Ontario Construction News staff writer
A new report from RBC Thought Leadership argues modern methods of construction (MMC) could play a critical role in addressing Canada’s worsening housing affordability crisis by accelerating homebuilding, lowering costs and easing labour shortages.
The report, titled A New Blueprint: How Modern Methods of Construction can help solve Canada’s housing crisis, was written by housing policy lead Stephanie Shewchuk and warns Canada must build as many as 480,000 housing units annually through 2035 to restore affordability and meet projected demand — far above current construction levels.
“The challenge is clear: we’re not building enough affordable homes quickly enough through conventional means alone,” Shewchuk said in the report. “MMC, including modular, panelized and prefabricated approaches, offers a path to accelerate delivery and lower costs.”
MMC includes modular construction, prefabricated wall panels, bathroom pods, 3D printing and other digital construction technologies aimed at improving efficiency and shortening project timelines.
According to the report, factory-based construction can reduce build timelines by 20 to 50 per cent while improving quality control, energy efficiency and airtightness. It also reduces onsite labour requirements and simplifies coordination among trades.
Despite growing interest, MMC remains a small share of Canada’s housing market. The report estimates full modular construction accounts for about 7.5 per cent of the construction market, representing roughly $5.1 billion annually, while some MMC methods make up as little as two per cent of housing starts.
Shewchuk identifies three key conditions needed to scale MMC in Canada: regulatory and policy frameworks adapted to off-site construction, stronger market conditions supported by industry integration and skills development, and financing systems designed for factory-based production.
“MMC is not a suite of products that can be dropped into the existing homebuilding system,” the report states. “A fundamentally different approach will be required — one that requires coordinated and sustained commitment across government, industry and the financial sector.”
The report points to fragmented regulation as a major barrier. While Canada has a national building code framework, provinces and municipalities often interpret and apply it differently, creating inconsistent approval processes, inspections and warranty requirements across jurisdictions.
Financing is also cited as a significant challenge. Traditional construction lending is tied to onsite milestones, while modular construction requires large upfront investment in factory production before units reach the site. This mismatch increases financing risk and often forces developers to commit more equity earlier in projects.
Canadian lenders and insurers, the report notes, have been slower to adapt products for MMC compared with markets such as the United Kingdom and Australia.
Geography also presents challenges, with transportation costs potentially eroding savings when modules must travel long distances, particularly to northern and remote communities. However, the report also highlights MMC’s potential benefits for those same regions, where traditional construction is often difficult and expensive.
Several Canadian organizations are already expanding their use of off-site construction.
Ottawa-based developer Caivan is producing four to seven homes daily using factory-built systems and plans to scale to 5,000 homes annually. The company is also working with federal and territorial governments and Inuit organizations to deliver 750 modular homes in Nunavut.
Meanwhile, Habitat for Humanity Greater Toronto Area is using modular construction for a 33-unit affordable housing project in Toronto’s east end, while Bonville Industries continues expanding its prefabricated housing operations across Quebec and Ontario.
The report calls for coordinated action across government, industry and finance, including harmonized building codes, faster municipal approvals, procurement policies that prioritize modular housing and financing tools tailored to off-site construction.
It also highlights recent federal efforts to support MMC, including commitments to modernize national building codes to better accommodate factory-built housing and speed approvals for innovative construction methods.
The report points to Canada Mortgage and Housing Corporation and the federal housing agency Build Canada Homes as key players in scaling up modular construction through financing reforms and procurement programs.
Internationally, the report cites Sweden, Japan, the United Kingdom and Australia as examples of jurisdictions where MMC has gained traction when supported by aligned policy, industry structure and financing systems.
Sweden now builds roughly 45 per cent of its homes using off-site manufacturing, while Japan has developed a highly industrialized housing sector. The UK and Australia have also introduced targeted procurement and financing initiatives to encourage adoption.
The report concludes that MMC alone will not solve Canada’s housing crisis, but argues it could become an important component of a broader housing strategy if governments and industry commit to long-term, coordinated reform.
