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Buildings are an important part of society's environmental impacts, both in the construction and in the use phase. As the energy performance of buildings improve, construction materials become more important as a cause of environmental impact. Less attention has been given to those materials. We explore, as an alternative for conventional buildings, the use of biobased materials and circular building practices. In addition to building design, we analyze the effect of urbanization. We assess the potential to close material cycles together with the material related impact, between 2018 and 2050 in the Netherlands. Our results show a limited potential to close material cycles until 2050, as a result of slow stock turnover and growth of the building stock. At present, end‐of‐life recycling rates are low, further limiting circularity. Primary material demand can be lowered when shifting toward biobased or circular construction. This shift also reduces material related carbon emissions. Large‐scale implementation of biobased construction, however, drastically increases land area required for wood production. Material demand differs strongly spatially and depends on the degree of urbanization. Urbanization results in higher building replacement rates, but constructed dwellings are generally small compared to scenarios with more rural developments. The approach presented in this work can be used to analyze strategies aimed at closing material cycles in the building sector and lowering buildings' embodied environmental impact, at different spatial scales. [ABSTRACT FROM AUTHOR]