Company closing Kitchener factory, blames cost of development and government overregulation

Z Modular employees work on a student residence project at St. Clair College in Windsor, Ont. (Courtesy: Z Modular on Instagram)

A construction company that makes modular housing has decided to close up shop in Kitchener.

Z Modular, a division of the U.S.-based Zekelman Industries, announced on June 25 it would be closing its factory on Manitou Drive.

In a media release, the company cited the Canadian housing market as a major factor in their decision to shutter the facility.

“Public sector inefficiency in the permitting and entitlement process reduces the inventory of land available for housing development and renders land costs too expensive for the development of affordable housing,” it read. “A developer 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 also proved to be an inefficient and costly process."

They went on to say: "Under the Rental Construction Financing Initiative, all financing is subject to acceptance by the Canada Mortgage and Housing Corporation (CMHC). Z Modular worked diligently to have the first-ever modular construction development approved by CMHC. However, the approval took over a year and was not received until the project was nearly complete. Subsequent projects have experienced similar, significant inefficiencies in financing approval.”

CMHC refutes that claim.

“Our target approval time for MLI applications is 60 days, and this particular application was approved within this timeline,” they explained.

CMHC also said Z Modular’s financing was facilitated by Mortgage Loan Insurance (MLI) and not the Apartment Construction Loan Program, formerly known as the Rental Construction Financing Initiative.

“We appreciate the innovative work Z Modular does to create much needed rental homes for Canadian families and individuals and hope we will have the opportunity to support more of their projects in the future,” they added.

Zekelman Industries also lays blame on “inflationary government overspending [which] 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’s press release said.

CTV News reached out to the chief marketing officer at Zekelman Industries to learn more about the impact on the Kitchener facility and their reasons for the closure. They said they had no further comment on the matter.

The company said they’ll continue to invest and operate their facilities in the United States, including locations in Arizona, Texas and Alabama.

Z Modular has already completed a multi-family residential space in Lucan, Ont. and will soon begin leasing units at another project in Woodstock. They also built a student residence at St. Clair College in Windsor.