Housing, Tariffs and A Boring Fixed Price Contract

As published on Building.ca on Apr 23, 2025

What if I told you that the CCDC2 Fixed Price Contract ought to be an election issue?

Every political party accepts that Canada has a housing crisis and every political party believes that President Trump’s Tariff’s are bad. At the intersection of those two issues is the fixed price contract. If we want to keep building new affordable housing – and we need to – we are going to need to find a way of letting owners and contractors settle on the price of those new homes.

The Housing Crises

We have two housing crises in Canada. First, the gap between income and housing prices has grown so much that home ownership is increasingly out of reach for many, particularly young Canadians. And the second, and this one is not new, is that lower-income Canadians suffer from insecurity of tenure and must pay an increasing portion of their income to rent just to keep a roof over their heads. The two are related: forcing low-income Canadians to bid up rents hurts affordability across the housing system. For every new affordable home we build, we lose more. If we are fighting to ensure that every Canadian has a safe, secure, dignified place to live, we aren’t winning this fight.

Solving these crises involves both building new affordable housing and retaining as much as we can. Since the government of Canada holds important levers to address this issue, we need to pay attention to their platforms.

The Election

The political parties are advancing a spectrum of solutions. The Conservatives focus on greater supply through cost reduction, eliminating the GST on new homes under $1.3 million. Liberals have a similar view, but add in a new federal agency, promising a return to direct federal involvement in housing creation, harkening back to the post war era (just look for all those old CMHC homes around Toronto). If I read it right, CMHC would be split under the Liberals with affordable housing programs becoming part of the new agency, while the more commercial programs — insurance and presumably commercial lending — would stay at CMHC. The NDP, meanwhile, would look to create all affordable communities on federal lands. Added supply is important, and needs to happen across price points, including units that are affordable to the bulk of Canadians, not just sold at the market price.

Before moving on to tariffs and the impact on new housing construction, let’s acknowledge that we can’t just build our way out of this problem. Creating new units is only a part of the solution: acquisition and retention is key. Just before the election, the government launched the Canada Rental Acquisition Fund to help non-profits and co-ops acquire rental units coming up for sale, a proposal well-received by both the non-profit housing sector and market players. This is a critical aspect of a housing policy. It is cheaper and not impacted by tariffs. This policy has had pioneers in Toronto through the Multiple Unit Residential Acquisition Program (MURA) and in British Columbia through the BC Rental Protection Fund. It is overdue at the federal level and it needs to happen at scale.

Tariffs and Uncertainty

For new builds, tariffs represent a new barrier to the creation of new housing. Nobody can tell anyone exactly how tariffs will impact the building industry. We don’t know the final extent of the tariffs or how they will be administered. We don’t know how long it will take builders to source materials from outside the United States. We don’t know if the impact of the loss of U.S. markets to Canadian goods, like lumber, will impact their pricing to Canadians. We don’t know if all this uncertainty is by design or random. So, we better get comfortable with discomfort.

Recently, I attended a session on tariffs aimed predominantly at contractors. The basic thinking on the call was this: tariffs are an owner’s risk. If it costs more, the owner must pay because a contractor can not take on that kind of risk. The speaker then relented, “then again,” he said, “we have to find jobs, and owners can’t bear this risk either. So, we need to get creative.”

Fixing The Fixed Price Contract

We know we need more affordable housing. We know we need to both preserve and build affordable units. Meanwhile, a condition precedent to a CMHC loan to create below market housing is a fixed price contract. You know what’s really hard to get right now? A fixed price contract.

Solving this problem requires a mix of risk mitigation and risk allocation among owners and builders. This can mean limited cash allowances, buying early and storing, or sourcing from outside the United States. All those strategies need to be utilized. But it might also mean that this risk — an external risk that neither owner nor contractor can control, needs to have a more public solution — either a fund to absorb tariff costs, lending that permits tariff-related over-runs, or a new form of insurance to buy down this risk. So long as this uncertainty exists, dealing with the impacts of tariff has to be part of the next government’s housing policy.

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At Robins Appleby, we have been providing legal advice for over 70 years to entrepreneurs, businesses, financial institutions, and foreign companies operating in Canada. Located in Toronto's financial district, our firm is trusted by clients to help solve critical, time-sensitive issues. We offer a wide range of legal services including business and transactions, affordable and social housing, litigation and dispute resolution, commercial real estate development, tax law, employment law, and estate planning.