Human Resources Committee on Oct. 29th, 2024

[Tracy Gray, Conservative, Kelowna—Lake Country, BC]

Thank you.

I'm down to my last 15 seconds here, so I just want to ask one more question.

The federal Liberal finance minister in June claimed that her capital gains tax hike would build more housing. Do you think that hiking the capital gains tax will build more housing?

[Hans Jain]

No.

[Tracy Gray, Conservative, Kelowna—Lake Country, BC]

Thank you.

[The Chair, Liberal, Bobby Morrissey]

Thank you, Mrs. Gray. You're 10 seconds early.

Mr. Collins, you have five minutes.

[Chad Collins, Liberal, Hamilton East—Stoney Creek, ON]

Thanks, Mr. Chairman.

Welcome to all the witnesses.

I'll start with Ms. Fiorellino.

Ms. Fiorellino, I'd like to pick up where you left off with regard to the guarantee of orders and the commitment of all levels of government to invest in modular housing in order to drive innovation. I look at our rapid housing initiative, which was born out of the pandemic. You referenced procurement, and the procurement process for the RHI required that non-profits and municipalities build those units within a 12-month to 18-month time frame. Through three rounds of that program, I think we're up to almost 16,000 units, the majority of which are modular.

I see that almost as the only program in the country that's invested money into the modular industry through municipalities and non-profits. I can't think of another provincial program. Can you provide recommendations to us here at the committee that kind of speak to that issue in terms of a guarantee of orders, driving innovation, and driving the purchase of modular units through your business and others?

[Sabrina Fiorellino]

Absolutely.

The more procurement there is in general, even outside of housing, the better it is for the modular industry as a whole. When the rapid housing initiative came out, Fero was in its infancy, so we weren't able to bid on that. I think some of our other witnesses referenced the point that we don't need pilots but that we need big procurement projects to prime the pump. I mentioned that Fero has 300,000 square feet of manufacturing space. We can build hundreds of thousands of square feet of infrastructure, year over year. When every level of government looks at procurement, they look at it from a modular-by-default lens. My recommendation is to say “Why not modular?” versus “Why modular?”.

We have a lot of builders across the country, especially some of our larger infrastructure builders, that are full for the next five years and have no more capacity to build. We need to look at alternatives. You mentioned something about scale and technology. You can only really look at the real benefits of the technology at full scale. We have automation equipment. We use AI in our processes. However, if we're not operating our plant at full capacity, we don't also get the full benefit of that, which is more speed and, obviously, more affordability.

I would argue that today we have more of an affordability crisis in housing than a supply crisis. We can build; we just can't build at a cost that's feasible for people to buy. The more work we get, the more we can drive costs down.

[Chad Collins, Liberal, Hamilton East—Stoney Creek, ON]

Thanks for that answer.

I'll follow that up with the market penetration issue that you raised. I'll point to the housing accelerator fund that sort of created some healthy tension with municipalities to change the way they do business from a planning perspective. That program has driven many municipalities to adopt secondary dwelling unit policies that allow a unit in the backyard. I would see that as an opportunity for the modular sector to sell to the average individual.

You've mentioned the challenges that exist related to governments making investments in modular. How do we bridge the gap with the average person who sees that their municipality has allowed secondary dwellings in the rear yard, who wants to purchase a modular unit, but who isn't sure about how to go about that? How do we assist the industry, your business and others with growing the business and expanding the market penetration issue that you referenced in your opening?

[Sabrina Fiorellino]

Again, I'll go back to my opening remarks. There is a public perception issue as it relates to modular and some other new building technologies. I think there are a number of things that can be done. I talked about the government being first adopters of the technology. This is what happened in Europe, and then the public came along. There's also an ability to provide incentives for homeowners to choose modular or new technologies over more traditional methods.

One of the topics that came up was decarbonization and our targets for 2050. Modular is specifically designed for deconstruction, so I think it's one of the only building technologies that can get to a net-positive place over traditional methods.

I think we need to look at the incentives and promoting modular so the average person considers it as an alternative to traditional methods.

[The Chair, Liberal, Bobby Morrissey]

Thank you, Mr. Collins. That's right on time.

Ms. Chabot, you have the floor for two and a half minutes.

[Louise Chabot, Bloc, Thérèse-De Blainville, QC]

Thank you, Mr. Chair.

Mr. Arthur, the committee heard another witness say that Canada is lagging behind Europe and other countries in terms of innovation in construction. How can we do better and emulate other countries to encourage the emergence of new technologies in the field?

[Ian Arthur]

Yes, for sure. I'll pick up on the point of the last witness about priming the pipeline. Actually, this goes back to MP Zarrillo's question as well.

If you want to put a multiplier on government funding, provide it to companies doing innovation that are actively seeking private sector investment and you will have a 5 times, 6 times or 10 times multiplier on that investment very quickly, because the surety of work the government can provide to these companies is incredibly meaningful for security for private sector investment. If we look to Europe and the example of how they embraced modular housing technology and advanced it, which gave the private sector confidence to go in and follow in that space, I think it's incredibly important. I think we can do the same with multiple technologies here.

[Louise Chabot, Bloc, Thérèse-De Blainville, QC]

How will adopting that strategy through supports and subsidies help us achieve our goal of building affordable housing? Affordability is one thing that's in demand.

[Ian Arthur]

Pick the companies well that you're providing support to. Make sure they have a feasible path to production, scaling, meaningfully providing housing, increasing supply or lowering the cost of production.

[The Chair, Liberal, Bobby Morrissey]

You have 30 seconds left, Ms. Chabot.

[Louise Chabot, Bloc, Thérèse-De Blainville, QC]

So it's the theory of supply and demand, never mind that there's more demand for social or affordable housing. Is that right?

[Ian Arthur]

It is, and this is where we run into the process problem, which is where I started my comments. We're trying to solve a problem with mechanisms that, honestly, are 100 years old.

[The Chair, Liberal, Bobby Morrissey]

Thank you, Ms. Chabot.

We'll go to Madam Zarrillo for two and a half minutes to conclude this first hour.

[Bonita Zarrillo, NDP, Port Moody—Coquitlam, BC]

Thank you, Mr. Chair.

I have a question for Witness Fiorellino about the scaling and the scaling-up. How can the federal government create an environment where companies like yours can scale up and be sure to be fully optimized?

[Sabrina Fiorellino]

Thank you for your question.

I think the interest-free loan program that FedDev issued is very helpful. Like our previous witness said, we had to provide private sector funding alongside government funding, so there was 60% more private sector funding with a plan, metrics and testing to ensure that we are meeting the plan; otherwise, funding could be scaled back. That was very important.

Also, having orders.... I go back to priming the pump again. It's not just about scaling the plant. We can build big, beautiful plants and hire a lot of employees, but without work, none of it matters. Therefore, our targets for funding also related to how many orders we could put through the plant or the scaling of revenue in addition to the scaling of the labour force.

[Bonita Zarrillo, NDP, Port Moody—Coquitlam, BC]

I have a question on that. Has your organization, or anyone in the industry you've spoken with, ever been approached by the federal government to talk about innovation around how the government could invest in or make or buy these kinds of housing units?

[Sabrina Fiorellino]

We've spoken to all levels of government—I commend the work of all levels of government—about a number of things. Are robotics, automation and AI helpful? Would funds for that be helpful? How can we change procurement to ensure that the modular industry has a fair shot at different types of procurement?

I've had conversations with a lot of different government officials across all levels, and I am grateful for those.

[Bonita Zarrillo, NDP, Port Moody—Coquitlam, BC]

Perhaps I could ask both you and Mr. Arthur about trade shows. Does Canada host any innovation trade shows around home building? Where do you go, across the globe, to trade shows?

[Sabrina Fiorellino]

We go to a number of different conferences. We obviously serve a lot of different end sectors, so a lot of them are private conferences. We attend, for example, the Canadian Healthcare Engineering Society conferences, where engineers who service the health care industry attend. We have attended DiscoveryX, which is hosted by the Ontario Centre of Innovation. We have attended the World Business Forum in New York on leadership. We attend the Modular Building Institute conference that has a Canadian chapter, usually hosted in the U.S., that has modular building companies across North America and who globally attend.

There are lots of different trade shows, less put on by government, I would say, and more by the private sector.

[The Chair, Liberal, Bobby Morrissey]

Thank you, Madam Zarrillo. We're well over.

[Bonita Zarrillo, NDP, Port Moody—Coquitlam, BC]

Mr. Chair, I wonder if Mr. Arthur could submit something in writing.