Discipline Needed to Bring Innovation Into New Housing Construction

From: Tasnim Fariha
To: Housing observers
Date: February 18, 2026
Re: Discipline Needed to Bring Innovation Into New Housing Construction

Build Canada Homes promises to help transform Canada’s housing industry by supporting innovative building methods, such as factory-built housing. This is encouraging, but is more complicated than it looks. 

First, it is important to recognize that factory-built housing is a tool, not a cure-all for fixing Canada’s housing crisis. Its various technologies can perform particularly well under certain conditions; however, they are not universally competitive with traditional construction methods across all markets, building types, and regulatory environments, or locations where transportation and logistics costs are significant.

My recent C.D. Howe Institute paper acknowledged those obstacles, but also outlined how innovative construction methods – including modular, panelized, mass timber, and 3D printing – can improve labour productivity and sustainability, shorten construction timelines, and reduce exposure to workforce and weather-related constraints.

Off-site and digitally enabled construction methods shift a significant share of work into controlled factory environments, allowing scarce skilled labour to be used more efficiently while improving quality, safety, and schedule certainty. 

Three BC examples illustrate this potential. Selkirk College’s new residence in Nelson, reduced waste, lowered costs, and accelerated delivery, earning high marks for energy efficiency while meeting urgent student housing needs by using a hybrid of modular and mass timber construction methods. Similarly, Trinity Western University’s Jacobson Hall in Langley was built in just nine months, and UBC’s 18-storey Brock Commons Tallwood House had a more than 10-percent reduction in build schedule, with the structure completed in under 70 days after prefabricated panels arrived on site.

Off-site construction is also particularly economical in northern and remote regions like Nunavut and northern Ontario where factory-built homes can be rapidly assembled on site, despite labour and logistical constraints. 

Last fall’s federal budget emphasis on innovative housing technologies is timely, yet it risks remaining aspirational rather than transformational if the government does not grapple with the practical realities behind these technologies and their historically slow uptake.

Unfortunately, Canada’s adoption remains limited, due to high upfront costs, fragmented regulatory frameworks, and a lack of robust, Canada-specific evidence on performance and cost-effectiveness.

These technologies require large upfront investments in specialized equipment, facilities, and skilled labour, and only become cost-effective at scale. Many firms, both large and small, have struggled to secure the steady pipeline of projects needed to sustain production, and some major Canadian players have exited the modular space altogether after anticipated efficiency gains failed to materialize.

These challenges are compounded by high development charges, land costs, and municipal fees that reduce affordability and suppress demand. Financing, insurance, and regulatory systems are designed around traditional construction methods, leaving modular builders facing slow and inconsistent permitting, varying building code interpretations, duplicative inspections, and transportation barriers.

Together, these frictions have prevented innovative housing technologies from scaling successfully in Canada.

And they will have to be overcome if Ottawa’s $26-billion Build Canada Homes initiative and its commitment to innovation in housing is to succeed. Productivity gains will only materialize if governments focus more on removing the frictions that prevent innovative builders from operating at scale.

That means moving beyond publicly subsidized rental projects and facilitating widespread use in the private market. Broad adoption is what allows economies of scale to emerge, lowering per-unit costs, improving price competitiveness, and ultimately supporting affordability. Achieving this requires faster and more predictable permitting, consistent interpretation of building codes, and reduced development charges that suppress demand across the entire housing sector.

Financing reform is equally critical. Low-cost financing, investment tax credits, and output-based repayment models could help de-risk investment for the suppliers, particularly during market downturns. Targeted federal programs – such as shared training hubs and transition funding – could also accelerate industry capacity while addressing regulatory and skills gaps.

Meanwhile, lending and insurance frameworks need to be restructured to be more supportive of factory-built technologies to boost the confidence of the buyers.

Finally, greater national coordination is needed. Harmonizing transportation rules, eliminating duplicative inspections, and setting clear municipal approval timelines would restore the time and cost advantages that off-site construction promises. 

The government should look before it leaps, grounding policy decisions in rigorous, Canada-specific research to understand where these technologies work best. The focus should now be on unlocking its potential.

Tasnim Fariha is a senior policy analyst with the C.D. Howe Institute.

To send a comment or leave feedback, email us at blog@cdhowe.org.

The views expressed here are those of the authors. The C.D. Howe Institute does not take corporate positions on policy matters.

A version of this Memo first appeared in the Hill Times.