Systems That Must Change to Close the Housing Gap

Beyond the Factory: Three Tangible Systems That Must Change to Close the Housing Gap

Modular construction can build homes faster and more efficiently. But to truly close the affordable housing gap, the surrounding systems must evolve in tandem. Here are three concrete, non-construction changes that are essential:

1. Modernizing Mortgage Financing
The Problem: Lenders often treat prefab construction loans as higher risk, applying outdated models meant for slow, incremental site-built draws.
The Tangible Solution: Develop and widely adopt milestone-based lending. Loans disburse upon verification of factory-stage completions (chassis, closed walls, mechanical rough-in), aligning capital with the manufacturing workflow and providing certainty for builders. The Canada Mortgage and Housing Corporation (CMHC) could lead by insuring these new product types.

2. Evolving Insurance Underwriting
The Problem: Insurers lack data to assess the unique risk profile of factory-built homes, often leading to premiums that don't reflect their superior quality.
The Tangible Solution: Create insurance premium discounts for certified prefab homes. Third-party factory certification (e.g., from the Canadian Manufactured Housing Institute) and verified airtightness test results provide empirical data of lower risk. This would reduce costs for homeowners and validate quality construction.

3. Streamlining Land Use and Permitting
The Problem: Municipal zoning and slow permit approvals nullify the speed advantage of prefab.
The Tangible Solution: Municipalities must adopt pre-approved modular design catalogues with 'permit-by-right' or fast-track approval pathways. This removes the single largest unpredictable delay, making prefab’s timeline and cost savings a reliable promise.

Without these parallel reforms, the full potential of modular construction will remain locked away, unable to deliver affordability at scale.

Sources:

1. Canada Mortgage and Housing Corporation (CMHC): Research on financing innovation. CMHC, "Research on Alternative Construction Methods."

2. Canadian Manufactured Housing Institute (CMHI): Role in factory certification.

3. Prefab Solutions Blog: "Building the Builders: A System-Wide Blueprint."