Modular housing gains traction as Canada’s immigration numbers soar

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Canada’s housing stock is in a vise of its own making.

According to a 2023 Desjardins report, Canada needs to increase its housing starts by 50 per cent immediately to keep up with surging immigration levels. Last year, Canada welcomed 437,180 new permanent residents and plans to introduce almost half a million permanent residents each year between 2023 and 2025.

Yet, current construction rates are unable to meet expected demand, leaving an estimated shortfall of 3.5 million housing units by 2030, according to Canada Mortgage and Housing Corp. (CMHC).

One touted fix is offsite construction, known also as modular or prefabricated construction. This includes homes or building panels that are manufactured in large, controlled factories. Once complete, sections called modules can be rapidly assembled at the construction site.

Modular buildings are already popular in cities such as Vancouver and Toronto, where they’re being tested as a solution to homelessness. Amid the looming threat of a federal housing crisis, how will modular homes fare on a national scale?

At a glance, the benefits of modular housing appear plentiful. Timelines for the prefab construction can be up to 50 per cent faster than traditional builds, CMHC told The Globe and Mail by e-mail.

Andy Berube, vice-president of business development at NRB Modular Solutions – which has prefab projects in Dawson Creek, B.C.; Oshawa; Jasper, Alta.; and more – agrees that modular construction is fast, but says it isn’t necessarily less expensive upfront. Much of the saved cost, Mr. Berube says, comes from reduced schedules, which in turn bring reduced risk, reduced labour costs, averted weather and supply chain issues, and less community disruption around the construction site.

Some companies, including Vancouver-based Nexii, have also created modular panels that are non-toxic, energy-efficient, fire, pest and water-resistant, which may reap cost savings down the line.

Former Vancouver mayor Gregor Robertson, who now serves as the executive vice-president of strategy, partnership and impact at Nexii, says that his time in office offered him unique insight into the challenges of buildings and housing.

“Homes and buildings are the last and only product we build from scratch onsite – everything else is manufactured,” Mr. Robertson says. “[Construction] is the last industry to embrace much higher efficiency, and getting away from custom, bespoke design for each unit.”

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Nexii recently completed its 30th building, and is working on 23 projects on the New York State Thruway. But Mr. Robertson says scaling the firm’s housing arm has been a challenge. While Nexii raised $200-million in its early years, worsening economic conditions have made it tough to find new investors. Nexii chief executive officer Stephen Sidwell said in a 2022 CNBC interview that the company turns away 99 per cent of its leads because of a lack of supply.

That aside, government investment is increasing. Since 2020, the government of Canada has pledged $4-billion as part of its Rapid Housing Initiative (RHI), a program aimed at the rapid construction of new housing in Canada. This includes over 10,000 housing units and 3,200 modular units, which are currently “in different stages of construction,” CMHC told The Globe and Mail.

Mr. Berube says his company has been involved in a number of RHI projects this year. “I think it’s a fantastic initiative to support the housing crisis,” he says.

For NRB Modular Solutions, the biggest barrier to adoption is interest and acceptance of offsite construction by architects and general contractors. Still, Mr. Berube says, interest is growing, in part because of more political attention at all levels of government.

Kevin Lee, CEO of the Canadian Home Builders’ Association (CHBA), has also noted increased demand for modular housing. Mr. Lee says that the CHBA’s housing market index, which pulls data from home builders across the country, found that 29 per cent of builders across Canada are using some sort of factory-built, prefabricated approach. This mostly involves panelling, or sections of walls, he says, rather than fully built homes. Over the next three years, 90 per cent of those surveyed are considering a modular-based approach.

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For Mr. Lee, innovation is just one of many factors in slowing the housing crisis. Labour remains a top concern – especially with 22 per cent of the CHBA’s residential construction workers set to retire over the next decade. The wave of immigration that could strain the country’s housing stock could also help fill it out.

“We’re losing people,” Mr. Lee says. “We need to rely heavily on immigration to backfill some of those spots moving forward.”

Most agree there is no singular answer to the housing crisis. Benjamin Tal, managing director and deputy chief economist at CIBC Capital Markets Inc., says Canada needs concentrated efforts between private and public partnerships to incentivize purpose-built rentals, encourage research and development in the construction space, and act quickly to fill gaps within the trade labour shortage to improve onsite productivity.

“My fear is that the [housing] crisis will lead to some sort of anti-immigrant sentiment,” Mr. Tal says. “But it’s not about the number of immigrants, but [rather] the number of immigrants in trades and construction.”

“Newcomers must be part of the solution,” he says.

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