Canada's housing productivity problem

It's a major push in Canada to

accelerate home building. Although in

some places such as Ontario, the number

has been stagnating. In any case, our

guest says we really want to improve

affordability in housing. We need to

confront a major issue, productivity in

residential construction. Let's get more

from Murtaza Haider, professor and

executive director of the Cities

Institute at the University of Alberta.

Thanks very much indeed for joining us.

My pleasure. Thank you for having me. So

you co-wrote an op-ed, and you argue

that one of the problems here is just

worker productivity in residential

construction has not been going up. Just

talk about that problem first if you

would.

Absolutely. We worked with

McDonald-Laurier Institute for about a

year and wrote this report from which

the op-ed you saw,

analyzing the

declining residential construction

productivity not just in Canada but also

in the United States. It so happens that

of all the industrial sectors,

residential construction or construction

in general has the lowest productivity.

What does it mean in fact? It's that we

are using more workers, laborers now to

produce a home than we did some 20, 30,

or 40 years ago. And over the years, the

building firms, construction firms have

been spending more on labor than on

investing in technology or capital to

increase the productivity. The result is

that we are building as many homes as we

did in the 1970s but with three times

more workers. And that is a serious

challenge because if we continue to do

this, we will be spending more, our cost

of construction will continue to

increase, but our throughput in

annual in

construction would remain around 250,000

housing starts, which hasn't changed

over the last many years. Murtaza, why

has productivity per worker dropped?

Many reasons for it. First is that

we have lots of lot more regulation, red

tape now. So a lot of people are workers

are not just necessarily involved in

construction. They're more so involved

in

compliance with the regulations, new

laws, and whatnot. We also have on the

industry side

lots of small firms. The construction

sector in Canada is notorious for having

a very large number of very small firms.

In fact, there's only one construction

firm with over 500 employees in Canada.

This is from CMHC's research. So what

does it mean for us? It means that these

are small firms, too many, and they

don't have the means to negotiate better

rates, better wages, or better

investment in technology so they are

able to produce more homes with less

labor and are more efficient. So this

atomized structure, this over

overly restrictive environment for

construction, too much regulation and

red tape, all has contributed to a

decline in construction productivity.

Just expand a bit if you could. Why

would productivity have dropped over the

years?

So over the years, imagine like if you

go back to 1970s, we built about 2.7

million homes

in that decade. And the number of

workers I would believe was no more than

250,000 then. And then slowly we see

that we are investing more and more in

labor, and the cost of construction has

gone up. If you look at the construction

cost indices, they have gone up by 60,

70, 80% since the onset of the pandemic.

So basically we haven't invested in

maybe perhaps training the workers

to be more productive. In fact, there's

a good example of one of the economists

in Toronto used, and he said, if you

take a pilot from the '50s and drop them

in a cockpit of a modern plane today,

they wouldn't know what to do. But if

you take a worker, construction worker

from the '50s and drop them at a

construction site today, they'll be more

efficient probably than most workers

because they have known the short trick,

shortcuts, and everything. So that's a

problem that we that we have too many

workers, we have not perhaps trained

them because that's why we are using

more home. And at the same time in in in

in fairness to the industry, the homes

today are also much larger and more

complex than the homes that were built

in the '60s and '70s. So these all these

factors are at play, but what is needed

desperately for Canada, if you want to

change this, is to invest more in

industrial production of housing,

modular pre-fab construction in

industrialized environments. We produce

more, the higher throughput, bring them

and assemble them in record time, so

bring the construction time down from

months or years into three or three

months or less.

That is the way forward, and we have to

invest significantly, especially for the

Build Canada Home, that is the

government's new initiative looking at

construction and increasing

productivity. Why don't they invest in

producing social non-market housing? Use

and invest deeply in in in the modular

production of homes and fix two

problems, increase the productivity and

also increase the supply of social

housing in Canada.

The construction industry is notoriously

conservative though, isn't it? I think

it was the Toronto Star had a piece

recently. People wanting to put in heat

pumps were told by loads of contractors,

"Oh, it won't work in this climate."

Simply because they didn't want to

learn a new skill and do things

differently.

I wouldn't go that far. I mean, I I work

very closely with the industry, and I

see innovations. It's just that those

who are bigger bigger builders who build

maybe 2,000 homes or more, they have the

means or the capacity to invest in

technology and train their workers to be

more productive. It's the challenges

with those who build five, 10, 50 homes

a year. They don't have the means or the

and the deeper pockets to be able to

invest in capital rather than labor. So

what they do is when they get more work,

they just get more workers rather than

thinking that there's a better way of

increasing their profitability, lowering

the cost of construction, reducing the

time of construction, and be more

productive at it. And that requires

investment in industrialized housing.

Murtaza, thank you very much. Murtaza

Haider, professor and executive director

at the Cities Institute at the

University of Alberta.