As Canada's housing crisis continues to challenge affordability and supply, the nation is turning to innovative solutions. Among these, modular and prefabricated homes are emerging as a promising option for Canadians.
Programs like the federal Build Canada Homes (BCH) initiative aim to improve housing accessibility by reviving government-led homebuilding and embracing modern solutions like modular housing.1 It is praised for its ability to address the housing shortage efficientlyand cost-affordably.2
This blog explains:
- What modular homes are
- How they fit into Canada's housing strategy
- What homebuyers need to understand about financing, regulations, and legal protections
What Are Modular Homes?
Modular homes are built using one or more prefabricated (prefab) three-dimensional sections called modules.3 Unlike traditional homes, modular homes are manufactured in a factory, then transported and assembled on-site.4
In Canada, prefab homes are categorized into three styles: mass timber (large wooden components assembled on-site), panelized (flat wall panels manufactured off-site), and modular (fully enclosed 3D units built in a factory and stacked or connected together on-site).5 Thanks to advances in materials and technology, modular homes look and function like traditional houses.6
The key difference lies in the construction and delivery process.7 Traditional homebuilding involves transporting raw building materials to the site and constructing the home from the ground up.8 Whereas, modular construction involves fabricating three-dimensional modules in a controlled facility, transporting them to the site, and placing them on a foundation.9
Benefits of Modular Homes
Modular homes offer several advantages10:
- Faster construction – Some can be completed in as little as eight days, reducing overall build time
- Greater energy efficiency – These homes generate less waste and produce fewer carbon emissions compared to traditional on-site construction
- Consistent quality and predictable timelines – Built indoors in controlled environments, they avoid weather delays, ensuring reliable craftsmanship
- Flexible and scalable design – Available as single or multi-storey homes, with customizable styles and layouts
Why Modular Housing Matters to Policy Makers
With Canada's housing crisis accelerating demand for faster and more affordable solutions, modular construction offers key benefits for the economy, environment, and community. For instance, the federal government aims to catalyze the housing industry by providing over $25 billion in financing to prefab homebuilders.11 Similarly, in Ontario, Premier Doug Ford has committed $50 million to support modular housing technology.12
Several small cities in Ontario have successfully implemented modular developments. The City of Peterborough has built a 50-unit complex and the City of London has built a 61-unit building.13
Can You Finance a Modular Home like a Traditional Home?
Yes! Modular homes can qualify for traditional mortgages from banks and financial institutions, as well as personal loans and manufacturer financing, similar to a Vendor Take Back (VTB) mortgage.14
The Canada Mortgage and Housing Corporation (CMHC) offers mortgage loan insurance for modular home buyers, helping reduce risks and potentially lowering interest rates.15 As with any home purchase, it's important to compare loan options carefully and ask for any conditions that may apply.
Legal Protections and Warranty Coverage
Modular homes are subject to many of the same legal standards and consumer protections as conventionally built homes.16 Zoning by-laws must be reviewed and building permits must be secured for both the foundation and for home placement.17
Most new modular homes qualify for coverage under Tarion, but eligibility depends on key factors18:
- The home must be new
- It must be built on a permanent foundation
- The builder or vendor must be licensed by the Home Construction Regulatory Authority (HCRA)
- The owner cannot act as their own general contractor or divide construction tasks
Is This a Long-Term Solution or Just a Fad?
Experts agree that modular homes are not a one-size-fits-all solution, but they can play a critical role in expanding Canada's housing supply.19
The success of modular housing depends on20:
- Clear zoning and construction regulations
- Expanded financing and insurance options
- Strong warranties and buyer protections
- Close collaboration between government and industry
Thinking About Buying a Modular Home?
Modular homes offer promising benefits, but due diligence is essential. Here are a few steps to get started:
- Vet your builder – Ensure they are licensed and experienced in modular/prefab construction
- Check land ownership and zoning by-laws – Confirm that the subject land is zoned for residential use and that modular construction is permitted
- Understand your rights and duties as a homebuyer
- Compare financing options – Shop around for the best rates and terms
- Consult professionals – A real estate lawyer can help navigate legal financial complexities
With proper planning and professional guidance, they offer a practical and affordable path to homeownership.
Footnotes
1. The Liberal Party of Canada, "Mark Carney's Liberals Unveil Canada's Most Ambitious Housing Plan Since the Second World War" (31 March 2025), online: (https://liberal.ca/mark-carneys-liberals-unveil-canadas-most-ambitious-housing-plan-since-the-second-world-war/).
2. Ibid.
3. The Ministry of Municipal Affairs and Housing, "Building a Modular Home" (2021), online: (https://files.ontario.ca/mmah-building-a-modular-house-en-202-12-06.pdf).
4. CREA Café, "Can Modular and Prefab Homes Help Address Canada's Housing Crisis?" (13 September 2024), online: (https://www.crea.ca/cafe/can-modular-and-prefab-homes-help-address-canadas-housing-crisis/).
5. Ibid.
6. The Ministry of Municipal Affairs and Housing, supra note 3.
7. Ibid.
8. Ibid.
9. Ibid.
10. Ibid; Philip Drost, "Canada Needs More Homes. Prefabricated Houses Could Fill the Void." (18 May 2025), online: CBC Radio (https://www.cbc.ca/radio/costofliving/prefab-housing-shortage-1.7535092).
11. The Liberal Party of Canada, supra note 1.
12. Sharif Hassan, "In Canada's Housing Crisis, Are Modular Homes a Cheaper and Faster Solution?" (15 May 2025), online: CBC News ( https://www.cbc.ca/news/canada/toronto/modular-homes-housing-crisis-1.7535799 ).
13. Ibid.
14. Manufactured Housing Association of British Columbia, "A Few Points on Modular Housing Financing" (2025), online: (https://mhabc.com/a-few-facts-on-modular-housing-financing/).
15. Ibid.
16. The Ministry of Municipal Affairs and Housing, supra note 3.
17. Ibid.
18. Ibid.
19. Robin MacLennan, "OREA Pushes Prefab Housing to Ease Crisis" (23 April 2025), online: Ontario Construction News ( https://www.ontarioconstructionnews.com/orea-pushes-prefab-housing-to-ease-crisis ); Hassan, supra note 12.
20. Ibid.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
