The Impact of Trump Policies on Canada’s Housing and Development Sector

Setting the Stage

The re-election of President Donald Trump in 2024 brings policies that could significantly impact Canada's housing and development sector. With Canada imposing stricter immigration controls, immigration-driven housing demand may no longer be a key driver. Instead, attention shifts to trade relations, construction costs, currency fluctuations, and strategic investments.

Tariffs and Trade Disputes: The Core Concern Understanding the Tariff Dynamics

While U.S. tariffs on Canadian exports might seem unrelated to domestic material costs, potential Canadian counter-tariffs on U.S. imports pose a real concern. Given the political emphasis on housing affordability, it’s unlikely politicians would impose tariffs on essential construction materials.

However, political motivations such as protecting domestic industries or responding to U.S. trade actions could still prompt selective tariffs.

Currency Risks

Trade disputes often cause currency fluctuations. A weaker Canadian dollar would raise the cost of imported construction materials, further impacting housing affordability.

Supply Chain Adjustments

Developers should diversify supply chains, considering alternatives from Europe, Asia, or local suppliers, opening opportunities in domestic manufacturing.

Immigration Policies: Limited Demand Impact

With tighter immigration policies in Canada:

• Expect stable rental demand in major cities, rather than surges.

• Focus will shift to domestic demand drivers like interprovincial migration and urbanization.

Broader Economic Implications Economic Slowdown Risks

Trade disputes may dampen confidence, leading to:

• Reduced consumer spending and lower homeownership demand.

• Delayed development projects, especially those depending on foreign capital.

Interest Rate Adjustments

The Bank of Canada could adjust rates, impacting mortgage and borrowing costs. Developers should prepare for:

• Higher financing costs delaying projects.

• A shift toward affordable housing due to weaker demand for premium units.

Strategic Considerations for Investors

A. Focus on Affordable and Mid-Market Housing

• Embrace modular construction to reduce costs.

• Prioritize mid-market options to meet sustained demand.

B. Invest in Secondary Markets

Target secondary cities like Hamilton, Kitchener-Waterloo, and Halifax for better returns. Look for:

• Municipal incentives: incremental tax grants and development charge waivers.

• Low vacancy rates: indicating strong rental demand.

C. Strengthen Local Partnerships

Partner with:

• Municipal governments for housing incentives.

• Domestic producers to secure stable material supplies.

D. Stay Policy-Aware

Monitor:

• Canada-U.S. trade talks.

• Possible counter-tariffs and their impact.

• Interest rate trends affecting borrowing conditions.

Investment Opportunities Amid Uncertainty

1. Value-Add Renovations

Renovate existing properties for higher margins, particularly in urban areas where land costs remain steep. This remains one of the most reliable and high-margin investment strategies.

2. Commercial-to-Residential Conversions

Turn underutilized commercial spaces into residential units, especially in downtown areas where housing demand remains strong. This strategy capitalizes on shifting work trends and urban revitalization.

3. Purpose-Built Rental Housing

With affordability challenges and limited homeownership demand, purpose-built rental housing offers stable, long-term returns. This is especially viable in urban areas with consistent rental demand.

4. Senior Housing and Assisted Living

Given Canada’s aging population, senior housing and assisted living facilities represent growth markets, providing stable returns with long-term demand.

Conclusion: Navigating the Road Ahead

President Trump's policies pose complex challenges for Canada’s housing and development sector. With limited immigration growth, rising construction costs, and economic uncertainties, developers must stay adaptive.

Key strategies include:

• Investing in secondary markets with incentives and low vacancy rates.

• Pursuing affordable housing, purpose-built rentals, and domestic partnerships.

• Exploring value-add renovations, commercial-to-residential conversions, and senior housing opportunities.

Reach out to us to determine what is best for your portfolio and investment objectives. Let’s navigate these opportunities together. Amir Farahi is President of Farahi Group