Residential construction and forest products sector successes are intertwined

By Richard Lyall

for Canadian Forest Industries

July 27, 2026

The forestry and wood products industries in Canada are heavily reliant on residential construction. Housing drives demand for wood products and influences employment and economic activity.

As a result, the fortunes of sawmills, lumber producers, engineered wood manufacturers, panel producers, logging contractors, transportation firms and many rural communities are closely tied to housing activity.

New homes consume enormous amounts of wood and residential construction is the dominant application for many wood products. A typical North American single-family home requires roughly 15,000 to 16,000 board feet of lumber, plus plywood, OSB, trusses and engineered wood products.

When housing starts decline, demand for lumber and wood products falls, panel and engineered wood inventories build up, prices weaken, mills have to reduce shifts, logging firms harvest fewer trees, and transportation and equipment suppliers lose business. You get the picture.

The good news for the forestry and wood products industries is that Canada needs more housing. The problem is that builders are finding it difficult to build homes people can afford. This is due to myriad factors, including land and construction costs, lengthy approval timelines, and government-imposed taxes, fees and levies.

According to the latest analysis from the Canada Mortgage and Housing Corporation, the nation needs housing starts to nearly double to about 430,000-480,000 homes a year through 2035 to restore affordability to sustainable levels. We’re nowhere near that.

The nation will need another 3.5 million housing units above what is already expected to be built by 2030 to restore affordability. That would require Canada's housing stock to exceed 22 million units by 2030, compared with roughly 18-19 million units under current construction trends.

Taxes are killing the market. Although governments cannot control every variable, they do control a significant portion of the tax and fee stack. Lowering the levies is one of the most immediate policy levers available to reduce the price of new housing and improve project viability.

The math is straightforward. If taxes and fees account for nearly $381,000 on an average Ontario new home, even partial relief can change affordability. A lower purchase price can reduce downpayment requirements, borrowing needs, monthly payments and mortgage stress-test pressure.

Tax reductions are most effective when paired with faster approvals, infrastructure funding certainty and clear project eligibility.

The present housing crisis cannot be solved unless governments reduce the growing burden of taxes, fees and levies on the cost of new homes. In Ontario today, recent research showed that government-imposed charges account for 36 per cent of the purchase price of a new home. The cost is ultimately passed on to homebuyers through higher prices and larger mortgages.

Municipal development charges (DCs), which help fund infrastructure such as roads, water systems, transit and parks, are a big part of the problem. While this infrastructure is necessary, the model places a disproportionate share of the cost on new homebuyers. In some municipalities, development charges alone can add well over $100,000 to the cost of a home, creating affordability challenges and making many projects financially unviable.

The recently announced Development Charge Reduction Program (DCRP) is an important step in the right direction. Through the Canada-Ontario Partnership to Build, municipalities that reduce development charges by 30 to 50 per cent or more will be eligible for a share of up to $8.8 billion in infrastructure funding over the next decade. The program will help lower costs, improve project feasibility and support the construction of more homes across Ontario.

However, the DCRP alone will not be enough to restore housing affordability or achieve housing supply targets.

Broader reforms are still needed, including permanent and predictable GST/HST relief on new homes, and further reductions in development charges. Governments should also improve transparency around housing-related taxes and fees and ensure cost savings are passed on to consumers.

Lowering government-imposed costs is not just a housing affordability issue - it’s an economic issue. It would have a ripple effect on the forestry and wood products industries which support hundreds of thousands of jobs, many of them in rural and resource-dependent communities.

What’s good for the residential construction sector is good for those industries as well.

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.