Modern methods of construction are part of the toolkit, but not the whole thing

By Richard Lyall

for Canadian Forest Industries

May 20, 2026

The decline in homebuilding, which affects the entire wood and forest products industries, has generated numerous bold ideas, with modular, prefabricated and factory‑built housing - often grouped under the banner of modern methods of construction (MMC) - as one of the most prominent.

Advocates rightly point to faster build times, factory efficiency and the promise of innovation in a sector that has struggled with productivity for decades.

While it isn’t a silver bullet for all that ails the residential construction sector, it does belong in the housing toolkit.

Offsite construction methods, including modular and factory-built housing, offer valuable labour productivity benefits and niche applications such as remote communities, purpose-built rentals, and emergency housing.

However, scaling up requires financial support, streamlined regulations, and subsidies as was recommended by the Standing Senate Committee on Banking, Commerce and the Economy.

That must happen alongside structural reforms in land use, approvals, and infrastructure to effectively address housing supply challenges.

But if offsite construction is to play a meaningful role in Canada’s housing response, it must be understood clearly. It is not new. It is not a cure‑all. And it cannot, on its own, close Canada’s housing supply gap. What it can do - and do well - is supplement a comprehensive housing strategy, filling real gaps where conventional construction consistently falls short.

That distinction matters, because Canada does not suffer from a single construction problem. The primary drivers of undersupply are structural: restrictive land‑use rules, lengthy approvals, infrastructure shortages, development charges and financing constraints.

No form of construction, factory‑based or otherwise, escapes those barriers. Faster assembly does not mean faster housing delivery when projects spend years waiting for zoning or servicing.

Where offsite construction adds genuine value is in well‑defined niches - and in addressing labour productivity, one of the construction sector’s most persistent weaknesses.

Factory‑based construction offers real, measurable productivity advantages. Work takes place in controlled environments, with standardized processes, repeatable designs and less downtime. Site and factory timelines can run concurrently, compressing on‑site schedules by 20 to 50 per cent in many projects. That matters, particularly at a time when construction labour productivity in Canada has been falling, adding tens of thousands of dollars to the cost of an average unit.

Those benefits are most powerful where projects are repetitive, predictable and capitalized for scale. Purpose‑built rental housing backed by institutional capital, supportive and student housing, military accommodations, and government‑procured affordable housing all fit that model. So do remote and northern communities, where on‑site labour is scarce, costly and unreliable, and emergency or disaster‑response housing, where speed of occupancy is paramount.

There are some caveats to offsite construction, and they need to be considered. The best available evidence suggests that cost reductions in Canadian conditions tend to be modest - often in the range of zero to 10 per cent - once transportation, financing, customization and local site costs are included.

Offsite construction is also capital‑intensive, with high fixed costs, thin margins and a constant need for a stable order book. Globally and in Canada, many modular ventures have failed not because of poor intentions, but because demand was too volatile and policy support too episodic.

That is why it is critical to have financial and regulatory support. The Senate committee recognized this reality, recommending that the federal government support small and medium‑sized enterprises seeking to modernize construction, with a particular focus on modular and factory‑built housing.

Importantly, the committee also urged Ottawa to consider offering subsidies to help create demand - echoing the experience of countries like Sweden, where government‑backed demand, not wishful thinking, supported industrialized housing over time.

Ontario’s construction sector needs a similar approach. Innovative offsite builders cannot scale on pilot projects and press releases alone. They require predictable procurement, shared‑risk mechanisms for expansion, favourable loan terms and tax policies that recognize the upfront capital costs unique to factory production.

Purchasing guarantees or bulk orders - particularly through affordable housing and public‑sector programs - can provide the stable demand that factories need to survive, invest and innovate.

Regulatory reform is equally critical. Fragmented provincial and municipal standards, inconsistent inspection regimes and duplicative approvals erode many of MMC’s core advantages. Streamlining and harmonizing approvals across jurisdictions would reduce uncertainty and lower costs.

National mutual recognition of factory certification would further support scale, especially for builders operating across provincial borders.

Offsite construction has a meaningful place in Canada’s housing strategy. But to increase housing supply, other reforms are just as critical. We need land-use liberalization, faster approvals, infrastructure investment and sensible development charges.

MMC can complement those reforms. It is part of the toolkit - but not the whole toolbox.

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.