On February 16th<\/sup>, RBC, the Task Force on Housing and Climate, and BC Housing joined forces to host a roundtable discussion in Vancouver to address Canada\u2019s housing crisis by enabling and scaling prefabricated or manufactured construction. We assembled a cross-section of attendees in the buildings space, including executives from commercial builders, real estate investment firms, pre-fabricated manufacturers, construction services, Metro Vancouver, BC Housing, Infrastructure Canada, industry associations, and others, plus RBC\u2019s real estate and sustainable finance lending teams. The conversation highlighted the fundamental and structural challenges that need resolution before prefabricated construction can emerge as a viable solution. While some challenges have been captured below, this note focuses on some of the enablers and ideas tabled in the discussion that could help solve Canada\u2019s housing challenge.<\/p>\n Here\u2019s what we took away from the discussion:<\/p>\n Manufactured housing has succeeded in jurisdictions that have shown urgency in resolving the housing crisis and have executive champions that facilitate approvals through the system. St. Catharines, Ontario, and Charlottetown, Prince Edward Island, were cited as municipalities where builders delivered housing projects within months, thanks to various city departments\u2019 willingness to negotiate existing guidelines and expedite approvals.<\/p>\n This includes properties owned by municipalities that offer shared equity with developers and financiers. Patient capital for affordable housing projects should also be explored. Importantly, lenders are being asked to rethink their financing terms and risk and valuation models to enable more manufactured construction, which differs significantly from traditional construction finance. In manufactured construction, heavy capital outlay is required prior to tooling starting at factories, compared to traditional construction financing that anticipates a steady pace of outlay as the site progresses.<\/p>\n Private sector players provide the vast majority of housing in Canada and will play a pivotal role to meet CMHC\u2019s projection of 3.5 million additional housing units (for a total of 5.8 million) by 2030. But current macro conditions are hampering their ability not just to build, but survive. In the past 18 months, interest rates on loans and land debts have ballooned exponentially, affecting project economics. And while public advocacy for prefab and mass timber construction has been ramping up, several manufacturers such as Nexii and Structurlam, have gone under. Industry, including developers, contractors, manufacturers, and others, needs proper incentives, including subsidies and tax credits, to invest more in housing, especially affordable stock that often yields thinner margins.<\/p>\n Given the high capital costs required to invest in manufacturing plants and facilities, an extended period without housing projects could render companies insolvent. That\u2019s where public entities can play a foundational role. Ensuring that there\u2019s not only a fast approval process but one that guarantees projects allows companies to grow and scale.<\/p>\n Ultimately, we may need to also look outside of Canada to get the scale needed to build nearly six million in cumulative housing units by the end of the decade. Many manufacturers in Canada have already folded, and the remaining may not have the capacity and\/or scale to meet the projected housing target. China\u2019s manufacturing capacity\u2013at millions of square feet of factory space\u2013should be explored.<\/p>\n But it needs to be reconciled against the complex policy landscape across various levels of government, including national codes, provincial policies, and municipal codes. Builders are struggling to keep up with constant changes to building codes. Significant effort is also required to adapt existing knowledge for each amendment, which prevents their ability to scale using manufacturing.<\/p>\n Federal Minister Sean Fraser has signalled the department\u2019s increased focus on manufactured housing as a solution to the crisis in recent forums and discussions. The CMHC\u2019s Housing Accelerator Fund is another laudable effort to tie federal funding to municipals to removing local barriers to building homes fast. The Task Force on Housing and Climate\u2019s report on March 5 will likely have recommendations that end up in this year\u2019s federal budget. B.C.\u2019s Ministry of Housing is also expected to push through a swath of legislative changes this spring, on the heels of the province\u2019s new BC Builds program. However, governments can do more to facilitate development, including harmonizing codes across jurisdictions, speeding approval processes, and educating permitting departments on the benefits of innovative construction methods and materials.<\/p>\n The province is managing its forests in more sustainable ways and focusing on high value rather than high volume. WoodWorks BC and other organizations are also working to build up supply of wood and mass timber product. As builders increase the use of the low-carbon materials, the sector could see a jobs boost.<\/ol>\n\n