Government of Canada Housing Proposals Will Make Residential Projects More Expensive

by Duncan Thomson | Jun 12, 2025 | Current Market

Canada’s new PM, Mark Carney, plans to use prefabricated and modular housing methods to solve Canada’s housing problem. Trouble is, it will not work. The systems have been around for decades, beginning substantial use in the early 1950’s. They would have been used long agio for mass housing projects if those forms of housing were the path to less expensive housing at a quicker delivery rate. Canada has some exceptional builders. All are cost and time conscious and most look for every nickel of savings. The primary reason they don’t use prefabricated or modular housing methods is – they cost more, a lot more. A second reason is that most voters of most municipalities do not want the stigma of modular or prefabricated homes in their neighbourhoods. The perception of inferior housing the two forms conjure up goes back decades. This viewpoint that prefabricated or modular forms of housing as being a solution really misses thew real issue.

There are four main problems that cause Canada’s lack of housing at affordable costs:

1. Average Canadian family incomes are very low and one of the lower ones in the OECD. In constant 2022 dollars, average family incomes in 2002 were almost identical to those in 1976 (Stats Canada, U of T). You read that right. In almost 50 years average family incomes did not change. Even if the houses are built, people cannot afford to buy them, as we are now seeing in the market. Builders pull production back and housing units available drop and housing becomes a bigger problem.
2. Severe labour scarcity in the trades is the biggest block to more housing. The industry simply does not enough qualified trades people to get the job done, even if the buyer group had the money to buy. Labour scarcity equals much higher labour coats per hour which in turn translates into higher housing costs per unit.
3. For years the Government and its permitted policies of longer amortisation periods, and lower down payments only encouraged excessive demand as buyers, who otherwise could not, came into the market. Existing capital pools and labour pools are taxed to beyond their realistic capacities to meet the artificial demand. The result are prices much higher than they ever would have been.
4. Many municipal rules and regulations are very necessary for life safety requirements and to recover legitimate municipal infrastrutture costs that rightly should be borne by the new home owner. The issue is that most municipal planning and permitting departments are substantially under staffed. Municipal governments need to streamline the development and building permit processes and hire more staff. Not doing so only adds to carrying costs and reduces production due to delays.

The solution to high housing costs are:

1. Canada’s Federal Government should forget being involved directly in the building of houses. Its only focus should be ensuring and incentivising massive increases in production per capita and thus individual incomes. Then people could realistically afford to pay for a house.
2. Like in B.C., across the country all provincial school systems need to start to provide trades education starting in grade 10. That way by the time a student has graduated, he or she will have all the formal training completed and within a year of graduating will complete field training and have a red seal trades ticket. 19 years old and they will be earning good money and have the skill sets and formal qualifications for life long employment.
3. Reduce amortisation periods to a maximum period of 20 years. Increase down payment amounts to a minimum of 15% for an insured mortgage and 25% for a conventional non-insured mortgage. This will force buyers to save more for a down payment and to qualify for a mortgage at a reduced amortisation period. The result is demand reduced to more normal levels of interest.
4. Municipalities need to stream line development and building permit processes by setting parameters for each zoning that if a proposed project is within the the envelope of the parameters set, then the project licensed architect can issue the permits. And, hire more staff to cope with greatly increased housing demand.

Thank you for your consideration.