Z Modular closes Kitchener factory due to development costs and government ‘overregulation’

Ontario Construction News staff writer

Z Modular, a division of Zekelman Industries, has announced the closure of its factory on Manitou Drive in Kitchener, citing significant challenges in the Canadian housing market and government overregulation as the primary reason.

“Despite the hard work of our teammates to drive costs down, the Z Modular business in Canada is unsustainable due to high cost of developable land, government overregulation and lack of project financing support,” explains Barry Zekelman, executive chairman and CEO of Zekelman Industries.

The company cited multiple contributing factors leading to the closure, including:

• inefficiency in the permitting and entitlement process that reduces the inventory of land available for housing development and renders land costs too expensive for the development of affordable housing.
• developers must either choose to pay too much for developable land or wait too long to go through permitting and entitlement.
• financing for modular construction in Canada is an inefficient and costly process.
• Under the Rental Construction Financing Initiative, all financing is subject to acceptance by the Canada Mortgage and Housing Corporation (CMHC).

Despite working “diligently” to have the first-ever modular construction development approved by CMHC, approval took over a year and was not received until the project was nearly completed.

Subsequent projects have experienced similar, significant inefficiencies in financing approval. Finally, inflationary government overspending has driven operating costs to a level that substantially increases project risk.

“These unfriendly business conditions ultimately led to the company’s difficult decision to close the Kitchener factory and the regrettable job loss for teammates at the facility,” the company said in a news release.

The company, known for producing modular housing units,  as key factors in its decision.

The company has completed projects in Lucan and Woodstock, Ontario, and has built a student residence at St. Clair College in Windsor.

Z Modular will continue operations in the United States, with facilities in Arizona, Texas, and Alabama.

“Inadequate land availability, coupled with protracted approval processes and inflationary government spending, has created an unsustainable environment for affordable housing development,” the company stated. “These business conditions have forced the difficult decision to close our Kitchener facility, resulting in regrettable job losses for our team.”