Trade barrier removal to increase housing supply and help renters

On Canada Day, the Government of Canada significantly reduced federally imposed barriers to interprovincial trade across the country. This followed similar moves at the provincial level, with Nova Scotia, Prince Edward Island, Quebec, Ontario, Manitoba, Alberta and British Columbia all introducing legislation or entering into agreements to reduce their interprovincial trade barriers.

These changes will increase housing construction and may help fix our housing supply gap over time. However, on their own, they may not benefit homeownership affordability. To maximize the impact of eliminating interprovincial trade barriers on housing supply, Canada also needs to pay attention to other interprovincial constraints, including the need to improve west-to-east transportation infrastructures.

New modeling by CMHC shows that the elimination of interprovincial trade barriers in Canada may incentivize more than 30,000 housing starts annually, pushing the total annual number close to 280,000 starts over time. This is a meaningful step towards fixing Canada’s housing supply gap. It represents close to 15% of the additional housing supply needed annually over the next decade to return to pre-pandemic affordability levels, as recently estimated by CMHC. Removing interprovincial trade barriers will also lead to an increase in household income of about 6%.

Lower interprovincial trade barriers are expected to strengthen the economy in several ways that will drive up demand for homeownership across Canada:

• a stronger overall economy
• a lower unemployment rate
• higher household incomes

The combination of increased supply and greater capacity to pay for housing from increased income will increase those with access to homeownership. Initially, about 300,000 additional households will have access to homeownership. However, as increased incomes support higher housing demand and house prices, this will slowly diminish to about 150,000 households by 2035, compared to the status quo. This also means an equivalent amount of rental units may free-up and be accessible to households who want to enter the rental housing market or upgrade their rental housing situation. The graph below shows the path of households becoming homeowners and its evolution over time resulting from the removal of interprovincial trade barriers.

Since increased income is expected to increase demand for homeownership, housing supply must increase to at least match the increase in demand to maintain or improve affordability. It is also expected that the average rent will go up 3.1%, about half the increase in incomes. Rental housing market affordability will improve since incomes will be growing faster than rents.

Interprovincial transportation infrastructure needed

A scenario where the reduction of interprovincial trade barriers foster better use of our domestic resources is realistic. Further analysis of Statistics Canada’s Canadian International Merchandise Trade (CIMT) data by CMHC shows that Canada has ample domestic production and is a net exporter of wood, aluminum, iron and steel. That means the country doesn’t use all that it produces, and a significant share of our domestic production could be redirected towards residential construction in Canada.

For concrete, cement and machinery, however, Canada remains dependent on U.S. and European supply, because of limited large-scale local production.

The following graph shows the net trade status for core construction components. A positive sign means Canada is a net exporter of a good, meaning it exports more than it imports. A negative result denotes the opposite: Canada imports more than it exports. It’s worth noting that most core materials, and especially machinery, include a wide array of goods that don’t necessarily all serve the construction industry.

Beyond interprovincial trade barriers, other constraints to maximizing our use of domestic materials across provinces remain. A survey conducted by Statistics Canada showed that close to half of Canadian construction firms cited distance and transportation costs as the main reasons for not purchasing goods or services from suppliers in another province or territory. Provincial or Territorial tax laws came third while difficulty to obtain permits and licenses and industrial regulation challenges came much further down.

This highlights the need for west-to-east transportation infrastructure to be developed alongside the removal of interprovincial trade barriers to make the most of the current movement towards Canadian economic integration.

Source: Statistics Canada Table 33-10-0966-01

Latest release: March 2025

The current movement towards the elimination of interprovincial trade is a good step forward in responding to the current international trade crisis, and one that economists have called for over decades. That said, there is a need for commensurate investments in transportation infrastructure across the country, for example railway and highways but also deep seaports in remote locations where housing needs are dire.

These are nation-building projects that will help accelerate the building of one Canadian economy from coast-to-coast-to-coast, accelerate the current trend towards economic integration west-to-east and in the North as well as maximize the housing industry benefits of the current interprovincial trade legislations and agreements.

Contributors to this article: Dana Senagama, Olivier Fortin-Gagnon, Gorkem Ozdemir, Lindsay Tu, Pierre-Luc Deslauriers, Adebola Omosola, Inna Breidburg and Nicolas Bernatchez.