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 it requires a deeper understanding of the problem it seeks to solve.
First, it is important to recognize that factory-built housing is a tool, not a cure-all for fixing Canada’s housing crisis. These 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 in the Canadian context.
My recent research for the C.D. Howe Institute found that innovative construction methods—including modular, panellized, mass timber, and 3D printing—can play a meaningful role in strengthening Canada’s housing sector by improving labour productivity and sustainability, shortening construction timelines, and reducing 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.
Canadian examples illustrate this potential. Selkirk College’s residence in British Columbia 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 B.C. was built in just nine months, and the University of British Columbia’s 18-storey Brock Commons Tallwood House saw a more than 10-per-cent reduction in build schedule, with the structure completed in under 70 days after prefabricated panels arrived on site. Besides, off-site construction is 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.
Budget 2025’s 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, adoption in our country 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 financial, regulatory, and market frictions have prevented innovative housing technologies from scaling successfully in Canada.
The federal government’s $26-billion Build Canada Homes initiative signals a serious commitment to innovation in housing. But without confronting the regulatory, financial, and logistical barriers that have long constrained factory-built construction, these technologies will struggle to scale or deliver meaningful cost savings. Productivity gains will only materialize if governments focus more on removing the frictions that prevent innovative builders from operating at scale.
The objective should not be to confine modular and prefabricated housing to publicly subsidized rental projects, but to enable their 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. On the other hand, 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.
Understanding that factory-built housing is not a panacea for all of Canada’s ongoing housing challenges, a cautious approach is necessary. 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—through regulatory reform, predictable demand, and workforce development—while improving outcomes for affordability, delivery speed, and industry capacity.
Tasnim Fariha is a senior policy analyst with the C.D. Howe Institute.