RBC: Construction must ‘modernize or die’

Key Takeaways:

• Labor productivity in the construction sector fell 37.3% between 2001 and 2023. Modern methods can build homes 50% faster and 40% cheaper than traditional stick-frame construction.
• Inconsistent provincial and municipal building codes create a patchwork of regulations that hinder industrial scale.
• Traditional construction financing is misaligned because it releases funds based on on-site milestones rather than factory production. Developers are forced to front-load equity to cover costs before modules arrive on-site.

The Whole Story:

A new report from RBC highlights that Modern Methods of Construction (MMC) can deliver homes 50% faster and 40% cheaper than traditional builds, offering a solution to a 37.3% decline in construction productivity since 2001.

Researchers say the industry is facing a “modernize or die” moment, but a web of fragmented regulations and archaic financing is keeping the technology on the sidelines.

The report paints a stark picture of a sector in decline. Between 2001 and 2023, labor productivity in Canadian construction dropped by 37.3%. This efficiency gap comes as the Canada Mortgage and Housing Corp. (CMHC) warns the country needs 480,000 new units annually until 2035 to restore affordability—a target the industry hasn’t come close to hitting in a quarter-century.

The scale of the challenge

Currently, MMC accounts for just 7.5% of the Canadian construction market, valued at approximately $5.1 billion annually. To reach even 15% of the annual supply need, RBC researchers say Canada would need to develop dozens of new factories at current production capacities.

The report identifies several high-profile practitioners successfully navigating the space:

• Caivan: The Ottawa-based developer is producing four to seven houses daily at its off-site facilities, with a roadmap to reach 5,000 units a year.
• Bonville Industries: A fourth-generation business that has manufactured over 45,000 homes, specializing in the “missing middle” of 4-to-12 unit buildings.
• Habitat for Humanity GTA: Utilizing modular technology for a new 33-unit affordable housing project in Toronto slated for completion in 2027.

Regulatory and financial bottlenecks

Industry insiders cite a “patchwork” of provincial and municipal building codes as the primary barrier to scaling. A manufacturer looking to sell across provincial lines currently faces inconsistent inspection regimes and approval processes that erode the cost-savings of factory production.

The report also highlights a fundamental mismatch in how projects are funded. Traditional construction financing is built on “draw schedules” that release funds as on-site milestones—like foundations or framing—are achieved.

“For volumetric modular construction, the largest costs are incurred in the factory, often before a single module arrives on site,” the report notes. This leaves developers to finance the production phase out of their own pockets, which can cancel out the efficiency gains of the method.

A call for systemic change

The federal government has begun to signal a shift. In the 2026 Spring Economic Update, Ottawa committed to updating National Model Codes to better support factory-built housing. Furthermore, the federal housing agency “Build Canada Homes,” launched in September 2025, is now mandated to accelerate MMC implementation.

RBC suggests Canada look to international leaders for a roadmap. In Sweden, 45% of new housing is produced off-site due to decades of code harmonization and standardized design. In Australia and the U.K., banks have already adapted protocols to allow lenders to advance funds against verified factory production milestones.

The report concludes that incremental changes will not suffice. Achieving a “tipping point” will require coordinated action across government procurement, building code alignment, and the creation of specialist teams within financial institutions to assess MMC risk.