Labour and Material Costs in Construction: Navigating Canada's Building Challenges
51% cost increase
The Unpredictable Landscape
Breaking ground on a new home can be fraught with challenges, as lumber prices surge unexpectedly or essential components become scarce. This isn't a hypothetical fear for many in Canadian construction; it's the daily reality. The cost of building a home has never been higher, up an astounding 51% since Q1 of 2020 (RBC Thought Leadership). This surge stems from a perfect storm of factors, including escalating labour costs, material shortages, and a complex global economic landscape. It's a challenge reshaping Canada's housing affordability and the very fabric of our construction industry.
This cost explosion isn't just about rising demand; it's a multi-faceted problem. Wages in construction grew by almost 10% in 2022 alone, nearly double the pace of other industries, reflecting acute labour shortages, particularly in skilled trades. Simultaneously, the production of essential goods is struggling, with lumber output falling 11% and lime (a critical input for cement) down 20% (RBC Thought Leadership). These domestic supply issues are compounded by housing starts being up almost 100% since 2015 (CBC News), demonstrating an immense demand that current supply chains struggle to meet.
Adding to this volatile mix is the re-election of Donald Trump in the U.S., whose administration has already taken aggressive steps that directly impact Canadian industries. President Trump has announced plans to hike tariffs on many imported goods from Canada, with a 35% tariff set to go into effect on August 1, 2025 (Associated Press, Al Jazeera). This comes on top of existing tariffs on steel and aluminum, which significantly impacted costs for Canadian builders (CHBA). The possibility of new or expanded tariffs on a wider range of building materials like drywall, electrical systems, or even lumber could further destabilize supply chains and directly inflate project costs for Canadian construction firms, contributing to economic slowdown and impacting housing starts (CHBA, Policy Options). These geopolitical tensions, coupled with ongoing global uncertainties, mean that these pervasive issues are unlikely to dissipate anytime soon.
| Pressure Point | What's Happening | Key Data |
|---|---|---|
| Persistent supply-chain snags | Port congestion, shipping backlogs, and geopolitical flare-ups disrupt inbound goods. | Lumber output -11 %; lime production -20 % (RBC TL). |
| Demand still sky-high | Housing starts are ~100 % higher than in 2015, plus a national renovation boom. | CMHC / CBC News. |
| Labour shortages | Trades wages grew ~10 % in 2022, nearly double other sectors. | StatCan / RBC TL. |
| Inflation & tariffs | Trump administration’s 35 % tariff on Canadian imports takes effect Aug 1 2025—on top of existing steel/aluminum duties. | Associated Press; CHBA. |
The Impact on Projects
Schedule overruns. Materials that once arrived in two weeks now take two months.
Budgets blown. Fixed-price contracts signed in 2023 are underwater today.
Affordability crunch. Every extra dollar in input costs pushes ownership out of reach.
Risk-shift contracts. Cost-plus or escalation clauses are becoming the norm.
Building Through the Storm: Five Play-Calls That Work
“The best teams don’t wait for calm seas, they learn to tack hard into the wind.”
—Blue Anvil’s playbook
Given this complex and challenging environment, Canadian construction businesses must adopt proactive strategies to mitigate risks and maintain profitability. Here are key approaches:
Lock in prices with long term contracts: To gain cost certainty in an unpredictable market, construction firms can negotiate long-term supply agreements with their suppliers. This strategy aims to provide price stability over the duration of a project, shielding against sudden market fluctuations and potential new tariffs (N3 Business).
Use alternative materials: When traditional materials become scarce or prohibitively expensive due to supply chain issues or tariffs, exploring and adopting alternative building products can be a viable solution. This involves substituting materials based on current availability, cost-effectiveness, or newer, more sustainable options (NRGtek).
Diversifying supply chains: Relying on a single supplier or a limited geographic source can expose businesses to significant risks, especially with current trade uncertainties. Construction firms can enhance their resilience by broadening their network of suppliers, identifying new vendors both domestically within Canada and from diverse international markets. This strategy helps ensure a more stable and reliable flow of essential materials, even if one link in the chain is disrupted (N3 Business).
Buy in bulk: When project scale and adequate storage facilities permit, purchasing materials in larger quantities can often secure better pricing through volume discounts. This approach can also act as a valuable hedge against anticipated future price increases, including those driven by new tariffs, by securing necessary inventory ahead of demand spikes (N3 Business).The Road Ahead
The Bank of Canada’s easing cycle (policy rate now 3.25 % after five cuts) may take some heat out of financing costs, but material volatility and geopolitical friction will keep budgets on edge through 2025. Expect moderate—but uneven—price hikes to persist, with lumber and cement the most exposed to weather-driven supply shocks and tariff crossfire.
Forge Forward
Canada’s builders have weathered fires, floods, and pandemics—this next test is no different. By locking in costs, broadening supply lines, and doubling down on skilled labour, firms can move from survival mode to a position of strength.
Need a workforce as reliable as your own? Blue Anvil sources, vets, and places committed tradespeople, so you can focus on pouring concrete instead of putting out fires.
Sources:
RBC Thought Leadership (2025) • CBC News (2024) • CHBA • Associated Press • Policy Options • N3 Business • NRGtek • StatCan
