From Artisanal to Industrial: Transforming Canada’s Homebuilding Industry

By Laurent Carbonneau
CCI Director of Policy and Research

In mid-September, the federal government announced the launch of Build Canada Homes — a new agency that will work to, well, build homes in Canada.

Or, it probably won’t actually build homes. But at least the federal government will facilitate building homes, with a focus on non-market housing, and with an interesting focus on scaling up pre-fabrication.

It’s an interesting idea and we at CCI certainly wish them luck. As we’ve said in the past,  housing is an innovation issue. But Government should make innovating and industrializing in the private housing market a priority, too.

Our unaffordable big-city housing markets make it harder to attract workers and the returns on real estate keep capital tied up in buildings and land instead of in pushing the boundaries of technology and industry.

Because housing is a national crisis that directly impacts the innovation economy, the policy team at CCI has been doing a lot of our own thinking on housing and homebuilding. We’ve been hitting the stacks and talking to innovators all over the country about where the barriers are and how policymakers can enable and amplify success, instead of putting up even more barriers (which seemingly are just about the only thing that get built).

We’ll have more to say about that very soon. But for today, we’ll give our loyal Mooseworks readers a sneak peek at what’s really needed to build homes and position Canada as a leader in a rapidly changing industry.

Turning around homebuilding in this country is going to be a big task, on the order of a modest industrial revolution. Canada’s construction sector makes up 7.5% of the national economy, the largest share among G7 countries, and employs 1.6 million people. At the same time, it is also one of the country’s least productive sectors, dragging down our overall economic performance. It’s shockingly and uniquely gotten less productive over time, a trend that has accelerated since the pandemic: we build 25% fewer homes per worker than before 2021.

Why is that? In some ways, construction looks a lot like it did in the Middle Ages. The industry is overwhelmingly made up of tiny companies each with their own quirks, technology adoption is quite low, and the workforce is getting older very quickly, with one in five workers over 65.

As that labour gap deepens, housing labour, which is already scarce, is going to get even thinner on the ground. And that is going to make building the 5.8 million homes needed to restore affordability by 2030 completely impossible unless something dramatic changes.

That “something dramatic” has to be a technology-driven industrialization of homebuilding. While it’s proper that the federal government is going to focus on non-market housing, it can still play an important role in transforming how we build homes in Canada.

The thing that makes industrialization work, at a really basic level, is standardization and interchangeability. Instead of artisanal production, we use assembly lines where commoditized inputs become standardized outputs.

Standardization and interchangeability make scale possible. Factories and the machines that go in them are incredibly expensive. If we want anyone to have a reasonable prospect of making their money back, factories have to produce a lot.

Right now, there are companies in Canada that have invested in building factories to build homes. And the scale of our housing gap is such that there is a lot of demand from the private and public sectors to build them. But if every municipality or even neighbourhood needs its own dedicated production line to meet zoning, design and permitting quirks, this won’t work. If Ford and Toyota built cars this way, they would come with a six-figure sticker price.

So, federal and provincial governments can support modular and prefabricated homes through strategic procurement, sure, but it won’t work unless it’s legal in as much of Canada as possible to put the home there. A big part of the reason why houses are still bespoke non-standard construction is because a mess of provincial and municipal regulations mean that homebuilders can’t just adhere to a single standard.

So that is going to have to be an overriding priority – without a roughly comparable system of zoning, site control, and permitting across Canada, then no amount of technical ingenuity can make up for it. Industrial building will simply not work because it will not be able to operate at an appropriate scale.

In that same regulatory vein, there are a lot of highly prescriptive codes and regulations that do not permit innovators to innovate. Fire codes in Canada, historically, say that you must build out of such-and-such material, where fire codes in Sweden impose performance requirements – that a building must be able to resist a fire for so many hours. There are lots of areas where we can and should move to performance-based standards. They allow for innovators to use new methods of achieving safety and performance goals without having to shepherd regulatory changes through themselves.

Finally, while we’re focused on industrializing, it makes lots of sense to build in strong linkages across existing value chains – namely, by embracing mass timber construction. You can read more about that here, but right now our existing mass timber buildings in Canada have been mostly fabricated in Europe. This does not have to be the case, and indeed we should be the ones selling to them.

We have big challenges ahead of us to meet our homebuilding targets and make Canada more affordable. If we take steps to industrialize and standardize homebuilding, we can do that and become a global player in building beautiful, affordable homes at scale.

--

Laurent Carbonneau is CCI's Director of Policy and Research. He can be reached at lcarbonneau@canadianinnovators.org. Mooseworks is the Council of Canadian Innovators' innovation policy newsletter. To get posts like this delivered to your inbox, sign up for CCI's newsletter here .