Policymakers in Canada have dedicated immense time and energy trying to untangle the root causes that make home ownership cost prohibitive for many aspiring first-time buyers. Government officials have looked at diverse reforms — fiscal and monetary policy, immigration levels, red tape reduction and more — through the lens of housing and construction.
It’s clear that increasing supply is desperately needed. While the housing crisis requires addressing both supply and demand, the good news is there are multiple mechanisms to help boost supply, including expanding capacity in materials manufacturing.
Manufacturing Capacity
For many businesses, the pandemic largely slowed, sometimes even completely stalled, operations and reduced consumption at the same time. However, this was not the case for businesses manufacturing construction materials such as walls, ceilings and floors. While public health restrictions made production more burdensome, demand for the materials skyrocketed, as people spent more time in their homes, and more resources upgrading or upsizing their homes. According to Statistics Canada, spending on home renovations increased by 66 per cent from February 2021 to June 2021, and a record number of home sale transactions closed that year as well.
The public health restrictions of the COVID-19 pandemic, and the spike in building and renovating that followed, highlighted the inflexibility of installed capacity of building materials across Canada. Building activity overall continues to remain at an elevated level with significant market volatility. Most manufacturing businesses are playing catch up just to reach, let alone surpass, current market realities, leading to a situation that allows for little slack throughout the production and supply chain process.
In fact, many Canadian manufacturers stretched their equipment and facilities near the upper limit of what they can produce. Many have invested in altering their processes or products to align with ever-changing building codes or standards. Doing this may have required them to defer capital projects to expand capacity or improve efficiency that were planned during the COVID-19 period. We have seen cases where the cumulative sum of these investments is the same as the capital required to build an entire new plant.
Ultimately this has resulted in a backlog of work that further constrains an industry that relies on capacity that is inherently inflexible and challenged to respond to market volatility. While many manufacturers and suppliers compete to improve their operations or stabilize assets that have been stretched, we see increased inflationary costs for the materials and equipment that is required to meet elevated and volatile levels of demand today.
We’re currently seeing a need for our manufacturing sector to re-invest in expanding capacity, renewing equipment, and adopting new innovations and tech. There are untapped possibilities in providing them with the right support and incentives to do so.
Labour Availability
Undeniably, a labour shortage in the construction and manufacturing industries has emerged and persisted. A 2022 Statistics Canada study showed that 47.4 per cent of manufacturing businesses and 49.5 per cent of construction businesses reported struggles in finding skilled workers.
The labour shortage that plagues home construction goes beyond the builders and developers themselves. It extends into all stages of the materials supply chain, where we see challenges filling positions in manufacturing floors, mining sites, material supply warehouses, contracting services and trucking.
These issues were becoming apparent long before what we called the “Great Resignation”, but that condensed period of heightened retirements and job switching did impact manufacturing and logistics jobs disproportionately. For example, recent data suggests the manufacturing industry is near the top of those reporting they expect a shortage in labour to continue for the near future, and that the trucking workforce — an industry homebuilding is quite reliant on — is among Canada’s oldest, on average.
Reversing these trends will require a collective effort to change how we talk about these lines of work in Canada and start challenging dated stigmas and false stereotypes about construction and manufacturing careers that are too often perpetuated, especially to young people.
We likewise would benefit from seeing greater investment from industry, non-profits and government in initiatives that incentivize Canadians to enter these lines of work in greater numbers.
Distribution Efficiency
If construction materials can’t get to the job site efficiently, it prolongs timelines and adds costs for everyone, developers and homebuyers alike.
Transporting these materials to the job site is not always smooth sailing, as made evident by recent news of strikes in our rail and port networks. Also, transporting these products long distances across our vast country is not ideal from a climate perspective.
Shortening our materials supply chain — that is, manufacturing products geographically closer to end users — is one of the best ways to tackle both of these issues at once. In 2023, CGC announced a $104-million investment to re-launch its state-of-the-art gypsum quarry (a significant material in new home builds) in Nova Scotia. In addition, CGC’s $210 million investment to build a new manufacturing plant in Wheatland County outside of Calgary is underway. The plant will significantly reduce the distance wallboard needs to travel to reach distributors and contractors in Western Canada while unlocking significantly constrained capacity in eastern Canada.
The role of materials manufacturing in stimulating housing construction cannot be taken for granted. We need to invest in Canada’s manufacturing sector and make it easier for these businesses to invest in themselves if we’re going to expand capacity. And greater collaboration between industry leaders and policy makers will help ensure we find the most effective places to focus our investment.
Sid Tetz is the Vice President of Sales and Marketing at Canadian Gypsum Company (CGC Inc.), a leading marketer, manufacturer and distributor of gypsum wallboard products, interior finishing materials and suspended acoustical ceilings in Canada.
