This executive summary lays out highlights from the report "Building Innovation: Offsite Construction In Canada," written by Max Bell School Master of Public Policy students聽Mercy Nwosu Baidoo, Ian Lupton, Adrita Rahman, and Abdelrahman Sherif as part of the 2024 Policy Lab.
Access the summary and presentation below, and read their full report here.
The Canadian housing market is experiencing an acute crisis characterized by an insufficient supply of housing units to meet burgeoning demand. This shortfall has resulted in skyrocketing housing prices and rents, significantly diminishing affordability. To restore housing affordability, the federal government has estimated that 5.8 million new housing units need to be built over the next decade. This means that, in addition to the 2.3 million units that would normally be built in that period, an additional 3.5 million units are required to restore housing affordability in Canada by 2031. Traditional stick-built construction methods, time consuming, susceptible to delays, and requiring high labor intensity, are proving inadequate to address this crisis. Therefore, there is a pressing for innovative and productivity-enhancing solutions.
The question posted by the Canada Mortgage and Housing Corporation is,聽鈥淲hat can the federal government do to incentivize productivity-enhancing innovations in Canada鈥檚 residential construction sector to build more units of market housing each year?鈥�
During our research we explored policy options, including legislative and programmatic solutions, for the federal government to incentivize productivity-enhancing innovations in Canada鈥檚 residential construction sector. After months of research and stakeholder consultations, our report identifies offsite construction as a particularly promising solution. Offsite construction involves the construction of building components, in whole or part, in a controlled factory environment and transporting them to a final location for installation. This offers substantial benefits, including reduced construction timelines, improved quality control, and scalability for various types of residential projects.
Key Insights and Findings
A. Technological Innovations: The report highlights several cutting-edge technologies, including 3D printing, adaptive re-use, and advanced building. These technologies, while promising, currently face limitations as to their applicability in Canada including material availability, cost, and regulatory compliance. Offsite construction offers the most promising pathway to more housing units.
B. Stakeholder Consultations: 31 extensive consultations with housing experts, developers, government officials, and other stakeholders provided invaluable insights into challenges and opportunities within the housing market. These consultations underscored the need for a supportive regulatory framework and financial incentives to promote the adoption of offsite construction.
C. International Case Studies: The report examines successful offsite construction initiatives in China, Sweden, and the United States, providing valuable lessons on the need for enabling environments that facilitate higher adoption rates and successful implementation of modular construction.
D. Policy Recommendations: The report presents three primary recommendations:
- Legal and Regulatory Reforms: Establish a consistent regulatory framework across the country to streamline the adoption of offsite construction methods. This includes development and federal regulation of a single National Building Code for Manufactured Homes. We also propose amending the National Housing Strategy Act to invite provincial and territorial Housing Ministers to contribute to a truly National Housing Strategy.
- Financial Incentives: Develop financial vehicles to lower financial barriers to offsite construction growth and adoption, including supply-side and demand-side incentives. We propose providing capital support to firms to mitigate market volatility and help firms maintain their cash flows. Also, we propose federal interventions to drive more uptake of offsite construction, by requiring its use in federal housing programs, and by providing preferred rate direct lending, on a commercial basis, to offsite construction homebuyers.
- Skilled Workforce: Revise Canada鈥檚 skilled worker immigration point system to attract more skilled tradespeople by reducing point allocations for language proficiency and education and favouring point allocations for relevant construction work experience.
In sum, the adoption of offsite construction represents a fundamental shift towards industrialization of homebuilding, necessary to bridge the housing gap in Canada. This will require changes in policy, attitudes and ways of doing business. By embracing this productivity-enhancing innovation, linked with regulatory reforms and labor market improvements, Canada can effectively increase housing supply and potentially achieve its ambitious housing goals. The proposed strategies, grounded in data, research, stakeholder insights and international case studies, provide a roadmap for addressing an essential component鈥攊nnovation 鈥� of the housing crisis. This report calls on all levels of government to engage in a national dialogue on adopting these innovative solutions, to help ensure a sustainable and affordable housing future for Canada.
Download the full version of this report here.
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