Modular opportunities

Richard Lyall

We need to build an additional 3.5 million homes in Canada in the next six years – over and above the anticipated base level of 2.2 million homes – to have any hope of restoring housing affordability, according to latest figures from Canada Mortgage and Housing Corporation.

We are nowhere near that target.

Nationally, in 2023, actual housing starts in centres with a population of 10,000 or more were down seven per cent compared to 2022 figures. We are not producing enough new housing when we need it the most.

There are many reasons. High interest rates have stalled buying and inflation has driven up costs of materials and labour, making it difficult for builders to put up a home that’s affordable to a working family. Other obstacles such as exorbitant fees, taxes and levies, along with bureaucracy and red tape have also stymied production and made it difficult to get residential projects moving.

We must find ways to remove these barriers and figure out ways to speed up construction of new housing.

Off-site construction, whereby both low- and high-rise homes are manufactured in factories, much like how we mass-produce cars and cellphones, could be one solution to the housing problem. By fabricating building components or modules off-site in a controlled environment, homes can be manufactured faster, since modular methods permit concurrent execution of multiple tasks, with no weather delays, compared to the mostly sequential nature of traditional construction.

Because the work can be done indoors in a factory, the work is also safer as there is less traffic to and from sites by suppliers and trades, which also reduces carbon emissions. Surveys have also shown that assembly line methods yield faster schedules and reduced costs. Meanwhile, using standardized components for mass-produced housing is cost-effective and reduces waste.

In January, federal Housing Minister Sean Fraser told BNN Bloomberg that the next phase of Canada’s housing policy will be focused on increasing supply – and factory-built homes will be part of that.

However, for that to happen there are regulatory issues that stand in the way of widespread adoption. Layers of restrictive government regulations and zoning bylaws often are problematic. There is also the small matter of financial assistance and tax breaks to incentivize companies to build more modular housing manufacturing plants in Canada, as well as the critical need to provide research and development funding so the industry can keep pace with new technology.

Education is also needed to raise awareness of the solutions offered by off-site construction, perhaps through demonstration testing and training of the latest technologies. Though off-site construction increased to six per cent of all construction starts in North America in 2022, up from 2.14 per cent in 2018, there is still a lack of awareness amongst professionals and trades.

A recent report released by the CSA Public Policy Centre noted that the most fundamental barriers to modular construction are that it is poorly understood, and industry regulators have limited experience with modular projects, which results in longer review and approval times.

The report, called Seizing the Modular Opportunity, suggests that guidance material and training be developed for regulators, that building code gaps and inconsistencies be addressed, that procurement methods be developed to encourage engagement by modular builders, that access to financing be improved, and that evidence be gathered about the merits of modular.

Off-site construction is not a new concept. Modular buildings have been used in the past to add space to hospitals and schools, and as temporary living quarters for workers on project sites. Technological advancements have now made modular units appealing for housing.

Don’t get me wrong here. Off-site construction will not solve all our housing woes. We still must address the other issues that are slowing residential construction; namely, the unnecessary rules, regulations, procedures, and inflated and expensive add-ons to housing costs. But given our present housing predicament, it is an attractive alternative.

In the Greater Toronto Area, for example, the cost of building a 13- to 39-storey residential tower now ranges from a low of $295 to a high of $380 per square foot – that is $10 more than a year ago.

There is now a public appetite for bold action. Mass production of housing off-site would lower the cost while bringing both low- and high-rise units to market quicker.

In many parts of the world, off-site construction is deemed a viable and cost-effective way to address the critical demand for housing. In light of the housing supply and affordability crisis that’s hitting Canada, it would be wise to look to this construction method as a way of building more new homes at an accelerated pace.

Richard Lyall is president of the Residential Construction Council of Ontario (RESCON). He has represented the building industry in Ontario since 1991. Contact him at media@rescon.com.