CMHC Study Finds Housing Construction Productivity Falling as Crisis Deepens

Why It Matters

Productivity losses in home building directly inflate construction costs, worsening affordability at a time Canada needs a surge in housing supply. The findings signal that without systemic changes, simply adding workers will not close the housing gap.

Key Takeaways

• Residential construction productivity fell 2.1% annually, 37.3% total 2001‑2023
• Small firms (<20 workers) drove over 38% of productivity decline
• Larger firms added modest 10% productivity edge, insufficient to reverse trend
• Ontario accounted for >50% of national productivity drop, all firm sizes fell
• Build Canada Homes agency launched to boost productivity, but broader reforms needed

Pulse Analysis

The CMHC‑backed analysis paints a stark picture: while Canada’s broader economy has nudged productivity upward at roughly 0.5% per year, residential construction has trended downward, shedding more than a third of its output per worker since the early 2000s. This divergence is not merely a statistical quirk; it translates into higher unit costs, delayed project timelines, and ultimately steeper home prices for buyers. The productivity gap widens the affordability chasm just as policymakers project a need for millions of new units to meet demand by 2035.

A deeper dive shows firm size as a critical lever. Companies with fewer than five employees alone contributed 22 percentage points to the national decline, and those with five to 19 staff added another 16 points. Even as the share of employment in small firms fell from 80% to 66%, the modest productivity gains from larger firms—roughly a 10% advantage—have been insufficient to offset the overall erosion. Regional data sharpen the story: Ontario, the country’s construction hub, drove more than half of the productivity loss, with every firm‑size segment slipping, while provinces such as Prince Edward Island and Nova Scotia managed modest gains.

Policy responses are emerging, most notably the creation of Build Canada Homes, a federal agency tasked with lifting construction efficiency. However, experts caution that size consolidation alone cannot reverse the trend. Sustainable improvement will require coordinated action on multiple fronts: expanding skilled‑trade pipelines, incentivising digital and modular building technologies, simplifying permitting processes, and fostering stable market conditions that reduce firm churn. If these levers are pulled together, Canada can begin to close the productivity gap, lower construction costs, and move closer to meeting its ambitious housing‑supply targets.