A New Statistics Canada Study Reveals Residential Construction Workers Produce Far Less Than They Did Two Decades Ago — And the Inefficiency Is Showing Up in Every Quote
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A CMHC-backed study published April 15, 2026, has put a number on something Canadian homeowners have felt for years: the people building and renovating homes are getting less done per worker than they used to — significantly less. Labour productivity in residential construction fell by a cumulative 37.3% between 2001 and 2023, according to research authored by CMHC deputy chief economist Aled ab Iorwerth and Statistics Canada economists Jenny Watt and Wulong Gu. Over the same period, the overall business sector grew its productivity by 12.5%.
That gap matters beyond the spreadsheet. When each worker produces less output than they did two decades ago, the cost of that inefficiency flows directly into the price of every new home and renovation project. Materials get the headlines when prices spike, but labour productivity is the quiet variable that never corrects — and it helps explain why quotes keep climbing even when lumber stabilizes.
The study's most striking finding is geographic. Ontario alone accounts for more than half of the entire national productivity decline, and it is the only province where productivity fell across every firm size. For the roughly two million Canadian homeowners who renovate in any given cycle — spending an average of $37,000 each — this is the hidden cost driver that rarely makes the quote breakdown. It sits alongside the affordability pressures already spreading beyond Toronto and Vancouver and makes the full picture harder to ignore.
Labour productivity, as defined in this research, is real gross output per worker. It is not a measure of effort or hours on site. It measures how much housing output the industry produces for each person it employs. A decline means the sector is hiring more people but getting proportionally less built.
The numbers are stark. Between 2001 and 2023, residential construction productivity dropped at an average rate of 2.1% per year. The broader Canadian business sector, by contrast, grew at 0.5% per year — a modest pace by international standards, but one that still moved in the right direction. Residential construction moved the wrong way for two decades.
The timing is particularly costly. Canada needs a massive increase in housing starts to restore affordability by 2035, according to CMHC's own projections — a target Ontario is already falling behind on by roughly 30,000 units per year. The authors of the study are direct about the implication: this long-term erosion in productivity is likely contributing to reduced housing affordability and rising home prices at precisely the moment the country can least afford it.
The study's firm-size decomposition is where the headline finding becomes personally relevant to anyone hiring a contractor. Residential construction in Canada is dominated by small firms, and those small firms account for nearly all of the productivity decline.
The breakdown is measurable and lopsided:
Firms with fewer than five employees — sole operators and micro-crews — contributed more than 22 percentage points of the total 37.3% drop. Firms with five to 19 employees added another 16 points. Together, small firms with fewer than 20 employees account for the overwhelming majority of lost productivity. Only firms with more than 50 employees made a positive contribution over the study period.
That pattern has a direct consequence for homeowners. About 60% of construction firms in Canada are microbusinesses with fewer than five employees, according to a federal government briefing note on the housing workforce. These are the contractors most Canadians actually hire for renovations, additions, and smaller builds.
Small firms are also the ones most exposed when material costs shift due to tariff changes — they lack the purchasing power to absorb price swings the way larger operations can.
A natural assumption is that larger firms must be dramatically more efficient. The study challenges this. Between 2001 and 2023, the employment share of small firms (under 20 employees) fell from nearly 80% to about 66% of sector jobs — a meaningful shift toward larger operators. But that consolidation boosted overall productivity by less than five percent.
The reason: the productivity advantage of larger firms over the smallest is only about 10%. That gap is real but modest. A homeowner hiring a 50-person firm is not automatically getting a project that runs twice as fast or costs half as much as one from a five-person crew. The inefficiencies are structural, not simply a function of headcount.
The regional decomposition is where the study delivers its sharpest finding. Ontario contributed –24.7 percentage points of the overall –37.3% national decline in residential construction labour productivity. That is well over half of the total.
Ontario is also the only province where productivity fell across all firm sizes — micro, small, medium, and large. No segment of Ontario's residential construction industry improved its output per worker over the study period. That suggests the problem is not limited to small operators but reflects broader structural or policy-related challenges specific to the province.
Ontario homeowners face a compounding challenge: the province where construction demand is highest is also the province where construction productivity has declined the most, across every size of firm.
The rest of the country is not uniform. Alberta and Quebec also experienced declines, largely driven by small firms. But a few provinces moved in the opposite direction — Prince Edward Island, Nova Scotia, and New Brunswick each achieved modest productivity gains. British Columbia made a positive contribution at the national level, though largely because its share of construction activity grew (from 12.9% of jobs to 19.2%) rather than because individual firms became more efficient.
The contrast matters. Ontario's broad-based decline is not an inevitable feature of residential construction. Other provinces, operating under different conditions, managed to hold the line or improve. For Ontario homeowners comparing renovation quotes, the implication is that the province's housing start shortfall is compounded by a workforce that is producing less per person than it was a generation ago. Add development charges that layer tens of thousands onto new-home prices, and the full cost structure facing Ontario buyers and renovators becomes clearer.
The study points to several structural factors behind the persistent decline, and none of them are easily reversed.
Chronic shortages of skilled tradespeople sit at the top of the list. Canada needs to add 187,300 construction workers by 2034 just to keep pace with retirements and demand growth. The industry employs over 1.5 million people and accounts for about 7% of GDP, but the pipeline of skilled entrants has not kept up.
Regulatory complexity adds friction. Different building codes, permitting processes, and inspection requirements across provinces and municipalities limit the ability of firms to standardize processes or scale prefabrication across jurisdictions. For homeowners, this is part of why a seemingly simple renovation permit process can add weeks or months to a project timeline.
Limited adoption of new technologies is a recurring theme. As CMHC's deputy chief economist put it in a separate interview: "There hasn't been a lot of innovation in building single detached housing. It's built now the same way it was 100 years ago." Companies are "not improving their processes" and are instead "just buying more labour" — a pattern the study confirms at the data level.
Industry fragmentation compounds all of the above. The construction sector has a constant churn of firms entering and exiting the market. High turnover can drive innovation in some industries, but in construction it more often signals an unstable business environment where long-term investment in technology and training is difficult to justify.
The federal government has created a new agency, Build Canada Homes, aimed partly at boosting productivity and increasing housing supply. But the study is clear that reversing decades of decline requires more than one structural intervention. Without meaningful gains in productivity, simply adding more workers may not be enough — and could, the authors warn, further exacerbate inefficiencies.
Here is where the study's findings connect to the number on your contractor's quote.
Labour productivity is embedded in every line item. Statistics Canada's Residential Renovation Price Index tracks quarterly changes in the prices contractors charge for 37 types of renovation projects across 15 metropolitan areas — and those prices explicitly include materials, labour, equipment, overhead, and profit. When labour productivity declines, the labour component of every quote absorbs the inefficiency.
The scale of the renovation market makes this more than an abstract concern. Roughly two million Canadian homeowners renovated between 2018 and 2021, spending a combined $72 billion — about $24 billion per year, according to CMHC survey data. Statistics Canada estimates total residential renovation activity, including rental and investor properties, averages about $56 billion annually. A 37% productivity decline applied across that spending volume represents billions in embedded inefficiency flowing through to homeowner costs each year.
The earlier CMHC research framework estimated that post-2019 productivity losses alone added $6 to $8 billion to housing construction costs nationally, accounting for up to 20% of the increase in new home prices. That is not materials inflation. That is not interest rates. That is the cost of getting less done per worker.
When comparing contractor quotes, the lowest bid is not necessarily the best value. CMHC recommends obtaining at least three written quotes before signing a contract. In a market where productivity varies widely between firms, the spread between quotes often reflects real differences in how efficiently a contractor runs a project — not just how aggressively they price it.
For homeowners planning a renovation or build in 2026, the practical takeaway is context, not panic. Material costs remain a factor — particularly with ongoing tariff pressures on lumber, appliances, and hardware. But the productivity story explains the other half of the equation: why the labour portion of a quote often feels disproportionately high, and why project timelines stretch beyond initial estimates. The inefficiency is systemic. It is not unique to the crew in your driveway.
Understanding that context does not lower your quote. But it does change how you evaluate one. A contractor who uses project management software, invests in prefabrication where applicable, and runs a tight site schedule is not just organized — they are working against a two-decade structural headwind that most of the industry has not addressed. That distinction is worth asking about.
