Canada’s housing market is in crisis, with affordability at record lows and new supply struggling to keep pace with demand. While much of the blame is placed on the BOC’s post-pandemic interest rate fiasco and insufficient supply-side reforms, one often-overlooked factor is Canada’s own internal trade barriers. These barriers—ranging from restrictions on building materials and labour mobility to fragmented mortgage regulations—add unnecessary costs, slow construction, and make housing even less affordable. In this blog, Tembo will outline many of these barriers. By the end of this blog, you will fully appreciate just how serious the problem of these compounding barriers is and how they’re unnecessarily hurting our ability to build homes across the country – a huge ‘own goal.’

The Hidden Cost of Trade Barriers on Construction Materials

Building a house in Canada is more expensive than it needs to be, partly because provinces make it difficult to transport and sell construction materials across borders. Lumber, steel, drywall, cement, and insulation all face interprovincial restrictions, forcing builders to buy from local suppliers even when cheaper alternatives exist just a province away. For example, Quebec has regulations that make it difficult for Ontario concrete producers to sell in the province. This means Quebec builders may pay higher prices for cement even when there’s an abundant supply just across the border. Similarly, different provinces have their own requirements for insulation materials, meaning a supplier in Alberta might not be able to sell its product in British Columbia without expensive modifications. These barriers drive up costs for homebuilders, and those costs are inevitably passed down to homebuyers and renters. The more expensive it is to build, the more expensive it is to buy.

Labour Mobility Restrictions Create Shortages and Higher Wages

Canada is facing a skilled labour shortage in the construction sector, but the problem is made worse by provincial licensing restrictions. Electricians, plumbers, and carpenters who are fully qualified in one province often need to go through additional certification to work in another. A master electrician in British Columbia, for instance, can’t just move to Saskatchewan and start working—he needs to get re-certified under Saskatchewan’s licensing system. This prevents workers from moving to where they’re needed most, leading to labour shortages in high-growth provinces and wage inflation that makes housing construction more expensive. During peak building seasons, some provinces struggle to find enough skilled tradespeople, while others have surplus workers who can’t easily relocate. These inefficiencies make projects take longer and cost more, further limiting the supply of new housing.

Mortgage and Investment Restrictions Limit Capital for Housing

Interprovincial financial regulations also create barriers to investment in the housing market. Mortgage lenders, real estate investment trusts (REITs), and other financial institutions must navigate different provincial regulations, making it harder for capital to flow where it’s needed most. For example, a private mortgage lender based in Ontario may face additional licensing or compliance hurdles when trying to finance projects in Alberta. This reduces competition and limits access to financing for both developers and homebuyers. Similarly, certain REITs that operate in one province may struggle to expand into another due to differing rules on property ownership and taxation. If Canada had a more streamlined financial regulatory system, more capital would flow into housing development, helping to accelerate construction and lower borrowing costs for homebuyers. Keep in mind that we are the only G7 nation without a national financial securities regulator! Every province has their own!

Red Tape Slows Down Housing Approvals and Starts

Even when developers have the money and workers to build new housing, they face layers of bureaucratic red tape that vary from province to province. We’re a bureaucratic, often stifling, and red tape loving country. But this is a terrible trait to have as a society desperate for new housing supply. Different approval processes, environmental assessments, and municipal zoning laws create a maze of regulations that delay projects and drive up costs. A company that builds modular homes, for example, might struggle to sell them across multiple provinces because each jurisdiction has slightly different building code requirements. A prefabricated home designed in Alberta might need modifications to be legally sold in Ontario, even if the differences in regulations are minor. This lack of standardization makes it difficult for national homebuilders to operate efficiently. Instead of focusing on getting housing built quickly and affordably, they must spend time and money navigating regulatory inconsistencies.

Transportation Barriers Increase Construction Costs

Moving building materials across provinces is also more expensive than it should be. Different trucking regulations, weight limits, and fuel taxes make it costly to transport goods from one province to another, adding to the overall price of housing construction. For example, an Ontario-based manufacturer might find it more expensive to ship materials to Manitoba than it would be to send them to the United States due to differing provincial transport rules. These unnecessary costs pile up, making everything from lumber to drywall more expensive for homebuilders. Apart from cross-province rules, it might simply be more economical for a business to export to the U.S. then to seek markets in other provinces, especially in their close to the border.

The Impact on Housing Prices and Supply

All of these factors—higher material costs, labour shortages, restricted investment, excessive red tape, and transport barriers—add up to one thing: more expensive housing and a slower pace of new construction. Canada’s housing crisis is fundamentally a supply problem, yet internal trade barriers make it harder to build new homes efficiently and affordably. For example, Toronto is experiencing an explosion in new listings, but home sales remain sluggish because affordability remains out of reach for many buyers. Builders are hesitant to take on new projects when costs are high and demand is uncertain. If Canada streamlined its interprovincial regulations, it could reduce construction costs and encourage more new developments to break ground. In 2016, the federal Standing Senate Committee on Banking, Trade and Commerce released a report titled Tear Down These Walls: Dismantling Canada’s Internal Trade Barriers, finding that internal trade barriers cost the Canadian economy up to $130 billion yearly and that “far too many unnecessary regulatory and legislative differences exist among Canada’s jurisdictions.” The number today is probably much higher. Fundamentally, our housing market would be in much better shape if we could rid ourselves of our burdensome internal trade barriers. Let’s hope our political class can leverage Trump’s tariff threats to get this done, and soon.