Australian Construction and the Shortage of Workers

 Industry employment and the quantity of work done

 

This post looks at output and employment in Australian construction over the last few years. Although there have been many suggestions there is a shortage of workers and this is the main constraint on industry capacity, construction employment is now all-time high. Between June 2021 and June 2023 employment increased by 14% while output increased by only 4%.

 

The construction industry is widely seen as having a serious employment problem, or more precisely a significant lack of workers. In November 2023 Master Builders Australia estimate was the industry will need to attract about 480,000 new workers by the end of 2026 to build enough homes for a growing population. How they got this improbably large number of about 40% of current employment is not explained. 

 

The December 2023 Skills Shortage Quarterly report from Jobs and Skills Australia found fill rates for Engineering Trades Workers (30%) and Construction Trades Workers (38%) suggests ‘skill shortage pressures are most acute for these occupation groups’. (The fill rate is the percentage of advertised positions filled). 

 

Another indicator, the April 2024 HIA Trades Availability Index was -0.58, down from -0.64 at the end of 2023. The index has had a shortage of skilled tradespeople in Australia since 2021, as in Figure 1. This ‘acute shortage’ of skilled trades in 2024 is despite a slowdown in building activity. 

 

Figure 1. Housing Industry Australia Trades Availability Index

 

Source: HIA

 

In October 2023 BuildSkills Australia was established by the federal government, as the national Jobs and Skills Council for the built environment sector, to find solutions to the workforce challenges facing the construction, property and water industries. Their March estimate that an extra 90,000 workers will be needed to achieve the National Housing Accord target of 1.2 million homes over five years led to  headlines like this one in the Sydney Morning Herald and The Age on March 24:  Australia skills shortage preventing Labor's housing goal. 

 

Finally, in response to Peter Dutton’s budget reply speech developers and economists lined up in the Financial Review  to argue any limits on skilled migration that reduced construction workers would add to the shortage of skills and workers and further reduce the already remote likelihood of building anything close to a million new homes in the next five years. Residential developers also claimed non-residential building and engineering construction, which are increasing output, are taking workers away from residential building, where output is falling, and making the skills and worker shortage worse. 

 

For all the claims of lack of workers and constraints on capacity it is an inconvenient fact that construction employment is actually at an all-time high. According to the Australian Bureau of Statistics it was a record 1,338,314 people employed in November 2023 and was 1,316,931 in February 2024. There has been significant growth in the number of people employed over the last few years, but over that period the volume of work done has barely increased. That is the issue, why is output not increasing as the number of people employed is increasing? Because it is a relatively labour intensive industry, construction industry capacity is assumed to be directly related to the size of the industry workforce.  

 

The current high level of employment does not, of course, mean there is not a problem with training, skill levels and worker availability, or that there will not be a problem with maintaining the construction workforce in the future, which is aging and has to compete for new workers. And the focus on trade skills means that shortages in professional services like designers, project managers and quantity surveyors are often not included as part of the problem.  

 

Industry Output

 

The Australian Bureau of Statistics final estimate of the quantity of construction work done is published several months after the quarterly estimates of the value of building and engineering work done. The most recent data is up to December 2023. These chain volume measures of work done adjust value of work done for inflation and are for the volume or quantity of work done. Construction industry capacity is the volume of work that can be done in a year, based on the limits that exist in the supply of materials and the availability of workers.

 

With the significant increases in prices for building materials and labour costs over the last couple of years the headline numbers for the nominal value of work done have increased by around 40 percent for both building and engineering. Adjusting the nominal value of work done for these price increases to get an estimate of the quantity of work done dramatically changes the picture. 

 

The output or volume of work done by the construction industry has increased over the last few years, but not by much. From the ABS chain volume measure low of $189 billion in 2021 and 2022 it was $196 billion in 2023, and my forecast is $202 billion in the year to June 2024. In the six months to December 2023 the volume of work done was $106 billion, but less work is done between January and June because January is usually the annual holiday and there are other public holidays.  

 

As Figure 2 shows, the increase in work done is due to small increases in non-residential building and engineering construction. Engineering construction was $63 billion in the year to June 2023 (half the record levels of the peak mining boom years of 2013 and 2014) and will be at least $3 billion more in 2024. Non-residential building work done was $54 billion in the year to June 2023 and will be a couple of billion more in 2024. The quantity of residential building work done has been $80-81 billion a year since 2020, and is forecast to be at that level for 2024 (there was $53 billion of residential building work yet to be done in December 2023).  

 

Figure 2. Australian construction output by sector

Source: ABS

 

Industry Employment

 

Both Infrastructure Australian and the National Housing Supply and Affordability Council claim skill shortages, a lack of workers and low productivity are the limiting factors on Australian construction output. However, ABS data on construction employment has a record number of people employed in the industry in 2023 and 2024. The most recent ABS Labour Force data had total employment of 1,316,931 persons in February 2024 and an all-time high of 1,338,314 in November 2023. Also. around 80% of people employed in construction are working full-time. Figure 3 shows output and employment since 2007. The chain volume measure of construction work done is over the year to June and employment is for the month of May. Between 2021 and June 2023 employment has increased by 14% but output by only 4%. This is the issue. 

 

 

Figure 3. Australian construction output and employment

Source: ABS 

 

The number of people employed in construction has increased year after year from 2012, until a slight dip in the Covid years of 2020 and 2021. Then there was a large increase of 168,421 workers in construction between the 2021 low and February 2024, with most of that increase (130,000) between 2022 and 2023. 

 

Is this a shortage of workers in the industry? All the official reports and industry commentators all argue this is the problem, but the number of people employed increased steadily until 2020, and then in 2022 and 2023 grew strongly. Perhaps the ABS is getting its figures wrong and over-estimating the number of people employed. The big increase in 2023 may be revised down in future data releases. However, ABS data is generally reliable and there have been no issues raised with their methodology. 

 

Between February 2021 and February 2024 the increase in total construction employment was 168,421 or 14.7%. For the three industry divisions the increases were 34,616 for Building (10.6%), 22,736 for Engineering (19.5%) and 168,421 for Construction services (15.8%). The increase in Engineering employment reflects the high level of infrastructure work in transport and energy, but Building and Construction services also had substantial growth in employment.

 

 

Figure 4. Construction employment by industry division

Source: ABS

 

An Inconvenient Fact

 

For all the estimates of a lack of workers and constraints on capacity it is an inconvenient fact that construction employment is at an all-time high, and was at a record 1,338,314 people employed in November 2023. The big increase in employment over 2023 came with a slight increase in output as a small drop in Residential building was counterbalanced by increases in work done in Non-residential building and Engineering construction. The big increase in output was in Engineering work, which is the least labour intensive of the three industry sectors, and over the last 12 months Engineering has actually lost about 3,000 workers.

 

The largest increase the last few years was over 160,000 more people employed in Construction services, which are the trades. The great majority of these people are usually employed in residential building, so the increase in employment at a time when the volume of residential work has been steady or slightly falling is somewhat mysterious. There may have been more people employed in civil engineering related trades like equipment operators and electrician, but because the ABS does not allocate the trades to the sectors of residential building, non-residential building and engineering it is impossible to know where these people are working. This would be an extremely useful one-off survey to add to their data collection, as was done in recent years for other industries like Professional and technical services and Building cleaning, pest control and other support services. It could also identify the extent of worker mobility across the three sectors in construction, which would be an important addition to the policy framework for improving productivity and housing and infrastructure delivery. 

 

Whether the recent increase in the number of workers will lead to greater industry capacity and an increase in industry output not clear. New workers lack experience and are expected to be less productive than current workers while they get up to speed, a process that can take a couple of years of learning by doing. So there is a potential boost to productivity in the future. On the other hand, over the last few years the industry has employed a lot more people to produce a volume of work that has barely increased. That may be a management problem. 

 

 

Industry Capacity

 

There are no official estimates of construction capacity, despite the numerous reports issuing from the various agencies and research organisations about the housing crisis and rising project costs. Infrastructure Australia published their 2003 Infrastructure Market Capacity report in December, where ‘several market capacity constraints are inhibiting the ability of the sector to deliver projects on time and on budget’ (p. 5). These were skills shortages, non-labour supply challenges, and stagnating productivity. On their Public Infrastructure Workforce Supply Dashboard in October 2023 there was a shortfall of over 200,000 workers of which about 130,000 were construction trades and the rest professional services like engineers, quantity surveyors and project managers. The shortage is forecast to double by mid-2025 to over 400,000 workers. The report did not, however, include an estimate of infrastructure construction capacity, which is primarily engineering construction where output volume has increased to over $60 billion a year

 

The National Housing Supply and Affordability Council (established in 2023) released their first report in May 2024 with a lot of data on residential building activity and forecasts for the next 6 years. But no estimate of capacity as the maximum number of houses and apartments that could be delivered in a year was given. Chapter 3 discusses current supply and demand conditions and the price of housing, and Chapter 4 has projections for new housing supply and demand over the next 6 years finding ‘market housing supply is projected to average around 43,300 dwellings per quarter, or 173,000 dwellings per year … New net market supply is expected to peak at an annual rate of 177,000 dwellings in 2026–27’ (p. 83). Their view is the housing supply system is limited because it is inflexible and unresponsive to demand, with a long-term trend of limited availability of skilled labour, materials and finance, and weak productivity growth.

 

Industry capacity is the limit on production, a theoretical maximum of what can be produced in a single period. In some cases this is straightforward, based on the installed capacity of paper mills, blast furnaces or other machinery, adjusted for their utilization rate and maintenance requirements. A production line for bottles, chips or cars can produce a set amount day after day, week after week. Construction is not like this.

 

Buildings bring together many suppliers at many sites. This creates coordination and logistical problems to a degree not found in other industries, shipbuilding for example brings together many suppliers but at few sites. Manufacturing usually has a few suppliers at a few sites. Prefabrication can go some way in solving the many suppliers problem but adds transport and installation costs, and still requires site preparation and coordination. Those sites can be remote, or difficult to access, or have challenging ground conditions. All these and other issues affect the organisation and delivery of projects to a greater or lesser degree. On a large project the set-up costs of the site office and sheds can be significant. 

 

Also, it is hard to optimise the use of machinery and equipment, such as cranes, excavators and hoists. These will be worked as efficiently as possible but can be affected by weather, use rates at different stages of a project, interruptions to site deliveries and other factors outside the project managers control. And despite the increase in plant, equipment and powered hand tools, construction is much more labour intensive than industries it is typically compared to such as manufacturing or mining. While there are significant differences in labour intensity between residential building, non-residential building and engineering, which is high, medium and low respectively in these three sectors when compared to each other, labour intensity is high compared to manufacturing or mining. This makes the number of people employed the key constraint on construction industry capacity.

 

 

Why is output not increasing with employment?

 

Despite the growth in the number of people employed over the last few years the volume of work done has barely increased. That is the issue, why is output not increasing as the number of people employed increase? Because construction is a relatively labour intensive industry, industry capacity is assumed to be directly related to the size of the industry workforce. If the volume of output had increased by the same percentage as the number of workers it would be over $25 billion more in 2023-24. 

 

There are two common answers to this question: inexperienced workers are less productive, or the quality of managers may not be very good so they don’t get high levels of productivity from their workers. Both of these may explain some of the missing capacity, but cannot plausibly explain all of it. I don’t think these are the important factors affecting capacity, instead there are three others that could account for much of the missing output.

 

First, increased regulation, safety, planning and approval requirements might require more people working on tasks that do not directly produce more buildings and structures. This probably does not affect the trades as much as employment by building and engineering contractors. For example, the 2020 NSW Design and Building Practitioner Act introduced compulsory insurance, declarations to be given by designers and builders to ensure compliance with the Building Code of Australia, and a registration regime for engineers. Other states have also introduced legislation, following recommendations in the 2018 Building Confidence report, to address the problems of defects in apartment buildings, insolvencies and phoenixing that became common during the housing boom. 

 

Second, projects are taking longer to complete. In many cases this might be due to increased size and complexity, and the number of large transport and energy infrastructure projects now under construction will be stretching resources with their requirements for materials and labour. In residential building there has been an increase in high-rise apartment developments, which take years to complete compared to months for a detached house, but all types of residential builds are taking longer and it is not obvious what is causing the increase in completion times. The Commonwealth 2024-25 Budget Papers included ABS data on rates of construction:

Apartment, townhouse and detached house completion times increased nationally by 39 per cent, 34 per cent and 42 per cent respectively over the 10‑year period to 2022–23. Most of this increase is concentrated over the pandemic period, however there has been a relatively consistent upward trend in apartment construction times since 2018–19. (Statement 4: Meeting Australia’s Housing Challenge, p. 141).

 

Finally, the industry is dealing with new types of occupations and projects, particularly in projects related to the energy transition. It is possible that new types of projects such as wind and solar farms are in the early stages of a learning curve and efficiency and productivity will improve as more are completed. There may also be a problem with the Australian Standards Classification of Occupations (ASCO) not including new roles in construction, for example in data or BIM management, renewable energy and energy efficiency related tasks. Both the Master Builders Association and the Australian Industry Group have argued the pace of occupational change in construction between ASCO revisions results in a growing mismatch between ASCO’s classifications and contemporary job titles or skill sets.

 

Conclusion

 

The relationship between construction employment and output has changed over the last few years, as employment has increased but real output has not. As well as the number of inexperienced new workers and the quality of the workforce, there are three other factors that could account for the missing growth in output that the increasing number of people employed could be expected to lead to: the industry may be becoming more labour intensive as projects get bigger and more complex; more people may be involved in digital and design tasks; and regulation becoming more extensive requires more people for compliance. 

 

Projects are also taking longer to complete, and this also needs explanation. There may be supply chain and logistics issues, size and complexity may be affecting the rate of construction, or projects may not have sufficient workers onsite and the work force could be spread across too many projects that are simultaneously under construction. There may be a range factors causing increased completion times, lowering industry capacity and the volume of output. 

 

The ABS could survey the industry to identify what has been causing this increase in project completion times, which might allow policy initiatives that would reduce completion times. It could also survey Special trades workers so they can be allocated to residential, non-residential or engineering work, which would significantly add to our understanding of construction employment at a time when shortages in skills and workers are affecting the capacity of the industry and the output it can produce.  

Residential Building is Not About to Crash

 Despite the fall in approvals the pipeline of work remains high

Because of the housing crisis there was a lot of attention given to the 5.8% fall in Australian residential building approvals for housing over the year to February 2024, the most recent data. Approvals for other residential (medium and high rise buildings) are now down to around half the level of 2022, while approvals for houses have declined by much less, around 15%. 

 

On the surface, these declining approvals look like a problem for residential building in the future, but this is not the case because of the backlog of work that has accumulated over the last few years. The combined value of work yet to be done on projects already commenced and the value of work on projects approved but not yet started is known as the ‘pipeline’ of future work.

 

In June 2023 there was $56 billion of residential building work yet to be done, a record amount, and in December it was $53bn. As Figure 1 shows, the value of work yet to be done on detached houses fell from $24bn to $21bn in 2023 and fell on other residential (medium and high rise buildings) from $33bn to $31bn. This slight slowdown in the value of work yet to be done reflects the 6.4% decline in commencements between December 2022 and December 2023, but does not change the fact that there were 226,035 dwellings under construction in December 2023 compared to 237,684 in December 2022. The value of residential work done only fell by 1.5% in the year to December 2023, and is still at a very high level. 

 

 

Figure 1. The value of work remaining to be done on jobs under construction 

 Source: ABS Building Activity, seasonally adjusted chain volume measures. 

 

 

The fall in the value of work yet to be done has been offset by increases in the value of work on projects approved but not yet started. Between December 2022 and December 2023 this increased from $5bn to $6bn for houses and, after falling to $10bn, was back at $11bn for other residential. In December 2023 the value of work on projects approved but not yet started was at a record level of $17.8bn. While some of these projects will not get built, for the great majority the question is when not whether they will be started. 

 

 

Figure 2. Value of work on projects approved but not yet started.

Source: ABS Building Activity, seasonally adjusted chain volume measures. 

 

 

When the value of work yet to be done on projects already commenced and the value of work on projects approved but not yet started is combined into the ‘pipeline’ of future work, the total in December 2023 was $70.6bn, slightly down from the record $72bn in December 2022. This is well above the previous record high of $58bn reached in 2018, and the result of sustained increases since the low of $44bn in 2020. 

 

 

Figure 3. Total value of work in the pipeline

Source: ABS Building Activity, seasonally adjusted chain volume measures. 

 

 

Why has the pipeline of work grown so fast and become so large? 

 

Despite the increase in interest rates since 2022 house prices have increased and the value of residential work done has barely changed. Monetary policy in Australia targets residential building because decreased consumer spending due to increased interest on residential mortgages is the RBA’s primary means of reducing inflation. Higher interest rates reduce the number of potential buyers of new homes so developers reduce project commencements, which have declined but not by much. However, developers continue making applications for development approval on sites they own because the outcome and time these will take is uncertain, and an approval is an option that can be exercised in the future. This increases the amount of work to be done on projects not yet started, and the cost of those projects is rising due to inflation. 

 

A second reason is the recent large increases in non-residential building and engineering construction, and the resulting competition for resources. The value of non-residential work done increased by 12% and engineering by 17% in the year to December 2023. Although the exchange of workers between industry sectors is limited, key trades like electricians and materials like concrete are both shared and finite, and non-residential construction will often be prepared to pay more for labour and materials than residential work. In particular, the increase in non-residential building from $12.8bn in December 2021 to $14.6bn in December 2023 (Figure 4) countered the decline in residential building so the total volume of building work has not fallen. 

 

Figure 4. Total construction

 

 Source: ABS Construction Work Done, chain volume measures.

 

A third, related, reason is the shortage of workers to complete the projects already started. The ABS had 1,229.8 million people employed in construction in December 2023, an increase of 0.0% since December 2022. Reallocation of workers between industries is typically small, not much more than a couple of percent of total employment a year, and tens of thousands of workers can't move from retailing to construction quickly or easily. More and better training opportunities would be one way to help solve the industry’s problems, as would higher retention rates for apprentices. 

 

According to the ABS, unemployment is historically low at 3.8% of the workforce, as is the underemployment rate of 6.5%. In March 2024 the participation rate was 66.6%, monthly hours worked increased, full-time employment increased to 9.9 million and part-time employment was 4.4 million people. The pool of available labour is small, there were 573,000 unemployed people in March, and the question of where more workers will come from has few possible answers: maybe early retirees would return to work with better working conditions; reducing hospital waiting lists might get people back to work; higher immigration favouring trades cuts both ways by increasing demand for housing. 

 

Finally, hundreds of building companies and professional services firms have failed over the last few years (Figure 5). How much impact insolvencies have on residential commencements and completions is hard to know, but there has to some effect as affected projects can be delayed by contract renegotiations, suppliers not being paid, and clients having to refinance the work. How many projects have been affected is also unknown, but the cumulative number of dwellings would be in the thousands, and incomplete projects are sitting in the pipeline. 

 

Figure 5. Insolvencies

 

Source: RBA Financial Stability Review – March 2024

 

 

Conclusion

 

The decline in approvals for residential other building has been significant, but has been much smaller for detached houses. However, although total residential building approvals have fallen to around half their level in 2022, the value of work in the pipeline for projects under construction and yet to be started has not, and is currently close to $71bn, just below the record high of $72bn at the end of 2022. 

 

Residential commencements in 2023 were only down by 6.4% on 2002, therefore expected completions in 2024 will not be much below the 2023 level of 172,725 dwellings. During 2021-23 between 40 and 45,000 dwellings have been completed each quarter, which may be less than the 50,000 plus quarterly completions between 2016-19 but is still close to the industry’s capacity to deliver new housing. 

 

Residential building capacity has been affected by the increase in non-residential building work, as the total volume of building work done is now at a historically high level. The limited supply of materials and availability of workers will reduce the number of residential building commencements and increase the time taken for completions. This will have the effect of keeping the value of work in the pipeline high through 2025, and probably further into the future as approvals increase from their current low level. 

 

Therefore, the good news is that residential building is unlikely to significantly decline in the near future, despite the recent fall in approvals. That level of expected completions, however, is well below the number required to meet the housing targets of the Commonwealth and State governments. The bad news is that it is hard to see how the supply of new housing can be increased in the short term, given the increase in non-residential building and public sector engineering construction. At these levels, the amount of work in progress is increasing the time taken to complete projects due to limits on the availability of workers and supply constraints. 

 

 

Prefabrication and MMC in Canada

Is this a case of missed opportunity?

 

The Origine green condo project in Québec 

 

Canada is a globally significant producer and exporter of wood products. Its main market is the US (61% of forest product exports), but Japan (9%), and China (18%) are important. In 2022 the sector generated 56,120 jobs, CAN$6.4 billion in GDP, $1.9 billion in provincial government revenue, 26% of provincial manufacturing sales and 24% of B.C.’s total commodity export value. Between 2013 and 2022 the value of Veneer, plywood and engineered wood product manufacturing increased from $1.4 billion to $3.2 billion (to 21% of total forest product sales).

 

Canada has policies at both the national and provincial (state) level that have supported increased use of wood products and Modern Methods of Construction (MMC.) The National Building Code was revised in 2009 to allow light frame construction up to 6 stories, and allowance for mass timber use in 7-12 story buildings was added in the 2020 building code. Many case studies of mass timber buildings are now available.

 

Conventional light-frame wood construction makes up the bulk of construction. Typical light-frame construction has repetitive wood framing to form rafters or trusses using standard dimension lumber. Mass timber products are thick, compressed layers of wood that serve as the load-bearing structure of a building. Because these products are lighter than other construction materials, they are used for prefabricated wood building systems. 

 

Although a major producer of wood products a comprehensive 2021 State of Prefabrication in Canada report found: 

There are three primary forms of wood prefabrication here in Canada – Mass Timber, Panels, and Volumetric Modular construction. Of these methods of prefabrication, mass timber is currently receiving significant attention due to the sustainability benefits it offers and the technical and market development efforts to encourage its use. While there are many different types of mass timber, the focus for this study is on cross-laminated timber (CLT) and Glulam structural systems. From a production capacity and market penetration perspective, mass timber in Canada still has a long way to go to reach the maturity of its European counterparts.

 

The report found 20 mass timber manufacturing facilities in Canada: British Columbia had 8 and 40% of total Canadian production; and Quebec had 5 facilities and 25% of overall production. Only two companies are integrated operations that harvest, mill, and offer full engineering, design, and production of mass timber structures; Kalesnikoff Lumber and Nordic Structures both transitioned to mass timber out of their milling operations. Up to 2021, 550 projects had been completed, almost half were institutional and public projects (232), the others commercial (141) and recreational projects (66). Of these 85% were 1-2 storeys, and 10% 3-6 storeys. Only 23 residential projects had been completed with the majority in southern British Columbia.

 

The report then looked at three types of prefabricated panels:

1. Open panels for standard Light Wood Frame construction with or without sheathing;

2. Closed panels with One Side Closed for standard light wood frame construction, with sheathing, exterior cladding, insulation, windows; and 

3. Both Sides Closed for standard light wood frame construction, with sheathing, exterior cladding, insulation, windows, electrical or conduit, plumbing, heating components and interior boarding. 

 

The open panel sector was found to be low-tech but there were several semi-automated panelized companies employing more digitization and automation using 3D modelling, automated nailing machines and conveyors and framing tables. These are used in residential building with 74% of panelized systems used for multi-family and 23% used for single-family buildings.  The adoption of closed panel systems are ‘still in their infancy’, with only two large companies employing full automation in construction closed panels and most of the companies ‘small and are low-tech operations utilizing framing tables and overhead cranes within warehouses.’ Leveraging their experience and technical expertise several European and Japanese companies have entered the market and become established producers of these panels.

 

On modular building, the report found the residential modular market had varied between 10% and 15% of single-family residential starts in Canada, or 11,000 to 17,000 annual starts, and had approximately 30,000 full time jobs with $6bn in total economic activity (direct and indirect activity). The largest regions for demand are Quebec and the Prairies. There were an estimated 26 modular manufacturers, operating in approximately 50 locations that were typically low-tech with little automation.

 

The commercial industry is divided relocatable buildings and permanent modular construction (PMC) and includes industrial, hospitality, education, healthcare and multi-family buildings. It was estimated that there are 100,000 relocatable structures such as job site office trailers, classroom portables, and remote workforce accommodation in use. 

 

Commercial PMC modular manufacturers in Canada build a variety of building types, mainly low-rise buildings under 6 stories using light wood frame volumetric construction. The main markets were portable classrooms for education and public sector multi-family buildings for affordable housing. The report noted ‘Over the past 20 years there have been many regional modular business failures, that have created pockets of reluctance from stakeholders and owners to try modular again after having seen their projects left unfinished or tied up in bankruptcy proceedings. A BC university recently completed two modular projects by two different manufacturers within a year only to see both companies unable to complete their warranty period due to bankruptcy.’ 

 

The State of Prefabrication in Canada report found a low level of automation and little investment in new technology by industry. The barriers of standardisation, acceptance by clients, procurement methods, access to finance and insurance, and the lack of a skilled workforce were identified. The eight recommendations addressed those barriers. 

 

 

Policy Measures

 

The Government of Canada invested $5 million between 2013 and 2017 to support two demonstration projects under the Tall Wood Building Demonstration Initiative, which resulted in the construction of the world’s then tallest hybrid wood building at 18 storeys, the Brock Commons Tallwood House at the University of British Columbia in Vancouver, and the Origine green condo project in Québec (pictured above). 

 

The Green Construction through Wood (GCWood) program was started in 2017 as a 4-year, $40mn program aimed at increasing the use of wood in construction projects and supporting Canada’s commitment to greenhouse gas emissions reduction targets under the Paris Agreement. As of March 2023, this had funded 4 tall wood building projects, 10 low-rise non-residential building projects, and 2 timber bridge projects. GCWood also facilitated the revisions to the 2020 National Building Code of Canada to allow wood buildings up to 12 storeys. 

 

Also at the federal level, the Canada Mortgage and Housing Corporation (CMHC) announced the Rapid Housing Initiative (RHI) in 2020 which funded affordable housing and required the use of prefabricated systems to complete a funded project within 12 months. The RHI started in 2020 with $1 billion in funding, a second round of funding had another $1.5bn for 2021-22 and the third round in 2022-23 added another $1.5bn, for a program total of $4bn that delivered 15,539 units/beds. 

 

Several provinces have a Wood Charter that promotes the use of wood in construction. Québec mandated for wood use in public buildings in 2013, and updated their Wood Charter in 2017. The share of wood-framed non-residential buildings of 4 stories or less increased from 28% to 34% between 2016 and 2020, and there is now a Policy for the Use of Wood in Construction. Alberta also has a Wood Charter, and New Brunswick a Wood First policy for public buildings. Between 2017 and 2020 Ontario had a $4.8mn demonstration program. The provinces also have started setting up training programs for timber construction with an emphasis on digital skills, Design for Manufacture and Assembly (DfMA) and Building Information Modelling (BIM).

 

British Columbia

 

The province of British Columbia (B.C.) has a large forest products industry worth $15bn in 2022, with the sawmill share well over 50% and a growing share of engineered wood products of around 20.  The 2022 review of the Economic State of the British Columbia Forest Sector is here. As a result of the changes to the building code in 2009 and 2020 building code, over 90% of 1-6 storey new residential construction in B.C. is built in wood, a greater share than in any other jurisdiction in the world. In 2011 North America’s first CLT plant opened in B.C, and around 350 mass timber structures have since been built, more than half of all mass timber buildings in Canada. There is now a local cluster of experienced designers and builders that work in both domestic and export markets for mass timber. 

 

An important policy for MMC in B.C. is the Wood First program, which promotes innovation in manufacturing, building design and construction. The Forestry Innovation Investment (FII) agency provides overall management and administration of the program and the focus areas of research, education, marketing and value-added capacity building. The FII 2023-2026 Strategic Plan is here. 

 

Funding comes from the Ministry of Jobs, Economic Recovery and Innovation, but the activities of the Wood First program are delivered primarily by third-party organizations under a cost-sharing framework with contributions from industry. There is an annual call for proposals reviewed by an Advisory Committee, with a focus on sustainability, advanced wood technologies and building systems, and industrialization of construction through prefabrication using DfMA and BIM. As a result the FII has an extensive library of case studies and technical manuals, the current recipients are listed here. 

 

There are two other programs that supported use of MMC. With the Rapid Response to Homelessnessprogram B.C. invested $291mn between 2016 and 2021 to build over 2,000 modular housing units for people who are homeless or at risk of homelessness. And between 2020 and 2023 B.C.’s Mass Timber Demonstration Program invested almost $11 million to help with costs associated with the design and construction of 20 building projects and 8 research projects that demonstrated emerging or new mass timber building systems and construction processes.

 

Ontario

 

The Ontario government started the Accelerated Build Pilot Program in 2020 to address capacity issues in the province’s health and long-term care (LTC) system. Infrastructure Ontario (IO) collaborated with industry to develop an innovative program for rapid procurement and modular construction. IO’s first accelerated build projects were completed in 2022. The Lakeridge Gardens LTC home was completed in February 2022, after 13 months of construction. In September 2022, the Thunder Bay Correctional Centre and Kenora Jail projects were completed. In May 2023, the Humber Meadows LTC was completed and in July 2023 Wellbrook Place with two LTC homes was completed.

 

There is a short documentary from PCL Construction on the Lakeridge Gardens project and the innovation involved, and Bird Construction has a short video  of the Kenora and Thunder Bay correctional facility modular build projects.

 

 

Conclusion

 

Canada has built some of the tallest mass timber buildings in the world and most residential buildings are wood framed. There are eight producers of CLT and Glulam, however they are mainly restricted to the local market and have not developed an export market in the US, where they compete with American and European producers. In 2020 only two companies were integrated operations that harvest and mill wood, and offer full engineering, design, and production of mass timber structures. The growth in mass timber demand has been largely driven by sustainability initiatives and public policy for carbon reduction.

 

Revisions to the building code since 2009 increased the use of wood framing and mass timber for both residential and non-residential building, with its use now required for many publicly funded projects. There is a significant wood truss industry across the country, and light wood framing is used for most residential construction, but the industry is based on traditional trades and not highly automated, with a few exceptions. 

 

The public sector programs by both national and province governments to use prefabricated buildings for housing and education have been important on the demand side, but much of has been low tech panelized construction or simple standardized modular buildings on the supply side. Several European and Japanese companies have entered the market and become established producers of closed panels, based on their experience and technical expertise. There is a well-established residential modular building industry for both relocatable and permanent buildings, but the cyclical nature of construction has led to the failure of many modular building companies, and this has affected private sector commercial and industrial demand.

 

Canada could be a classic example of aligning industry development with competitive advantage. With the natural endowments of climate and space a large and established forest products industry has developed, which exports timber to the US and Asia, and this could have been used to develop an advanced prefabricated building industry based on wood construction, creating a comparative advantage based on R&D and technical expertise. However, on the evidence available this has so far not happened. There have been demonstration projects and provinces have Wood First policies for public buildings, but prefabrication and MMC is not established as an alternative to traditional construction.