T reat of tari f s looms over Canadian businesses and rental housing industry
By Tony Irwin, Interim President, CFAA
On February 1, 2025, U.S. President Donald Trump signed an executive order, announcing 25 per cent tariffs on all Canadian imports; energy resources would face a 10 per cent tariff. He also imposed 25 per cent tariffs on goods imported from Mexico and 10 per cent tariffs on goods imported from China. The tariffs were set to come into force on February 4, 2025.
Prime Minister Justin Trudeau announced that Canada would retaliate in kind by imposing 25 per cent tariffs on $155 billion of U.S. goods imported into Canada. Initial tariffs on $30 billion of U.S. goods were to take effect on February 4, with duties on the remaining $125 billion to take place in 21 days.
On February 3, both Trump and Trudeau announced a 30-day pause on the tariffs between both countries. Under the agreement to pause the tariffs, Canada will do the following:
• Launch a Canada-U.S. Joint Strike Force to combat organized crime, fentanyl, and money laundering; this includes appointing a “fentanyl czar” and listing cartels as terrorists
• Implement a $1.3 billion border plan to reinforce the Canada-U.S. border with helicopters, technology, and personnel
However, on February 10, Trump signed two executive orders imposing 25 per cent tariffs on all steel and aluminum imports, including from Canada. These tariffs are set to take effect on March 12, and will stack on top of other tariffs should they be imposed.
Pierre Poilievre (federal Conservative leader) welcomed the one-month pause on U.S. tariffs. He also urged the government to take immediate action to strengthen Canada’s economy and prevent future tariffs. He called on the federal government to recall Parliament to pass a Canada First Plan, which would include:
• Retaliating with dollar-for-dollar tariffs to maximize impact on American companies while minimizing impact on Canadian consumers
• Putting tariff revenues toward helping affected workers and businesses
• Passing an emergency Bring It Home Tax Cut to bolster the economy, stop infation, and save and create jobs
• Cancel C-69, the anti-resource law, and greenlight LNG plans, pipelines, mines, factories, and port expansions to overseas markets
• Remove interprovincial barriers to bolster free trade
• Rebuild the military to increase border security
NATIONAL OUTLOOK
Other Canadian political leaders have responded to the tariff situation as follows:
• Jagmeet Singh (federal NDP leader) agreed this was a positive development for Canadians. He also stated the government should prioritize Canadian-made goods and build a selfsuffcient economy to reduce reliance on their allies.
• Mark Carney (candidate for federal Liberal Party leadership) said, “The tariffs imposed by the United States today are a clear violation of our trade agreements and require the most serious trade and economic responses in our history.”
• Danielle Smith (Alberta premier) was encouraged by the appointment of a “fentanyl czar” and called for the federal government to continue negotiations with the U.S. She said she would visit Washington in the coming weeks as part of the Council of Federation delegation and for the Republican Governors conference.
• Doug Ford (Ontario premier) stated Canada and the U.S. should unite against China, which is the “real trade challenge,” instead of fghting each other. He also agreed to pause Ontario’s retaliatory measures (e.g., removing American alcohol from the LCBO), as well as continue the $100 million contract with Starlink (which he had “cancelled” because of the tariffs).
• Susan Holt (New Brunswick premier) also agreed to not remove American products from Alcool NB Liquor (ANBL) shelves; however, they would not purchase new U.S. products until the tariffs issue was resolved. She also said she would be part of the Council of Federation’s Washington delegation.
The entire timeline of events has puzzled many people on both sides of the border. President Trump stated he will pause the tariffs because Trudeau agreed to increase border security. However, the Liberal government had already committed to the $1.3 billion border plan, which was previously announced in the 2024 Fall Economic Statement and agreed to under President Biden. Nothing new was added to the agreement. Some experts believe President Trump stepped back from imposing the tariffs due to the immediacy of the Canadian federal government’s retaliatory response, as well as the criticism from Republican states’ stakeholders who rely on Canadian exports.
The tariffs threat could have lasting impacts on the Canadian economy, including increasing support for lowering interprovincial trade barriers, expanding trade relations with other allies, and weakening the trade relationship with the United States. Tariffs would negatively impact Canadian consumers and many Canadian businesses. They would also affect the rental housing industry in numerous ways:
• Higher prices for lumber, steel, and other building materials would increase the cost of developing rental properties
• Higher construction costs could also force developers to postpone new construction projects, negatively impacting housing supply
• Economic uncertainty might make investors less certain about the rental real estate market, reducing the availability of capital for new purpose-built rental developments
• Developers would pass the costs onto tenants, which would mean higher average rents
• Higher home costs would push more people into the rental market, which would increase demand and rents
Government of Canada announces deferral in implementation of change to capital gains inclusion rate
On January 31, 2025, Dominic LeBlanc, Minister of Finance and Intergovernmental Affairs, announced the federal government is deferring the date on which the capital gains inclusion rate would increase from 50% to 66.67% on capital gains realized annually above $250,000 by individuals and capital gains realized by corporations and most types of trusts. The capital gains inclusion rate refers to the taxable portion of capital gains. The date has been pushed back from June 25, 2024 to January 1, 2026.
The federal government plans to maintain or enhance existing capital gains exemptions, while also creating a new investment vehicle. The maintained and newly created capital gains exemptions include:
JAN/FEB 2025
• Maintaining the principal residence exemption, which ensures homeowners do not pay capital gains taxes when selling their home
• Setting a new $250,000 annual threshold for Canadians, which ensures individuals who sell a secondary property remain eligible for the annual threshold and do not pay more tax
• Increasing the lifetime capital gains exemption (LCGE) from $1,016,836 to $1.25 million (as of June 25, 2024) on the sale of small business shares and farming and fshing property; Canadians with eligible capital gains below $2.25 million would pay less tax
• Creating a new Canadian Entrepreneurs’ Incentive by reducing the inclusion rate to one-third on a lifetime maximum of $2 million in eligible capital gains; this incentive would take effect in the 2025 tax year and would increase by $400,000 each year, reaching $2 million in 2029
It should be noted both Chrystia Freeland and Marc Carney (who are running to take over the leadership of the federal Liberal Party) have announced they plan to scrap the proposed increase in the capital gains tax if they are chosen to lead the Liberal Party. Liberal members will vote on March 9 to elect a new leader to replace Prime Minister Justin Trudeau. Freeland introduced the increase in the taxable amount of capital gains when she was Finance minister. Federal Conservative leader Pierre Poilievre has repeatedly stated he will “axe the tax” should his party win the next federal election.
CMHC releases 2025 Housing Market Outlook
On February 5, 2025, the Canada Mortgage and Housing Corporation (CMHC) released its Housing Market Outlook (HMO), which provides forward-looking analysis into Canada’s national and major housing markets through 2025–2027. To follow is a summary of the highlights with respect to the rental housing industry.
Affordability improvements release pent-up housing demand
• Housing market activity in Canada is expected to improve, due in part to lower mortgage rates and changes to mortgage rules
• Homebuyers previously priced out of the market may face longer loan terms, higher interest costs, and larger down payments
• Resale homes should be in greater demand from fnancially constrained homebuyers
• The length of new construction projects may limit developers’ ability to meet demand
• Millennials, who are driving housing demand, will prioritize being closer to jobs due to the decline of remote work, which will boost sales in larger urban markets
• Some repeat homebuyers looking to upgrade and take advantage of lower mortgage rates, as well as those facing mortgage renewals, will return to the market
• The condominium apartment market will lag in regions that depend on investor activity
• Prices will grow faster in 2025 due to demand for ground-oriented homes, before slowing down in 2026–2027
• Improved job markets and income growth will make housing more attainable in 2027
More affordable regions will lead price and sales recovery
• Because the housing markets in Ontario and BC are relatively unaffordable, as well as lower immigration targets, home sales should remain below their 10-year averages; prices are expected to grow more slowly in the frst half of the forecast period
• Sales in Alberta and Quebec are expected to reach historic highs, with prices growing faster than national averages during the frst half of the forecast period
Housing starts set to slow down
• Housing starts will slow down over the forecast period, primarily due to fewer condominium apartment starts
• Developers will have diffculty selling enough units to fund new projects, which means less new condominium apartment construction
• In Ontario and BC, pre-construction condominium apartments will see less demand due to weaker resale and rental markets, which will slow construction in 2025
NATIONAL OUTLOOK
• There will be less impact on Alberta’s new construction levels, as most buyers are residents rather than investors
• Rental apartment construction reached record levels in 2024 due to government support, a growing renter population, and strong rent growth; this momentum should continue through 2025–2026, but may lead to fewer rental projects in 2027
Bank of Canada lowers policy rate by 25 basis points
On January 29, the Bank of Canada reduced its target for the overnight rate to 3%, with the bank rate at 3.25% and the deposit rate at 2.95%. This marks the continuation of a series of rate cuts that began in June 2024. The Bank of Canada is expected to continue easing monetary policy through 2025, with some analysts predicting the interest rate to fall to 2% by the end of 2025. The Bank expects the Canadian economy to grow at around 1.5% for 2025, which is below initial projections for the third straight year. Canada’s labour market remains soft, with the unemployment rate at 6.7% in December 2024. Population growth is projected to decrease by 0.2% in 2025, primarily due to immigration caps. Wage growth remains high relative to productivity growth.
GDP growth is expected to strengthen going forward due to lower interest rates. The Bank of Canada projects GDP growth of 1.8% on average. CPI infation has moderated, with infation expected to be between 2.1% and 2.4% in 2025. Housing costs will continue to fuel infation.
Housing starts up 2%
According to CMHC, 2024 housing starts were up 2% year over year in cities with 10,000 or more people (227,697 units compared to 223,513 units in 2023). Combined with approximately 17,423 actual rural housing starts, there were 245,120 new housing units across Canada, also up 2% compared to 2023. This increase is primarily due to historically high rental construction levels and increased starts in Alberta, Québec, and the Atlantic provinces. Canada’s six largest Census Metropolitan Areas (CMAs) had a 3% year-over-year decrease from 2023. Vancouver, Toronto, and Ottawa had a decline in multi-unit starts fell due to weak pre-construction condominium sales.
Ontario going to the polls
On January 24, 2025, Premier Doug Ford announced a call for a snap election, which is set to take place on February 27. He is seeking a third consecutive term. Key election issues include infation, housing affordability, healthcare, education, and trade relations with the United States. The originally scheduled date for the next election was June 2026. Premier Ford cited the need for a strong mandate to address economic challenges in the face of the U.S. tariffs. All four party leaders have made various pronouncements regarding their platforms should they win the election. To follow is a summary of some housing-related promises in their platforms.
Progressive Conservatives
• Previously promised to build 1.5 million new homes by 2031
• Previously passed legislation to give municipalities powers to address stalled developments and prioritize ready-to-go projects
• Set aside billions for housing infrastructure to prepare undeveloped land
New Democratic Party (NDP)
• Create 60,000 supportive housing units
• Establish a public sector builder to boost the number of new homes
• Upload the cost of shelters to the provincial government
• Legalize fourplexes on land zoned as residential across the province
JAN/FEB 2025
Liberal Party
• Double the rate of the Ontario Disability Support Program (ODSP) and peg increases to infation
• Implement an empty homes tax of 5% for non-Canadian owners and 2% for Canadian owners with vacant residential units in urban areas
• Ban new non-resident ownership in Ontario’s housing market for at least four years
• Impose a ‘use it or lose it’ levy on speculators with serviced land and building permits
• Legalize fourplexes on residential land province-wide Green Party
• Legalize fourplexes on land zoned as residential across the province
• Provide new provincial funds to make municipalities whole for any lost revenues from changes to development charges
Federal government unlocks new properties for Canada Public Land Bank
On January 30, 2025, Jean-Yves Duclos, Minister of Public Services and Procurement, announced that six new properties have been added to the Canada Public Land Bank. These properties have the potential to create approximately 1,770 housing units. When possible, the government will turn these properties into housing through a long-term lease to support affordable housing and keep public lands within their domain. The six new properties added to the Canada Public Land Bank include:
• Dartmouth, Nova Scotia – Shannon Park – 15 Iroquois Drive, Site 2
• New Glasgow, Nova Scotia – New Glasgow Armoury
• Lévis, Quebec – 3595 Guillaume-Couture Boulevard, Jean-Charles Chapais Farm
• Ottawa, Ontario – 1745 Alta Vista Drive, Central Heating Plant
• Kingston, Ontario – 560 King Street West, Kingston Penitentiary
• Yellowknife, Northwest Territories – 5005 44 Street
Ninety federal properties across nine provinces and two territories have been identifed as being suitable to support housing.
Federal government invests in Ontario homes
On January 26, 2025, Nathaniel Erskine-Smith, Minister of Housing, Infrastructure and Communities, announced more than $2.1 billion in contributions and low-cost repayable loans to build and repair 22,417 homes through 234 housing projects across Ontario. These projects are supported through National Housing Strategy (NHS) initiatives, with the goal of addressing housing needs for various communities. The funding includes:
• $305,726,435 in loans and $129,556,363 in contribution through the Affordable Housing Fund (AHF) to create 2,319 new units and repair 1,047 units across 38 projects
• $118,750 in loans and $96,277,828 in contribution through the Affordable Housing Innovation Fund (AHIF) to create 3,671 new units across seven projects
• $1,444,846,000 in loans through the Apartment Construction Loan Program (ACLP) to create 3,306 new rental units across 15 projects, with affordability conditions
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NATIONAL OUTLOOK
• $7,890,445 in loans and $38,790,919 in contribution through the Canada Greener Affordable Housing (CGAH) to repair 10,615 units across 161 projects
• $85,813,344 in contribution through the Rapid Housing Initiative (RHI) to create 246 new units and repair 45 units through 11 projects
• $9,949,984 in contribution through the Federal Lands Initiative (FLI) to create 1,168 new units across two projects
CFAA Rental Housing Conference 2025 in Toronto
The CFAA Rental Housing Conference is scheduled for May 13 to 15 at the Sheraton Vancouver Wall Centre in Vancouver. Register at www.cfaa-rhc.ca and book a hotel room now before they run out.
Join senior leaders and decision-makers from across Canada at the must-attend event for the rental housing industry. The 2025 CFAA Rental Housing Conference in Vancouver is your opportunity to connect, collaborate, and shape the future of rental housing under this year’s theme: Partnering for Progress.
As the industry evolves, success depends on innovation, resilience, and strategic partnerships. This conference brings together the best minds in rental housing to share insights, tackle challenges, and drive meaningful change. Join the conversation in Vancouver:
• Gain strategic insights from industry experts
• Build connections that drive success
• Discover solutions that future-proof your business
New for 2025: Exclusive offer available to CFAA Direct Members! Stay tuned—session topics and speakers will be announced soon.
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