Canada has long been grappling with a housing crisis, struggling to meet construction targets necessary to address growing demand. Recent data reveals a surprising and troubling trend: despite a record number of skilled tradespeople in the construction sector, productivity has not kept pace, resulting in a significant shortfall in housing production. This discrepancy highlights an urgent need for a strategic overhaul in the industry.
The Canada Mortgage and Housing Corporation (CMHC) reported that in 2023, Canada had a record high of 650,000 construction workers. However, this impressive workforce produced only 240,267 homes. In contrast, with the current labor force, the country should be capable of building over 400,000 homes annually. This gap underscores a decline in construction productivity that is hindering progress towards housing goals.
Statistics Canada data reveals that since 1997, the housing construction labor force has grown by 136%, while housing starts have only increased by 63%. This indicates that the growth in labor force has not translated into a proportional increase in housing output. If labor productivity from 1997 to 2023 had been maintained, 2023 would have seen 377,000 housing starts, and under maximum productivity, nearly 400,000 homes would have been built.
Comparative data from the 1980s and 1990s shows that Canada was building more homes with fewer workers. For instance, in 1987, Canada built 246,000 new homes, more than the number constructed in 2023, despite the labor force being significantly smaller. This historical perspective highlights a concerning decline in productivity.
The CMHC’s analysis points to several factors contributing to this productivity decline. One major issue is the fragmented structure of the residential construction industry. In Canada, 69% of construction activity involves firms with fewer than five employees, and only one firm has more than 500 employees. This atomized structure hinders economies of scale and efficiency.
Professor Michele Buzzelli’s research from the late 1990s supports these findings. His study showed that in 1960, over 94% of Canadian builders had fewer than 26 employees, and by 1973, firms with more than 100 employees increased to 4.4%. Despite a smaller workforce and population, the 1970s saw peak housing construction in Canada, suggesting that firm size and structure play crucial roles in productivity.
To meet its ambitious goal of building 3.87 million new homes by 2031, Canada must address the underlying issues in the construction sector. This involves encouraging consolidation and mergers to create larger firms that can achieve economies of scale and negotiate better deals within the supply chain. Additionally, the industry must focus on adopting modern construction techniques and technologies to enhance efficiency.
While government policies such as reducing development charges, streamlining approval processes, and tackling nimbyism are essential, the construction industry must also introspectively seek solutions to boost productivity. Directpath Canada recognizes the critical role of skilled trades in meeting housing demands. We provide global recruitment, immigration, and settlement services, ensuring that businesses have access to high-quality workers who are committed to contributing to Canada’s long-term economic growth.
Navigating Canada’s complex immigration landscape requires expertise. Qualified and licensed immigration consultants play a vital role in ensuring compliance with legal requirements and facilitating the smooth integration of skilled workers into the workforce.
The current state of Canada’s construction productivity presents a significant challenge to addressing the housing crisis. By understanding and addressing the factors behind the decline in productivity, and leveraging the potential of a record high workforce, Canada can move towards achieving its housing targets. Directpath Canada is committed to supporting this goal by providing expert recruitment and immigration services, ensuring that businesses have the skilled labor needed to drive productivity and growth.
Information Source: Financial Post
