Cost of building a new, 3,800 square-foot custom home in Walnut Grove will go up an extra $9,000, while a series of more standard row and townhouses in Willoughby will cost $5,000 to $7,000 more to construct, following the introduction of a new drywall duty earlier this month.
A new tariff of up to 275 per cent has been added to gypsum board being brought up from the U.S., leaving Nathan Stone of Odessa Group and other builders in Langley fearful of what that’s going to mean to an already inflated Lower Mainland housing market.
Stone estimates that about 40 to 60 per cent of the drywall used in construction in the Lower Mainland was imported from the U.S. in the past.
While the price of the boards has been relatively the same for years, he said he’s perplexed by the recently imposed provisional duties and worried about what it’s going to mean to his industry.
This change, he said, comes as a result of a “yet to be substantiated” complaint from one B.C.-based drywall company to the Canadian Border Services Agency (CBSA), indicating that several U.S. companies are dumping gysum board into Canada at such cheap costs that is pricing them out of the market.
CBSA invoked a special import measure act on Sept. 6, and with it they’ve introduced a special tariff for drywall being shipped north of the 49th Parallel that was aimed at levelling the playing field, while they continue their review on the claim.
Stone predicts this decision is sure to price more people across Canada out of the housing market and force some builders and developers – especially in the struggling province of Alberta – out of business.
Stone understands what he calls limitations on the CBSA, saying they can only rule and act on the impact the drywall imports are having on other Canadian drywall companies. But this decision has much wider implications on the entire housing and construction industry, added Stone, who has been involved in commercial, institutional, and residential building – both new and renovations – for decades.
Working with other members of the Canadian Home Builders Association(CHBA), Stone is a vocal advocate for the repeal of this tariff. He understands it is still being reviewed, and that an ultimate decision isn’t expected until January.
But many in the homebuilding industry, as well as homebuyers, can’t wait until January to see if this is going to be corrected, he said. So, efforts are underway to lobby the national ministers responsible, asking them to step in and override the CSBA duty immediately.
He pointed to a similar incident a few years back, where the federal government had to step in when a “crippling” levy was added to rebar.
He said there’s other concerns, the least of which is supply and demand.
There are only three drywall manufacturers in all of Canada (in Vancouver, Calgary, and The Prairies) and he fears they won’t be able to keep up with the new demand.
It’s already having a ripple effect – causing a supply shortage of drywall – in Ontario, and Stone estimates it’s only going to be a short time before that happens here, as well.
This move has quickly gelled the construction industry, said Stone, who is part of a growing contingent of builders challenging the duties.
CHBA’s chief executive officer, Kevin Lee, is equally critical.
“These extremely high duties, ranging from 105.2 to 276.5 per cent, on about half of the drywall sold in Western Canada, will severely affect the businesses of drywall contractors, builders, and renovators, who will face losses on contracts already in place for the months ahead,” Lee said.
“While we respect the process, suffering companies cannot wait to see the final decision on this,” he added. “Even if duties are reduced or eliminated in the end of the review process, or if we have to request a hearing into the public interest because the duties are upheld – the damage to industry will be done.”
In the meantime, efforts to reduce housing prices and protect affordability are being “undermined,” Lee said, claiming insufficient attention is being paid to the implications for the public.
. “At a time when our governments are seeking to avoid further housing price increases, this duty will send both house prices and affordability further in the wrong direction,” Lee added.
It adds a two to three per cent increase on the overall cost of a new home construction, said Stone. And, with an estimated 25,000 new units built in B.C. every year, that’s some “huge dollars” added to the cost of everything from condos to single-family houses that homebuyers are not going to be willing or able to accept.
“You already have a high-priced housing market in Greater Vancouver and the Lower Mainland. No one can afford further increases to construction costs. This increase will have a negative impact on new homebuyers and homeowners’ renovation projects. Many of our drywall companies are at serious risk with contracts already in place.”
The tariff, as Stone calls it, must be revoked for the “greater good.”
“I still want to make sure housing is affordable for all Canadians,” Stone said, and he feels this is one more huge barrier that has been installed.