Building Smarter, Faster: Technology and Policy Solutions for Canada’s Housing Crisis

Canada’s housing sector is experiencing a multifaceted crisis characterized by escalating prices, acute affordability challenges, and a critical misalignment between housing supply and population growth. Demographic pressures – such as strong population growth – combined with economic factors like elevated interest rates, soaring housing costs and land prices are reshaping Canada’s housing market. Escalating housing costs have effectively priced out many potential buyers, compelling a larger proportion of the population to enter the rental market, thereby driving increased investment in rental and multi-family housing units (Statistics Canada 2024). However, those units have become much more expensive to build, too, which is reflected in higher rents and fewer starts than necessary to meet demand.

This modal shift reflects both market adaptations to economic constraints and broader structural changes in housing demand and affordability. On top of that, long-standing restrictive regulatory frameworks, including restrictive zoning regulations, substantial development charges, and land use constraints, contribute to housing supply limitations and price escalations (Dachis and Thivierge 2018). Addressing these structural obstacles is crucial for ameliorating persistent supply shortages, rising costs, and broader affordability challenges. The industry has been raising these issues for several years now. For example, in early 2024, the Canadian Home Builders’ Association (CHBA) released a comprehensive sector transition strategy identifying specific recommendations for systematic change in four areas: financial system, policy, labour, and productivity. In 2025, the Canada Mortgage and Housing Corporation (CMHC) emphasized that the pace of housing starts must double to gradually restore affordability to 2019 levels.

Many countries are leveraging prefabrication technologies – such as modular construction, mass timber, panelized systems, and on-site 3D printing – to accelerate homebuilding, increase productivity in the face of tight labour markets, and improve sustainability. In Canada, however, adoption remains limited amidst industry-specific challenges, complex regulations, and insufficient incentives to support these innovations.

Despite their promise, these technologies have not consistently delivered cost savings in the Canadian context. Modular, panelization, mass timber, and 3D concrete printing methods often face higher upfront costs, insurance premiums, or material expenses. To support the adoption of these innovative construction methods in Canada, more country-specific evidence is needed to guide policymakers, regulators, and developers. While international data highlight its benefits – such as speed, cost-effectiveness, and sustainability – Canadian decision-makers require more local insights. Academic-industry partnerships can help generate this evidence by analyzing best practices, labour dynamics, project outcomes, and measurable savings within the Canadian context (Dragicevic and Riaz 2024).

This paper aims to identify the main challenges facing the adoption of innovative home-building technologies in Canada. Drawing on a range of sources – including academic research, government and industry reports, and documents from builders’ associations – it offers an introductory examination of the issues at play. It does not present innovative construction methods as the sole solution to Canada’s housing crisis, but rather as a tool to improve labour productivity and accelerate residential development, particularly when supported by stable market conditions, coordinated government action, and a supportive regulatory environment. While recognizing the potential of these technologies, the paper highlights the need for more publicly available data and independent research to benchmark their performance against traditional building methods. The key recommendations from this paper – aimed at addressing the critical barriers of risk, complexity, and inconsistency – include:

• Financial Incentives and Risk Mitigation: Low-cost financing and tax credits to de-risk investments by builders, and construction-financing insurance for off-site construction to boost lender confidence; standardized mortgage and home insurance rules to reduce uncertainty for buyers; and tax incentives for maintenance and repairs of homes built with innovative technologies to build trust among lenders and buyers.
• Regulatory Streamlining and Efficiency: Expedited fund disbursement by CMHC to accelerate project timelines of purpose-built rentals and affordable housing; streamlined permitting processes and fast-track approvals for innovative projects; elimination of duplicative inspections for modular builds to reduce delays; reduction of development charges and related fees to improve overall housing affordability; and further research to assess how Canada’s multi-layered regulatory framework compares with international practices and whether it may be limiting competitiveness.
• Standardization and Harmonization Across Jurisdictions: Standardizing interpretation of building codes across municipalities to ensure consistency and avoid costly, time-consuming redesigns; standardizing – and where necessary, harmonizing – transportation regulations on modular and prefabricated components across provinces to facilitate efficient, large-scale production and delivery.

Current Challenges in the Housing Market

Supply Shortage

Currently, Canada is not building enough homes to meet its needs. In fact, the housing shortfall isn’t closing – it’s widening. When CMHC first sounded the alarm in 2022, it estimated that Canada needed to build roughly 500,000 housing units per year through 2030 to bring affordability back to early-2000s levels. Last year, the country started building just 245,000 units – less than half the target. Now, CMHC’s latest projections scale down the target but still call for 430,000 to 480,000 housing starts annually over the next decade, merely to restore affordability to 2019 levels. In regions like Ontario, British Columbia, Nova Scotia, and Montreal, the shortfall is even more severe.

Urban centres are disproportionately impacted by limited housing supply. Housing costs are dramatically outpacing income growth, creating substantial barriers for middle-class families, first-time buyers, and young professionals seeking homeownership. Shortage of supply and higher housing costs suppress the formation of new, smaller households, pushing more people into shared or doubled-up living arrangements. Building more housing would allow Canadians to form the types of smaller households they increasingly prefer, such as living alone or only with a partner or children (Lauster and von Bergmann 2024). A striking indicator of this supply crisis is the unprecedented decline in dwellings per 1,000 people (see Figure 1), a reversal from Canada’s historical trend of increasing housing supply. This decline highlights the pressing need for strategies to realign the housing supply with population needs.

Productivity Challenges

Residential construction productivity has not recovered in the post-pandemic period, contrasting with the gradual recovery in the broader construction industry and the overall economy (Figure 2). Recent economic analyses show the industry is expanding by increasing its share of the overall workforce while its share of output is simultaneously declining (Caranci and Marple 2024).

One contributing factor may be the construction sector’s tendency to retain its existing workforce during downturns, avoiding mass layoffs to preserve skilled labour for future booms. Despite the sluggish output growth from this sector since 2022, it continues to expand in terms of employment. For example, between 2020 and 2023, employment grew by 15 percent across all industries and 21 percent in construction overall, while residential building construction saw a 26 percent increase (Statistics Canada 2025a). While this strategy may protect long-term capacity, it can also depress short-term productivity metrics during periods of reduced construction activity. If this dynamic persists, it could have long-term consequences for Canada’s housing infrastructure and broader economic growth.

Affordability Crisis

Despite the urgent need for housing, affordability remains a barrier that limits the purchasing power of many Canadians and prevents the market from meeting housing needs. Home prices have risen nearly 40 percent since 2016, contributing to a significant decline in homeownership across the country. While recent changes to down payment rules and extended amortization periods aim to support buyers, high interest rates continue to erode affordability and heighten mortgage insecurity for both new and existing homeowners. Development taxes – including development fees, lot levies, and amenity fees – have increased by 700 percent over the past two decades and can now account for up to 25 percent of a home’s sale price (CHBA 2024). Between 2011 and 2021, the share of Canadians living in owned homes decreased by 2.5 percent, with nearly all age groups experiencing a drop in homeownership rates.

This shift has led to an increased demand for rental housing, prompting developers to prioritize the construction of more budget-friendly living spaces. According to the CMHC, 72 percent of all housing starts in the first half of 2024 were apartments, with 47 percent of these designated for rental units. However, while increased rental construction is a positive trend, it remains insufficient to close the affordability gap. More housing units for homeownership are required, too. Rising home prices, population growth, and high mortgage rates have driven rental costs higher, further exacerbating affordability challenges and placing additional strain on low-income households. The growth of corporate rental ownership by Real Estate Investment Trusts (REITs), as well as secondary rentals by investors, has played a notable role, too. The average rent for a typical two-bedroom unit across Canada rose by 45 percent between 2018 and 2024, according to the CMHC Rental Market Survey.1 In 2022, Statistics Canada reported that 245,900 households were on the waitlist for social and affordable housing, underscoring the critical need for increased housing supply.2

Labour-Augmenting Home Building Technologies: A Promising Tool for Easing the Housing Crisis

Technological innovation in construction may offer a promising path to improving labour productivity (see Box 1 for a comparison of conventional and innovative homebuilding methods). These labour-augmenting technologies3 have the potential to significantly enhance efficiency and accelerate the pace of homebuilding. Labour-augmenting technologies allow workers to produce more – whether in quantity, quality, or both – within the same amount of work hours. They align with the concept of increasing the capacity of human capital without expanding the workforce. Such progress can arise from various sources, including advancements in machinery, software, work processes, or the education and skills of the workforce. Research suggests that labour-augmenting technological change stimulates gross domestic product (GDP) growth and increases long-run total employment. In open, developed economies, focusing on enhancing the efficiency and productivity of skilled workers yields the greatest benefits (Ross et al. 2024).

Conventional homebuilding methods rely heavily on strenuous physical labour and are vulnerable to weather-related disruptions and higher on-site safety risks. Although specific data on the residential construction sector are limited, the construction industry as a whole remains one of the most hazardous sectors, with on-site building particularly prone to accidents due to the complex and variable nature of the work environment. In contrast, modern homebuilding technologies – such as off-site prefabrication and digital design tools – can reduce project failure rates, shorten construction timelines, enhance defect detection, and significantly improve worker safety (Patel and Kaushal 2024). Working in a stable, climate-controlled factory setting – without the disruptions of a transient worksite – can lead to greater worker satisfaction and productivity (Hoínková 2021).

Modular construction has been around for several decades, involving off-site fabrication in safe, controlled settings and reducing workers' exposure to harsh outdoor environments. Case studies from countries like Australia, the UK, and the US suggest that modular approaches can reduce construction timelines by 20 to 50 percent compared to traditional methods (Bertram et al. 2019). In panelization, prefabricated panels are quickly assembled on-site, eliminating sequential tasks and allowing different stages of construction to occur simultaneously. This significantly reduces project completion times while minimizing safety risks and physical labor demands. Compared to modular construction, panelization is often more flexible and efficient in terms of storage, transportation, and on-site logistics, making it a more scalable solution in certain contexts. Cross-Laminated Timbers (CLT) used in mass timber construction are easier to handle and assemble. Timber is a suitable material for prefabrication, and its insulating properties create safer working conditions in cold weather. Although somewhat more expensive than other materials, mass timber is valued for its ability to store carbon, contributing to more sustainable construction practices.

Another advantage of shifting to off-site construction is a reduced reliance on labor, especially as Canada's construction industry faces the retirement of nearly 260,000 workers (22 percent of the workforce) by 2030, requiring over 309,000 new recruits (BuildForce Canada 2021). Research on the global construction sector shows that off-site construction offers a promising solution by enabling 30 to 60 percent of project work to be completed in controlled environments, leading to a potential 5 to 10 times productivity boost through better labor management (Barbosa et al. 2017). Controlled settings also improve worker attraction and support the application of Lean Construction principles. Engaging higher-skilled labor in tasks such as integrating electrical and mechanical systems or operating automated machinery can yield significant productivity gains. Meanwhile, lower-skilled workers can still be effectively engaged in other aspects of the prefabrication process. This approach helps ease the industry's skilled labor shortage while improving supervision, safety, quality, material efficiency, and schedule adherence (Forestry Innovation Investment 2021).

The time savings and productivity gains cited above are largely drawn from global data across the broader construction sector and may not fully reflect the experience of residential construction in Canada, where adoption of these technologies has been slower and less standardized. The wide variation in estimated time savings often stems from differences in regulatory environments, labor availability, factory capacity, and the degree of integration with on-site workflows. Still, these figures illustrate the potential of innovative construction methods to enhance efficiency. More Canadian-specific research is needed to quantify the net productivity gains – both in time and cost – across different home-building technologies.

Demographic and regional shifts strengthen the case for modular and prefabricated housing. Urban growth, aging populations, and smaller households are driving demand for compact, dense housing in central areas where land is limited and speed is essential. Modular construction supports this need through rapidly deployable fourplexes, mid-rises, and Accessory Dwelling Units (ADUs) on infill sites – smaller, self-contained homes located on the same lot as a primary residence. It has also proven effective for student housing, offering speed and flexibility. For example, Selkirk College's residence in BC used a hybrid of modular and mass timber construction to reduce waste, lower costs, and accelerate delivery, earning high marks for energy efficiency while meeting urgent student housing needs.

Similarly, Trinity Western University's Jacobson Hall in BC was built in just nine months, and the University of British Columbia's (UBC) 18-storey Brock Commons Tallwood House saw a more than 10 percent reduction in build schedule, with the structure completed in under 70 days after prefabricated panels arrived on-site. In Northern and remote communities like Nunavut and Northern Ontario – where housing needs are urgent and labor shortages acute – off-site construction allows homes to be built in southern factories and rapidly assembled on-site, bypassing the logistical and workforce challenges of traditional construction.

Finally, it is crucial to assess Canada's position on the production possibility frontier (PPF), which represents the maximum number of homes that can be built using available resources, such as labor, materials, and technology, without overextending or underutilizing them. Canada's litany of problems includes high construction costs, elevated mortgage rates, soaring house prices, adverse weather conditions, and regulatory barriers like zoning laws and building codes, along with a lengthy permitting process. So it is reasonable to infer that Canada is currently operating inside the PPF. This indicates productive inefficiency. The country is not fully leveraging its resources to produce the maximum number of homes possible (productive inefficiency may not be directly quantifiable in precise terms due to data limitations). However, in a more conducive environment where regulatory hurdles are reduced and permit approvals are quicker, labour-augmenting technological advancements could shift the frontier outward, increasing labor productivity. This shift could enable Canada to build more homes more quickly and efficiently, helping to address the ongoing housing shortage.

Where Does Canada Stand on Housing Innovation?

Many countries are leveraging modular construction and mass timber to accelerate homebuilding and improve sustainability. While Canada has begun to explore similar approaches to those used in the US and Australia, its adoption has been slower. The reason: structural barriers, regulatory complexities, and a lack of appropriate support. Scandinavian countries, like Sweden, have embraced off-site construction at scale, where 96 percent of homes are built off-site and 84 percent of detached homes use prefabricated elements (Modular Intelligence 2024). These countries benefit from economies of scale, smaller geographies and unified building codes, with higher volumes justifying the upfront investment in off-site manufacturing. Although a direct comparison of productivity or construction costs between Canada and Sweden is difficult due to differences in labor markets, regulations, and building types, off-site construction has proven more efficient than traditional methods within the Scandinavian context. This relative efficiency has driven greater industry uptake and enabled more advanced forms of prefabrication to emerge – supported by long-term investment, automation, and integration into mainstream housing delivery. Moreover, in Europe and Asia, prefabricated construction differs from that in North America in both the materials used and the size of modules or panels (Forestry Innovation Investment 2021). Understanding how these regions arrived at their current practices can offer valuable insights for industry leaders and policymakers.

Recognizing the urgent need for technological innovation to address the current housing crisis, the Canadian government announced a $600 million package in the 2024 budget. This includes a $50 million Homebuilding Technology and Innovation Fund to scale up and commercialize technologies like modular and prefabricated homes, $500 million to support rental housing using modular construction, and $11.6 million to develop a Housing Design Catalog featuring standardized and efficient blueprints. The Housing Design Catalogue, released earlier this year, offers standardized low-rise designs focused on traditional construction to support gentle density and infill across Canada, with plans to include modular and prefabricated methods in future updates.

Greater potential for transformation lies in the recently announced initiative by the federal government, an agency called Build Canada Homes (BCH). It aims to catalyze the housing industry and create higher-paying jobs by offering $25 billion in debt financing and $1 billion in equity financing to support innovative Canadian prefabricated home builders. Its premise is that prefabricated and modular housing methods have the potential to reduce construction time by up to 50 percent, cut costs by 20 percent, and lower emissions by 22 percent compared to traditional building approaches. BCH also plans to issue bulk orders to manufacturers to stabilize demand, promote the use of Canadian materials like mass timber and softwood lumber, and expand apprenticeship opportunities to grow the skilled trades workforce.

It is too early to assess the impact of these initiatives. The distribution of funds involves lengthy bureaucratic processes, and the market requires time to adapt. Research and development, being inherently time-intensive, slowers immediate results. While these initiatives may hold significant promise for addressing Canada's housing crisis – particularly in an environment with fewer structural and regulatory barriers – their effectiveness depends on first tackling the core obstacles that continue to hinder housing development and discourage investment in productivity-enhancing innovations.

Government support plays a critical role in driving a sector's success and growth. As part of the HousingTO 2020-2030 Action Plan, 4  the City of Toronto committed to creating 1,000 new modular homes. By 2021, 250 homes were approved, and since then, 216 modular homes have been completed, contributing to the city's efforts to address housing shortages and provide affordable living spaces. A report from the Auditor General of the City of Toronto 5  stated that due to incomplete data and lack of benchmarking, the effectiveness and comparability of modular construction versus traditional methods – regarding cost and speed – could not be assessed. It recommended improvements in project planning, cost monitoring, and data collection to allow for clearer evaluations in the future. Vancouver is also utilizing temporarily available space to build modular affordable housing with support from CMHC and the Vancouver Affordable Housing Agency (VAHA). Calgary and Edmonton are adopting similar initiatives.

In 2020, the National Building Code of Canada (NBC) increased the limit for mass timber construction from 6 stores to 12 stores, reflecting advancements in technology and growing confidence in the safety and sustainability of mass timber. Last year, British Columbia updated its provincial building codes to allow mass-timber structures up to 18 stores. However, due to higher costs, adoption has so far been largely limited to public sector projects.

Canada's housing market is gradually adapting and embracing innovative technologies at a faster pace. A growing number of companies are now offering innovative housing solutions in Canada, providing faster, sustainable, and innovative alternatives to traditional construction methods. The Kakatoots (Siksika Nation) or Star Lodge in Alberta, 6  the Leamington project in Ontario, 7  and the Merritt and UBC project in British Columbia 8  are some of the ongoing 3D-printed home projects designed to combat the housing crisis in areas experiencing severe labor shortages.

Key Barriers to Housing Innovation

Despite these advancements, the adoption of innovative home-building technologies continues to face substantial challenges:

• High overhead costs, risks of investment, and workforce constraints. Modern construction methods are heavily constrained by the high initial investment and overhead costs associated with high-tech tools and equipment, such as prefabrication machinery, 3D printers, and robotics. In addition to utilizing low-skilled labor for certain tasks, some high-skilled workers trained in operating sophisticated equipment are also required, necessitating formal education and specialized skills development programs. Such training is resource-intensive, limiting its feasibility to larger firms with the financial capacity to invest in workforce development. However, in Canada, some of these larger firms have exited the modular construction space because the anticipated efficiency gains have failed to materialize. Without a consistent flow of orders, even large firms may struggle to sustain operations.
• Depressed and volatile housing market. Canada's housing market is marked by unpredictable boom-bust cycles and a lack of long-term stability, which discourages sustained investment. Volatility in financial markets and frequent shifts in monetary and immigration policy further increase risks for both builders and homebuyers. Factory-built housing relies on scale and repetition to be cost-effective – firms need a steady throughput to reduce the burden of high overhead costs. However, current market instability makes it difficult to maintain consistent production. On the other hand, high development charges, land levies, and amenity fees drive up housing prices across the entire industry, further dampening affordability and demand, and in turn, restricting the supply of new homes. These also make it more difficult for innovative builders to scale up and compete effectively.
• Financing and insurance challenges. Modular or prefabricated homes come with unique challenges compared to traditional houses. Since up to 80 percent of a modular project is completed off-site in a factory, manufacturers typically require substantial upfront payments to secure materials and begin production. However, current lending practices – both among private banks and public programs – are often structured around on-site progress payments. Hence, they rarely accommodate this model, significantly restricting access to financing for modular projects (Dragicevic and Riaz 2024). Additionally, in terms of mortgage and home insurance, modular and prefabricated homes often face inconsistent treatment across provinces, lenders, and insurers. Mortgage providers may require additional documentation, impose stricter conditions, or offer less favorable terms compared to traditional homes. For example, while CMHC does insure mortgages for modular homes, it requires that the home be permanently affixed to a foundation and comply with all local building codes – criteria that may be interpreted or enforced differently across municipalities. Some private mortgage insurers and lenders may impose further conditions or decline to finance certain factory-built or movable units, especially if they are not CSA-certified or permanently sited. On the home insurance side, modular homes may be subject to higher premiums or limited coverage due to perceived risks, misclassification, or unfamiliarity with the building method, sometimes even resulting in denied claims or coverage gaps. 9
• Financial support alone is not sufficient while structural barriers remain in place. Under the Apartment Construction Loan Program (previously known as Rental Construction Financing Initiative), all financing is subject to approval by CMHC. While there have been some improvements, the process can still take considerable time and needs to be streamlined. There are examples of firms exiting the Canadian market and shifting operations to the US, citing delays in CMHC fund disbursement as one of the contributing factors behind their decision. 10  The same is true for the Housing Accelerator Fund, which flowed to municipalities from the federal government. While some major cities have significantly exceeded their annualized housing supply targets in terms of permits issued, others have permitted fewer units than projected under their baseline expectations. 11  These challenges undermine the primary advantage of prefabrication: the ability to build faster.
• Municipal permit approval is slow for all types of housing . According to the Canadian Construction Association (CCA), it also takes nearly 250 days to obtain a building permit from the municipalities or the regional authorities in Canada – three times longer than in the US – placing Canada 34th out of 35 Organization for Economic Cooperation and Development (OECD) countries in building permit timelines. In some cities, the delays are even worse. Toronto and Hamilton take approximately 25 and 31 months, respectively, to issue permits (CHBA 2025). Municipal process delays during construction can also eliminate all time advantages of off-site construction and drive up costs.
• Inconsistency among municipalities in interpreting building codes. A major challenge for scaling up is that different municipalities, sometimes in the same province, interpret the building codes in different ways, requiring time-consuming and costly customized designs. The same can be true within one municipality, with variable interpretations between building officials. This dramatically impacts repeatability and replication that could make the process faster and more cost-effective for builders, and cheaper for homebuyers.
• Transportation-related hurdles. Transportation is another challenge in off-site construction, particularly for modular systems, which face strict road permitting requirements that vary by jurisdiction. While flat packing is efficient for panels and CLT, modular transport is more complex, especially across provinces. For example, module widths allowed in the Prairies can reach 7.3 meters, while in BC, they are limited to 4.88 meters, creating constraints for project delivery (Forestry Innovation Investment 2021). Similar constraints apply to transportation entering Ontario. These differences further hinder the feasibility of large-scale, duplicated production.
• Duplicative inspections create inefficiencies and difficulties, as two authorities are involved – CSA-certified bodies inspect factory-built components, while local Authorities Having Jurisdiction (AHJs) handle on-site work (Forestry Innovation Investment 2021). However, many AHJs lack familiarity with off-site construction and are often unclear about their jurisdiction and the acceptability of the off-site components that should not be subjected to duplicative inspections. This confusion can delay approvals, drive up costs, and create barriers for modular and panelized projects.
• Regulatory inefficiencies push firms out of Canada. For example, in 2024, a large modular construction company closed its Kitchener, Ontario factory, cutting 150 jobs. Citing overregulation, financing delays, and rising costs, the company moved operations to the US, where it found a more business-friendly environment.

Policy Pathways and Conclusions

Cost competitiveness and investment risk remain the two most pressing barriers to scaling innovative home-building technologies. According to Keynes' law, the market will naturally shift toward innovative home-building technologies when sufficient demand exists, and the supply side is prepared to meet it within a business-friendly environment. However, this is not currently the case in Canada, as both demand and supply are constrained by structural inefficiencies, financing gaps, and regulatory hurdles. The goal should not be to restrict these technologies to publicly subsidized, affordable rental projects, but to encourage their widespread use in the regular market. This would enable large-scale production to reduce per-unit costs through economies of scale, achieve more competitive pricing and improve affordability.

To mitigate the challenges and to encourage more innovative home-building projects, the following policy actions and further research should be considered:

• The federal government – ​​and other levels of government providing financial support – should work to minimize structural barriers, such as bureaucratic complexities and delays in fund disbursement, across all housing projects. This will accelerate delivery and reduce costs, complementing broader housing goals. While all housing supply efforts deserve timely support, streamlining financing processes for innovative home-building approaches – such as modular and prefabricated construction – will help unlock productivity gains and build capacity in this developing segment of the industry.
• To encourage builders to invest in innovative construction, the federal government should provide low-cost financing and investment tax credits. This would help them address high upfront costs and de-risk substantial investments in tools, machinery, and workforce training. Additionally, adopting output-based repayment models – rather than time-based – can help firms remain viable during housing market downturns.
• Federal funding can help accelerate the transition to factory-built homes through targeted programming. For instance, the CHBA is advocating for Contribution Agreement Funding to establish a Factory-Built Systems Hub. 12  The Hub would offer education and training for builders and officials, help address regulatory barriers, foster innovation in factory-built construction, and provide a concierge service to assist with access to government transition funding.
• To boost traditional financial institutions' confidence in financing off-site construction, CMHC should introduce construction financing insurance tailored to modular and prefabricated housing. While this insurance may add some initial cost, it would help address lender uncertainty and reduce risk premiums – improving affordability for buyers and predictability for builders. A key barrier is that financial institutions currently lack sufficient data to confidently compare off-site construction with traditional methods. This would provide the assurance needed to support lending for a relatively unfamiliar building process. This extra layer of security can be gradually reduced as lenders become more comfortable with these projects.
• The federal and provincial governments should standardize the rules and eligibility requirements for mortgages and home insurance for these types of homes to eliminate regulatory uncertainty for buyers. Income tax credits for the maintenance and repair of these homes could build trust among potential buyers, lenders, and insurance companies.
• Standardizing – and where possible, harmonizing – transportation requirements across provinces is crucial for the factory-built industry. Consistent regulations would enable cost and time savings by allowing the replication of identical units without the need for costly customization or delays due to jurisdictional differences.
• Overall, development charges and related fees should be reduced to improve housing affordability and stimulate construction activity. A more dynamic housing market will enable the industry to benefit from economies of scale.
• Municipalities should adopt a standardized interpretation of building codes to maintain consistency. Without this, efforts to develop a housing design catalog for the industry will have limited value. Indeed, with standardization, existing housing catalogs that builders already have could be deployed easily.
• Eliminating duplicative inspections would greatly streamline the construction process and avoid unnecessary costs and delays. Additionally, municipal officials need more training and education to increase their familiarity with off-site building methods and where inspection responsibilities lie.
• All municipalities and local authorities should publicly announce clear target timeframes for residential permit approvals, inspection processes, and all municipal approval processes. The goal: to accelerate housing construction and provide much more certainty for development timelines for industry. They should introduce a fast-track permit approval system for residential construction projects utilizing innovative technologies. Time savings and productivity improvements offered by innovative construction methods will not be realized if delays and lengthy administrative procedures persist.
• Further research is needed to benchmark Canada's regulatory environment against peer countries and assess whether overregulation may be discouraging investment or prompting firms to relocate to more business-friendly jurisdictions. This includes studying how countries like Sweden have successfully scaled housing innovations – such as modular construction, off-site manufacturing, and mass timber – and evaluating which aspects of their experience could inform Canadian policy. While a full exploration of these international comparisons is beyond the scope of this paper, it remains a critical area for future investigation.

While some policy recommendations apply broadly to improving overall housing supply, they are essential for creating the enabling conditions that allow modular and prefabricated projects to thrive. At the same time, targeted and preferential measures specifically supporting innovative home-building technologies are also necessary to overcome their unique challenges and accelerate their adoption. Although not a panacea to the ongoing housing crisis, wider adoption of these technologies has the potential to ease pressure in the short term by accelerating construction and to improve affordability in the long term through greater efficiency and scalability.

The author extends gratitude to Colin Busby, Nicholas Dahir, Parisa Mahboubi, Carolyn Whitzman and several anonymous referees for valuable comments and suggestions. The author retains responsibility for any errors and the views expressed.

References