Canada Announces $600 Million Effort to Fund New Construction Technology

Canada’s Trudeau administration takes aim at a national shortage of affordable housing.

Last week, from the shop floor of NRB Modular Solutions’ Calgary plant, the Ottawa administration promoted a $600 million mix of investment funds and loans designed to encourage modular and other technologies that will allow the industry to “build more homes, faster.”

On top of a $6 billion housing infrastructure fund announced a couple days earlier, the administration published a webpage outlining its effort aimed at “unlocking housing construction and launching Canada Builds.”  The aim of this program is “bold action to build more homes, faster, improve access to housing and make homes more affordable.”

In particular, the administration intends to spur construction of tens of thousands of new apartment units over the next decade. Recognizing the pressure this increased building activity could create on construction pricing where labor supplies are already tight, the government is also trying to implement measures to promote new ways of building that will hopefully lower construction costs while improving quality.

Global Push for More Affordable Housing Puts Construction Costs in the Crosshairs

In Canada, the United States and elsewhere, the push to promote more housing construction in order to increase supply and bring down prices is seen as potentially running headlong into the reality that construction prices are still rising faster than the rate of inflation. Economists and governments recognize that consistently rising construction costs continue to be a major factor leading to more expensive housing.

Even as the sharp rise in materials prices subsides, tight labor markets and declining demographics mean that the industry is already looking to fill thousands of open jobs, and study after study has shown a lack of productivity gains in construction relative to other industries. Indeed any gains governments look for in housing affordability by promoting more housing construction through cheaper financing, regulatory reform and subsidies could be lost to an increasingly rapid rise in construction costs.

As result, Canada and other countries around the world are pushing to promote investment in technologies and approaches that might lead to significant productivity gains.

Governments Are Becoming  Major Built World Venture Capitalists

Canada’s new “Homebuilding Technology and Innovation Fund” includes $50 million which it hopes to leverage with an added $150 million of funds from other units of Canadian government and private funds to provide $200 million to companies leveraging new technology that can make construction faster, better and cheaper.

On top of this fund, the government is offering $500 million in special low interest loans to developers that leverage transformative technologies in their projects. The fund will be led by Next Generation Manufacturing Canada, one of Canada’s “Global Innovation Clusters.”

In its effort to build faster and cheaper, the Canadian government seems willing to invest in a broad range of approaches. Among the types of solutions named are “prefabricated housing factories, mass timber production, panelization, 3D printing and pre-approved home design catalogues.” The latter initiative refers to a previously established program inspired by a similar post-World War II effort to create a  series of standard housing prototypes pre-approved for construction.

Additionally, Canada has provided $38 million to promote green construction through wood, $13.5 million to promote more standardized and streamlined building codes, and $191.8 million to promote new, lower carbon materials.

The announcement of the Canadian fund is significant, and it is just the latest example of how governments around the world are increasingly investing in construction technology. The government of Singapore has established a $250 million construction productivity and capability fund. The government of Japan has established a $13 billion green innovation fund to invest in promising technologies including technologies in the housing materials and construction sector.

With construction now more than a $14 trillion industry with costs growing at an average annual rate of about 5 percent per year, new technology will have to prove out savings of nearly a trillion dollars a year just to arrest the annual increases.