Canada’s residential construction industry has been adding workers but losing ground on productivity, a new Statistics Canada study found, intensifying pressure on already stretched housing affordability.
The report showed labour productivity in residential building construction fell 37.3% between 2001 and 2023, even as the broader business sector posted gains.
Smaller firms with fewer than 20 employees accounted for most of that decline, while Ontario alone contributed roughly two thirds of the national drop in productivity.
“It is estimated that Canada requires a massive increase in housing starts to meet demand and improve affordability by 2035,” the study said, citing Canada Mortgage and Housing Corporation (CMHC).
“Labour productivity growth in Canada’s construction sector has been slow and has lagged compared with that of other business sectors over the last 20 years.”
Nationally, latest CMHC index showed homeownership affordability hit its weakest point since the 1990s in the second quarter of 2022 before conditions improved modestly.
CMHC’s data traced three distinct waves of erosion beginning in 2001, with the latest – from 2020 to 2023 – no longer driven only by Toronto and Vancouver but by fast‑tightening conditions in Ottawa, Montréal and Halifax as remote‑enabled households moved into those markets.
“Increasing the efficiency of construction is the long term key to improving housing affordability,” Aled ab Iorwerth, CMHC deputy chief economist and a co‑author of the report, said in a CTVNews.ca interview.
“It’s not going to be a quick process. It’s going to take years of consistent building of more housing.”
Small builders, big drag
StatCan defined small firms as those with fewer than 20 employees and found they provided 66.1% of jobs in 2023.
Firms with fewer than five employees alone accounted for 22.4 percentage points of the overall 37.3% productivity decline, while those with five to 19 workers added another 16.1 points.
ab Iorwerth, added that many small companies focused on single detached homes that were “relatively easy to build” and had changed little in a century.
“There hasn’t been a lot of innovation in building single detached housing, its built now the same way it was 100 years ago,” he said.
Ontario’s slump, B.C.’s exception
Ontario’s firms were responsible for 24.7 percentage points of the productivity decline, and it was the only province where productivity fell across all firm sizes.
British Columbia was the sole province that made a positive contribution – mainly because its share of construction jobs grew – even though individual firms there also struggled to keep productivity rising.
Broader warnings for mortgage professionals
The StatCan findings echo a previous CMHC research which found that post‑2019 productivity losses added an estimated $6 billion to $8 billion to construction costs and contributed up to one fifth of new home price increases.
"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," ab Iorwerth said at the time.
He urged builders to “deploy the latest technologies … use materials in a better way” and invest in higher‑skilled workers, while pointing to countries such as Singapore and Japan that pushed industrialized building and robotics.
“I think what is happening in the industry is that demand for housing is increasing and that supply is just being met by hiring more and more workers,” he said.
His concern is that companies are “not improving their processes” and are instead “just buying more labour,” rather than turning to prefabrication, economies of scale and digital tools to lift output per worker.
CMP
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