As Canada grapples with a deepening housing shortage, Prime Minister Mark Carney has set an ambitious target — to double the rate of homebuilding and deliver 500,000 homes per year for the next decade. Similarly, Ontario Premier Doug Ford aims to construct 1.5 million homes by 2031.
But with housing starts on the decline, experts warn that both targets might be little more than political dreams. Could the answer lie in offsite construction methods like modular, prefab, and mass timber homes?
The Reality: Housing Starts Falling Fast
According to latest data, Canada recorded 245,791 housing starts in August — a steep 16% drop from July’s numbers and far below expectations. In Ontario, starts have plunged by 23% compared to 2024.
These declines paint a grim picture for the housing sector, even as demand continues to rise nationwide.
Build Canada Homes: A New Hope?
To reverse this trend, Carney’s government recently announced the $13-billion Build Canada Homes initiative.
The program aims to help builders speed up construction timelines and adopt innovative technologies like factory-built and modular housing.
“This kind of innovation allows workers to produce more within the same amount of work hours,” says Tasnim Fariha, senior policy analyst at the C.D. Howe Institute.
Can Offsite Construction Save the Industry?
The C.D. Howe Institute’s new report, Building Smarter, Faster: Technology and Policy Solutions for Canada’s Housing Crisis, explores how offsite construction could help meet housing goals and boost productivity.
The report highlights that factory-based construction can move up to 60% of the building process off-site, giving builders greater control over costs, materials, and timelines.
Key Benefits of Offsite Construction
- Reduced delays due to weather and supply chain issues
- Improved quality control in factory settings
- Lower long-term costs through efficiency gains
- Faster delivery times for new housing units
Learning from Scandinavia
Fariha points to Sweden and other Scandinavian countries as success stories. These nations have effectively scaled modular and mass timber housing through coordinated policies and government-backed supply chains.
“Canada has moved slowly, with fragmented standards and limited incentives for adoption,” Fariha explains.
This slow adoption has limited innovation, even as demand for affordable housing continues to soar.
Challenges Holding Canada Back
While modular and prefab methods sound ideal, they aren’t without challenges.
The report found that these technologies have not consistently delivered cost savings in the Canadian context due to:
- High upfront investment costs
- Complex insurance requirements
- Fragmented provincial regulations
- Limited standardization in building codes
These hurdles prevent modular builders from fully realizing potential savings and scaling production nationwide.
Policy Reforms Are Critical
The C.D. Howe Institute recommends a policy-driven approach rather than a single technological fix. Governments must:
- Streamline permitting and approval timelines.
- Harmonize building codes across provinces and municipalities.
- Offer financial incentives and tax credits for modular construction.
- Invest in workforce training for digital and prefab technologies.
“The vision must go beyond funding,” Fariha says. “To build smarter and faster, we need to modernize the rules and systems that shape how homes are built.”
The Role of Build Canada Homes
The Build Canada Homes initiative shows promise but will need regulatory and logistical reform to succeed. Without these, even a $13-billion investment might fail to deliver meaningful results.
The report emphasizes that standardized transportation rules and streamlined inspections could unlock massive efficiency gains for factory-built homes.
Streamlining Construction and Financing
To truly scale offsite construction, municipalities and provinces should:
- Eliminate duplicate inspections that slow projects.
- Standardize transportation laws for modular components.
- Provide low-cost financing and tax credits to incentivize innovation.
These changes would not only cut project costs but also shorten construction timelines, helping Canada meet its ambitious housing goals.
The Path Forward
With housing demand rising and labour shortages deepening, offsite construction offers a realistic way forward. But as the report warns, technology alone isn’t enough — it must be backed by policy innovation and industry collaboration.
Canada’s housing crisis requires bold action, and offsite methods could be a vital piece of the puzzle — if governments and builders work together to remove the barriers.
Conclusion
Offsite construction might not be the magic bullet, but it’s one of the few strategies that can help Canada catch up to its housing demand.
By embracing modular, mass timber, and factory-built housing — and by fixing outdated regulations — Canada could finally build smarter, faster, and more affordably for the generations to come.