Canada is facing a worsening housing crisis. Home prices have exploded, with 45 per cent of Canadians saying they are deeply worried about finding affordable housing.
Authors
- Ehsan Noroozinejad Farsangi
Visiting Senior Researcher, Smart Structures Research Group, University of British Columbia
- T.Y. Yang
Professor, Structural & Earthquake Engineering, University of British Columbia
The country needs to build an additional 3.5 million homes by 2030 to achieve housing affordability. However, housing supply is lagging well behind that target even as demand continues to rise , driven largely by population growth and immigration.
Into this crisis have come new costs. In March 2025, the United States imposed 25 per cent tariffs on Canadian steel and aluminum imports . Canada immediately hit back with its own 25 per cent duties on U.S. steel and aluminum , affecting roughly $12.6 billion of steel and $3 billion of aluminum goods.
In practical terms, that means higher costs for key building materials like steel beams, aluminum cladding, appliances and machinery.
Industry groups say these duties will drive up the price of new construction and further erode affordability . In a market already strained, adding tariff charges is like pouring salt on an open wound: it makes every new home more expensive to build and to buy.
Factory-built housing offers a way forward
Modern methods of construction , such as modular and prefabricated housing, are a promising answer to the housing shortage. These methods involve large components of houses being produced in factories and assembled at their final location.
Factory-built housing can be done about 50 per cent faster and up to 35 per cent cheaper than site-built homes.
Importantly, this speed and affordability do not come at the expense of quality or energy performance. Canadian-built modular homes achieve top efficiency ratings and reach net-zero energy while frequently delivering superior performance compared to site-built homes. They are also greener, as controlled factory processes produce far less waste.
In Japan, modular factories produce over 15 per cent of all new housing . Sweden's construction industry heavily relies on prefabricated construction as well; it is present in approximately 84 per cent of detached houses.
Other countries are rapidly scaling up modern construction methods. Singapore mandates every public housing project to use modular techniques because this enables mass apartment production with efficiency .
The combination of expensive labour costs and immediate housing needs makes Australia , the United Kingdom and parts of the United States optimal markets for modular construction expansion.
Canada can lead in modular housing
Canada has key advantages that make it well suited to expand modular and prefabricated housing. In particular, it has a strong forest products sector for supplying wood panels and engineered timber, a skilled construction and technology workforce and a growing policy drive for lower-carbon building .
Canadian builders have already shown they can deliver modular housing at scale. Launched in 2020, Canada's Rapid Housing Initiative committed $1 billion to modular projects, followed by another $1.5 billion in 2021 to quickly house vulnerable populations.
The Rapid Housing Initiative exceeded its target, creating nearly 4,700 new homes in short order. It proved that factory-built housing can be both fast and high-quality in Canada.
Canada has the opportunity to build on that success. The 2024 federal budget created a Homebuilding Technology and Innovation Fund aimed at expanding prefabricated housing. It set aside $50 million through Next Generation Manufacturing Canada (to be matched by industry) and up to $500 million in low-cost loans from the Canada Mortgage and Housing Corporation for prefabricated apartment projects.
Prime Minister Mark Carney has also shown interest in modular and prefabricated housing technologies to create sustained demand.
Provinces like Ontario and British Columbia are focusing on modular construction to cut red tape and better understand how to expand it. Canada's National Research Council is also consulting on aligning building codes and inspections for factory-built homes with the help of Canadian universities.
A global alliance on modular housing
As Canada faces a deepening housing crisis, it has the opportunity to turn today's tariff tensions into deeper international partnerships.
By forming an international affordable housing consortium, Canada could collaborate with countries that have succeeded in modern construction methods, like Sweden, Japan, Australia and Germany, to share knowledge. Together, these nations could harmonize building standards and invest in research.
Here are five practical moves Canada can take to build this global modular housing alliance:
1. Create a zero-tariff modular homes club.
Canada should use the trade tools it already has , like the Canada-European Union Comprehensive Economic and Trade Agreement and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership , to eliminate most tariffs with the European Union and Asian countries. Canada should negotiate an add-on protocol that lets modular components, such as panels and factory equipment, cross borders without tariffs.
2. Launch a joint show-home projects in partner countries.
We propose a "FastBuild 1000 initiative" initiative that would see each member nation commit to building a minimum of 1,000 modular homes. Pilot sites could include Vancouver, Sydney, Hamburg and Osaka - urban centres in countries already familiar with modern construction techniques. Engineers could travel across countries to test how modules fit different climates and design codes, while giving factories steady orders.
3. Pool global buying power for materials and appliances.
Canada and its partners could form a modular materials co-operative that bundles steel, engineered timber, heat pumps and windows. The proposed system should leverage economies of scale in factory production to make the final product much cheaper.
4. Open-source designs and one-click certifications.
Ottawa's catalogue of pre-approved housing designs could be expanded into a global online catalogue where partner countries can download and adapt pre-existing designs while keeping the structure safe and secure. Simplified, one-click certification would help speed up approvals across borders.
5. Create a 'modular skills passport' and research and development hub.
Canadian universities and colleges could train workers through micro-credentials in areas like offsite manufacturing, digital construction, robotics, penalization and on-site assembly. Some countries like Japan have a huge prefabrication industry valued at over $24 billion . Linking research and development would give Canada access to the latest technologies while offering partner countries entry into the Canadian construction sector.
By investing in this kind of international collaboration, Canada can address its domestic housing crisis while leading a fast, green housing revolution that makes homes affordable worldwide.
Dr. Ehsan Noroozinejad has received funding from both national and international organizations to support research addressing housing and climate crises. His most recent funding for integrated housing and climate policy comes from the James Martin Institute for Public Policy. He has also been involved in securing funding from NSERC and Mitacs.
Prof. T.Y. Yang secures funding from national and international organizations to develop innovative solutions for housing and climate crises, with a focus on modern methods of construction. His most recent funding has been from NRCan, NSERC and Mitacs.
