Scaling Up Housing Innovation: Insights from Developers in Canada

Executive Summary

In September of 2023, the Canada Mortgage and Housing Corporation (CMHC) estimated that by 2030, an additional 3.5 million housing units must be built to restore housing affordability. This looming crisis puts immense pressure on the construction industry to ramp up housing production.

Housing innovations, such as permit-ready designs, prefabrication, and modular construction, offer solutions to build faster and more efficiently across the country. However, these innovations can only increase the housing supply if developers and builders choose to adopt them. Therefore, understanding the drivers and barriers faced by developers is crucial for scaling up housing innovation and addressing the supply shortage.

This report will distill insights from interviews with 26 builders and developers across Canada. Our aim is to help innovators maximize their impact by following recommendations to drive adoption, as well as to inform policymakers about the conditions and incentives necessary for fostering innovation in the construction industry. Together, these steps can improve housing supply outcomes.

Our research suggests that the core factors influencing developers and builders remain unchanged; demand, cost, time, and risk are still central to project choices. These elements form the key levers for both innovators and policymakers alike. However, new industry challenges—including rising material costs, skilled labor shortages, high interest rates, and most significantly, delays in approval processes—are problems that innovative solutions can help solve. To succeed, innovations must demonstrate:

• Cost-effectiveness
• Significant time-saving potential
• No greater risk than traditional methods
• Adaptability to local regulations and market conditions

Exploring the barriers to adopting specific innovations reveals unique challenges for innovators. In today’s context, developers are drawn to prefabricated and modular construction to save time and reduce labor costs. However, barriers such as high upfront costs, perceived risks, and uncertainty about time savings hinder widespread adoption. Permit-ready designs, aimed at easing municipal approval bottlenecks, face limited industry penetration and skepticism from developers, who argue that building permits aren't the main obstacle—zoning approvals and neighborhood opposition are the real challenges. 

To overcome adoption hurdles and reshape the narrative around their respective innovations, innovators can leverage trusted channels such as professional organizations, conferences, and technical partners to build a portfolio of case studies that address key barriers or perceptions. 

Significant opportunities exist for policymakers to support innovation. Developers cite increasingly burdensome municipal requirements as an obstacle to keeping sale prices low, while infrastructure delays in high-growth areas add costly hold-ups, making innovative projects harder to execute. Alignment between federal, provincial, and municipal goals, as well as streamlined regulatory frameworks, is essential for innovations to thrive. Government funding programs that mandate innovative solutions have successfully influenced developer behavior; however, ongoing monitoring is still critical to ensuring these initiatives achieve their intended outcomes.

This report outlines the current landscape for developers and builders, delving into the conditions necessary for innovation to flourish. It highlights key strategies for increasing the adoption of innovations like prefabricated and modular construction and permit-ready designs, offering actionable insights for both innovators and policymakers.

Herein, we use the term “developers” to refer to both builders and developers.