played a major role.

Anyone who tried to renovate or build during that period probably remembers the stories about lumber prices. CMHC’s data illustrates just how extraordinary the increase was: wood-based building materials rose approximately 147% during the pandemic period examined in its analysis.

Metal fabrication costs increased by 66% over the same period.

Those increases ultimately made it much more expensive for builders to produce new housing.

And they didn’t affect every type of home equally.

Detached Homes and Townhouses Were Hit Particularly Hard

CMHC divides housing into several categories, including single-detached homes, townhouses, low-rise apartments and high-rise apartments.

Ground-oriented homes—primarily detached houses and townhouses—are particularly dependent on wood products.

In fact, CMHC estimates that the share of construction costs directly attributable to wood, plastics and composites is approximately 16 times greater for ground-oriented housing than for high-rise apartments.

From the first quarter of 2020 through the first quarter of 2023, construction input costs across the 15 major Canadian markets studied by CMHC increased:

59% for ground-oriented housing, compared with 37% for high-rise apartments.

That distinction matters.

When we talk about solving Canada’s housing shortage by simply “building more homes,” we’re grouping together very different types of housing.

A one-bedroom condominium apartment and a three-bedroom townhouse may both count as one new housing unit, but they serve very different needs.

For families looking for more bedrooms, outdoor space and family-oriented neighbourhoods, the economics of building ground-oriented housing are particularly important.

What Happened in Ottawa?

Ottawa wasn’t immune to the construction-cost shock.

CMHC’s data shows that between the first quarter of 2020 and the first quarter of 2023, construction costs in Ottawa-Gatineau increased approximately:

• 50% for single-detached homes
• 53% for townhouses
• 56% for low-rise apartments
• 30% for high-rise apartments

By comparison, CMHC found significantly lower increases for some housing types in Vancouver and Montréal. It suggests proximity to major lumber-producing regions may have contributed to better access to wood products during the pandemic, although it does not present that as a definitive explanation.

This regional difference is important to CMHC’s argument about what could happen next.

Then the Construction-Cost Story Changed

Interestingly, lumber is no longer driving construction-cost inflation in the way it did during the pandemic.

CMHC says the pattern began changing following the introduction of U.S. tariffs in 2025.

Between the end of 2024 and the second quarter of 2026, some of the largest construction-cost increases occurred in utilities, plumbing, HVAC, metal fabrication and structural steel framing—categories with significant exposure to tariff-affected inputs.

Meanwhile, wood, plastics and composites recorded essentially 0% growth, while concrete increased only about 1%.

So we have gone from a period when lumber was one of the biggest sources of construction-cost inflation to one in which wood-related costs have been comparatively stable.

That’s where CMHC sees a potential opportunity.

Could U.S. Tariffs Actually Help Lower Some Canadian Construction Costs?

It’s important to be clear about what CMHC is—and isn’t—saying.

CMHC explicitly acknowledges that U.S. tariffs have had, and are expected to continue having, negative effects on the Canadian economy and labour market.

But tariffs on Canadian lumber can also make our wood products less attractive to American buyers.

If fewer Canadian wood products are exported south of the border, more supply could remain available within Canada.

Greater domestic availability could potentially put downward pressure on wood prices and, perhaps more importantly, encourage Canadian builders to make greater use of domestically produced wood and wood-based construction methods.

CMHC points to technologies such as mass timber and other advanced wood-building systems as one area where Canada could potentially expand its use of wood.

The opportunity could be especially meaningful for detached homes and townhouses because those homes use considerably more wood than high-rise construction.

How Much Difference Could It Make?

This is where CMHC’s modelling gets particularly interesting.

CMHC looked at what could have happened if the cost of wood, plastics and composites across major Canadian markets had increased at rates similar to those experienced in Vancouver and Montréal since 2019.

Under that scenario, CMHC estimates that construction costs for ground-oriented housing could be as much as 17% lower in some centres.

Lower construction costs could, in turn, make more projects financially viable.

CMHC estimates that this could support approximately 4,000 additional ground-oriented housing starts per year across Canada, representing an increase of about 3.5%.

In Ottawa and Toronto, the estimated increase is approximately 4.5%. Calgary could potentially see an increase closer to 8%.

For Ottawa, that’s noteworthy.

We spend a lot of time discussing how to increase housing supply through zoning, development approvals and density. Those are important issues.

But there’s another basic requirement:

Builders need to be able to build homes at a cost that makes the project financially viable.

Reducing construction costs can therefore be another way of increasing housing supply.

Does This Mean New Homes Could Become 17% Cheaper?

No—and this distinction is important.

A potential 17% reduction in construction costs is not the same thing as a 17% reduction in the price a buyer pays for a home.

The final price of a new home reflects much more than construction materials. It can include land, labour, financing, development charges, municipal fees, servicing, taxes, design and engineering costs, marketing and the builder’s required return.

CMHC’s research is specifically examining the potential impact on construction costs and the resulting viability of additional housing starts.

So the more meaningful takeaway isn’t necessarily that buyers should expect dramatically cheaper new homes.

It’s that lower construction costs could allow some housing projects that currently don’t make economic sense to become viable.

And over time, increasing the number of homes that can economically be built could help improve the balance between housing supply and demand.

There’s Still a Major Canadian Problem to Solve

There is an irony in Canada’s situation.

We are one of the world’s major producers of lumber and wood products, yet moving those materials efficiently between Canadian regions isn’t always easy.

CMHC identifies insufficient east-west transportation infrastructure as one obstacle to expanding domestic use of Canadian wood products.

It also points to efforts to reduce interprovincial trade barriers as potentially important.

If Canadian lumber that would otherwise have been exported to the United States is going to supply housing construction in markets across the country, we need an efficient way to get those materials where they’re needed.

That means the solution isn’t simply “use more Canadian lumber.”

Transportation, trade, building technologies and construction practices all have to work together.

What Does This Mean for Ottawa’s Housing Market?

For today’s buyer or homeowner, probably not much immediately.

This isn’t a prediction that Ottawa new-home prices are about to fall.

Instead, CMHC’s research points toward something potentially more important over the longer term.

Canada’s housing affordability challenge isn’t solely about how much buyers can afford to pay. It’s also about how much it costs us to produce the housing we need.

Ottawa has experienced enormous increases in construction costs since 2020. Those increases have made it more difficult to build the detached homes, townhouses and other family-oriented housing that many buyers continue to want.

If Canada can make better use of its own natural resources, improve domestic transportation and expand cost-effective wood construction, we may be able to make some of those homes more economical to build.

That won’t solve Canada’s housing affordability problem by itself.

But when the cost of building housing has risen as dramatically as it has over the past several years, finding ways to bring those costs down is an important part of the solution.