National housing agency says productivity losses since the pandemic account for new home price increases
Weak productivity in Canada's residential construction sector has become a multibillion-dollar problem.
Since 2019, declining efficiency in homebuilding has added an estimated $6 billion to $8 billion in construction costs, accounting for up to 20% of new home price increases, according to new analysis from Canada Mortgage and Housing Corporation (CMHC).
"Productivity is critical, especially in residential construction where Canada's challenges are most acute. Industry has a key role to play, and governments can support that progress by establishing effective and long-term policies to make it easier to build homes," said Aled ab Iorwerth, deputy chief economist at CMHC.
The agency's report, Framework for Change: Productivity in Housing Construction, reveals a troubling trend. Productivity growth collapsed to negative 3.8% between 2019 and 2024, from the 1.5% growth recorded during the 2008-2019 period.
The problem intensified after the pandemic, when supply chain disruptions, inflation, and higher interest rates converged to discourage long-term investment in modernization.
Canada’s housing construction sector took a sharper-than-expected downturn in October, with national housing starts dropping 17% from the previous month.
CMHC reported that the seasonally adjusted annualized rate (SAAR) fell to 232,765 units, well below economists’ forecasts of 265,000 and down from September’s revised 279,174 units.
Canada’s housing construction sector took a sharper-than-expected downturn in October, with national housing starts dropping 17% from the previous month, according to new data from Canada Mortgage and Housing Corporation (CMHC).https://t.co/XhN4ZkafUD
— Canadian Mortgage Professional Magazine (@CMPmagazine) November 18, 2025
The construction industry's struggles reflect systemic inefficiencies. While housing prices surged in recent years, builders lacked incentive to reduce construction costs.
Some workforce retention practices, while protecting long-term capacity, also depressed productivity metrics. Fragmented regulations across provinces and cities further limit economies of scale.
Meanwhile, Fraser Institute earlier warned that sluggish housing starts and delayed projects threaten to drag down the broader economy.
Despite political promises to ramp up construction, the pace of new builds in key markets like Greater Toronto and Metro Vancouver has failed to keep up with demand.
Where solutions are emerging
Other countries have charted more productive pathways. Singapore combines prefabrication pilots with co-funding programs covering up to 70% of productivity-enhancing projects.
The United Kingdom mandated Building Information Modeling for all centrally procured public housing since 2016. Japan's i-Construction Initiative promotes automation and AI integration across residential projects.
Canada can follow suit. CMHC recommends mandating digital standards like BIM for social housing, streamlining approval processes, and co-investing in research and development.
Governments must also demonstrate long-term commitment to housing supply, which would encourage industry confidence and private investment in new equipment and worker training.
"Doubling the pace of housing construction in Canada is achievable, but not without a significantly larger and modernized workforce, more private investment, less regulation, fewer delays, and lower development costs," Iorwerth said.
Absent these changes, Canada risks missing its goal to double housing starts by 2030, leaving affordability pressures unresolved for years to come.
"Affordability—not demand—is now the dominant source of stress, as rent and ownership burdens remain historically elevated," according to Turner Drake & Partners' new Residential Market Pressure Index.
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