Lyall: Modulate your enthusiasm
By Richard Lyall
for Canadian Contractor
May 7, 2026
If there were any lingering doubts about the severity of Canada’s housing crisis, the latest numbers should put them to rest.
We are not in a mild downturn or a cyclical pause. We are in a full-scale supply and affordability crisis - and the market signals are flashing red.
In Toronto, first-quarter condominium sales plunged to a 35-year low, with new project launches effectively frozen. Ontario's 2026 housing starts are projected to fall to near two-decade lows. The provincial budget forecasted 64,800 units, significantly below the 1.5 million target for 2031.
At the same time, affordability remains historically out of reach. Only one in six households in Toronto can afford to buy a home. Estimates suggest prices would need to fall by more than 60 per cent to restore affordability to previous generations.
In short, demand has weakened, supply has collapsed, and the affordability gap remains enormous. The residential construction industry is in bad shape.
Against this backdrop, policymakers are searching for solutions - and increasingly, attention has turned to modern methods of construction (MMC), including factory-built, modular, and prefabricated housing. The appeal is obvious. Build homes faster, more efficiently, and with fewer workers.
The questions is: How much can MMC help?
Research shows that factory construction can deliver real productivity gains. By shifting work off-site into controlled environments, builders can reduce weather delays, standardize processes, and run factory production in parallel with site preparation. The result is genuine on-site schedule compression - often in the range of 20 to 50 per cent.
That matters, especially in a sector where labour productivity has been declining. Between 2019 and 2024, construction productivity in Canada fell significantly, adding tens of thousands of dollars to the cost of each new home.
MMC also shines in specific niches. It is particularly well-suited to remote and northern communities, where labour shortages are acute and logistics are costly. It works well for purpose-built rental projects backed by institutional investors, where steady pipelines can support factory economics.
It has clear applications in student housing, supportive housing, and emergency or disaster-response situations, where speed and repetition are paramount.
However, while MMC represents real opportunities to improve how we build, it is not a silver bullet.
The reason?
The fundamental problem is that Canada’s housing shortage is not primarily a construction problem. It is a structural one. Land-use restrictions limit where housing can be built. Lengthy and unpredictable approval processes delay projects for years. Development charges and government-imposed fees add substantial costs. Infrastructure constraints prevent new communities from being serviced. Financing challenges make projects difficult to launch.
A home assembled in a factory still requires land, zoning approval, servicing, financing, and regulatory compliance. Faster construction does not translate into faster delivery if projects are stuck in approvals or cannot secure funding.
There is also a tendency to overstate the cost advantages of factory-built housing. While savings are often claimed to be 20 per cent or more, the evidence in Canadian conditions suggests a much narrower range - typically between zero and 10 per cent. In some cases, savings disappear entirely once transportation, customization, and site integration are factored in.
More concerning is the fragile economics of factory construction itself. Modular housing requires high upfront capital investment, steady order books, and consistent demand to remain viable. Globally, the track record is littered with high-profile failures - companies that scaled aggressively only to collapse under thin margins and volatile pipelines. Canada has not been immune to this pattern.
This does not mean MMC should be dismissed. It means it should be approached with clear-eyed realism.
That is precisely the position being advanced by RESCON. We are urging governments to support innovation - but to do so in a way that reflects the evidence. That includes streamlining regulations across Ontario, addressing sustainable funding challenges, and helping prefabricated homebuilders scale production responsibly. It also means ensuring that public investment is tied to demonstrated demand and viable business models, not optimistic projections.
These are sensible recommendations. Regulatory fragmentation, in particular, is a real barrier. Harmonizing standards and inspection regimes could make it easier for factory-built housing to scale across jurisdictions. Strategic procurement - such as bulk orders for affordable housing - could provide the stable demand needed to support factory operations.
It would require substantial co-ordination and co-operations amongst all levels of government and a willingness to confront entrenched interests.
Modern methods of construction can help at the margins. They can improve productivity, reduce timelines in specific contexts, and expand capacity in targeted segments. They deserve a place in a comprehensive housing strategy.
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.