Policy support needed to enable a sector transition to factory-built construction

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Kevin Lee, CHBA CEO

This year started off with a bang for CHBA.

With Budget 2024 quickly approaching, CHBA government advocacy has been running at full tilt over the past few months.

In February, at CHBA’s annual Day on the Hill, the very high number of MP meetings and presence of still more officials at the evening reception, including members of the Prime Minister’s office, showed how our issues are top issues for politicians. With more than 62 meetings, CHBA delegates reiterated the challenges the residential construction industry faces in getting more market-rate housing supply built, offering tangible solutions such as how to address labour shortages in the sector, lower imposed costs that add to affordability challenges, and more.

Top priority

The top priority was to put forth recommendations that would immediately boost homebuilding at a time when housing starts are declining. With CHBA’s latest Housing Market Index (HMI) indicating record low builder sentiment for single-family dwellings (and nearly record low sentiment for multi-family), explaining to policymakers how high interest rates and tight financial conditions are blocking much-needed housing starts is imperative.

As our industry knows too well, builders can’t build if buyers can’t buy. CHBA’s title recommendation to MPs and policymakers during Day on the Hill was to introduce 30-year amortization periods for insured mortgages on new construction homes. This is a simple, no-cost way for government to enable well-qualified first-time buyers – who are currently locked out of the market due to high rates and overly-tight mortgage rules – to become homeowners. It will also enable the conditions to build more housing without creating demand in a supply-constrained market, since only new homes would be eligible for the longer amortization period.

Given the need to get housing starts turned around, and the growing interest by government officials to adopt this ask, as well as the significant media take-up it garnered after Day on the Hill, CHBA hopes to see 30-year amortizations for insured mortgages on newly built homes put into place as early as this year’s Budget.

Sector Transition Strategy

Shortly after the Day on the Hill, CHBA also officially launched the CHBA Sector Transition Strategy with a press conference on Parliament Hill, which gained significant media traction across the country. The Strategy details the changes and supports needed to enable the industry to double housing starts and build the 3.5 million homes – over and above the 2.3 million homes the industry would normally build – required over the next decade to close Canada’s housing supply gap and improve housing affordability. Of course, these targets are not possible with the status quo, which is where the Sector Transition Strategy really comes in.

The Strategy outlines several recommendations for government to support the industrialization of the residential construction sector, namely through factory-built solutions like modular construction. CHBA members know well that while factory-built construction boasts many benefits, it also comes with high capital costs and risks that make it difficult for builders to weather the boom-and-bust cycles of the housing market.

So, to de-risk the transition to factory-built systems, CHBA’s Sector Transition Strategy calls for holistic government action to overcome those barriers, de-risk investments, and create an environment where factory-built production can flourish.

Four key areas

This can be achieved by government setting the stage through making changes in four key areas: Financial system, policy, labour and productivity change. The recommendations outlined in the strategy lists levers available to government to support the industry in its move to factory-built, including grant funding for soft costs for site-builders to transition to factory-built, using strategic financing to incent and de-risk investment in factory-built plants and equipment, and much more.

For a deep dive into CHBA’s recommendations for government to remove the barriers preventing new housing supply and support a move to factory-built construction, read more about CHBA’s Day on the Hill and Sector Transition Strategy on page 21.

CHBA remains engaged with the federal government on these asks and expects to see new measures to support the sector in the upcoming federal budget.