Decline in homebuilding is bad for everyone
By Richard Lyall
for Canadian Forest Industries
April 24, 2026
The repercussions of the decline in home building, while quite severe, are not confined to the residential construction industry.
The impact will extend well beyond the industry as it is interconnected. A sustained decline will ripple quickly - and painfully - through the entire wood and forest products supply chain, affecting everything from construction sites to sawmills, to the transportation sector and more.
Spinoff effects will hurt our wood, softwood lumber, structural panel and engineered wood manufacturers, and those who make prefabricated components.
Residential construction is the single largest end market for wood products. Even a modest slowdown will deliver a substantial blow.
Already, plunging starts and sales have resulted in tens of thousands of job losses in the industry. Ontario is looking at a potential 1.5 to 2.5 per cent reduction in GDP between 2026 and 2027 tied directly to the collapse in residential construction. These are not normal cyclical adjustments.
Residential construction supports a vast ecosystem of tradespeople, suppliers, engineers, planners and small businesses, so the consequences will be widespread.
Housing is also the anchor tenant of Canada’s wood products economy. When homebuilding declines, demand collapses, prices fall, production is cut and jobs are lost across the supply chain.
Let me elaborate.
New housing drives a large share of lumber consumption for framing, joists and studs. Fewer housing starts means less demand. During slowdowns, mills are often forced to reduce shifts or temporarily shut down. We have seen this pattern repeatedly in past housing slowdowns.
Structural panel and engineered wood manufacturers are heavily tied to housing starts and a slowdown can lead to rapid inventory buildup and price declines. Facilities that produce these products are capital-intensive and rely on high throughput, so lower demand reduces efficiency.
In logging and forestry operations, mills need fewer logs and cut production in a downturn. Logging is highly capital-intensive but financing costs for equipment remain, adding to the problem.
A typical North American single-family home requires 15,000 to 16,000 board feet of lumber and significant volumes of OSC, plywood and engineered wood. That means a drop of 100,000 housing starts can remove demand for 1.5 billion board feet of lumber and massive volumes of panels and engineered products. Scale that up and the implications become enormous.
Studies have consistently found that residential construction contributes up to 10 per of Canada’s GDP when including indirect effects. A sustained housing decline can shave billions off national and provincial GDP.
History is a good teacher about the impacts of a housing slowdown.
In 2022 and 2023, for example, lumber prices fell from pandemic highs of $1,600 per thousand board feet to below $400. There were dozens of temporary mill shutdowns across Canada. Demand for engineered wood products softened and logging contractors reduced their harvesting volumes.
In 2008, during the financial crisis, the shock was more severe. The wood products industry went into a freefall. In Canada, more than 30,000 forestry jobs were lost between 2006 and 2010.
Many mills in Ontario and B.C. closed, and major producers of structural panels idled their plants. Logging activity dropped sharply as mills stopped buying logs and contractors went bankrupt.
The effect on the GDP was devastating. According to analysis from various organizations, the forestry and wood products sector saw billions in lost output.
The forestry and wood products industry has a strong economic multiplier. One direct forestry job supports two to three additional jobs in trucking, equipment manufacturing, maintenance and local services. When mills shut down, entire communities feel the effects.
My point, of course, is that we must do everything possible to support the residential construction industry - our economic health depends on it.
Housing is one of the most powerful economic engines in the country. When it stalls, the consequences ripple far beyond the construction site.
A study from John Molson School of Business at Concordia University bolsters the case for boosting the housing industry. It notes that doing so would deliver immediate economic benefits. The report suggests that investment in homebuilding, including streamlined approval processes and reduced input costs, can quickly translate into wider economic benefits.
The potential downside of inaction is alarming.
According to a recent analysis, without policy intervention, about 35,000 Ontario residential construction workers could potentially be displaced, on average, over the next 10 years, while 390,000 fewer Ontarians would be housed.
Reviving the homebuilding industry must be treated as an economic priority. Our economic future depends on it.
Richard Lyall is president of the Residential Construction Council of Ontario (RESCON). He has represented the building industry in Ontario since 1991. Contact him at media@rescon.com.