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The growing environmental problems, the rapid urbanization, and the disappearance of the demographic dividend in China has brought unprecedented opportunities to the development of prefabricated housing (PH). However, many barriers are hindering the promotion of PH, for instance, cost, lack of regulations, and the shortage of knowledge, among which cost is identified as one of the most critical barriers. Unlike previous studies focused only on production costs, this research aims to investigate transaction costs (TCs), e.g., searching costs, negotiation costs, and enforcement costs. First, this paper develops a theoretical TCs framework of the PH supply chain, based on an extensive literature review. Secondly, an empirical study was conducted on two cases in Chongqing to validate the TCs framework. Key stakeholders are identified by Social Network Analysis (SNA). Subsequently, 25 semi-structured interviews were conducted with key stakeholders, both to verify the new TCs framework and to explore stakeholder concerns about TCs. The centrality metrics by SNA identified six key stakeholders who have a significant influence on TCs. It is found from the interviews that both the conceptual phase and the construction phase are stages where the majority of TCs occur. Both the developer and the general contractor are paying for more TCs compared to the other stakeholders. This study contributes to theory by initially introducing the concepts of TCs to the PH field, and the findings bring implications on the governance of PH supply chain to both private stakeholders and the government. • Transaction costs in the prefabricated housing supply chain cause low economic efficiency. • Critical stakeholders include developers, general contractors, architects, local governments, supervisors and component suppliers. • Developers and general contractors are recognized as bearing more Transaction Costs compared with the other stakeholders. • The conceptual phase and the construction phase are where the majority of transaction costs occur. • To improve the governance of projects, both public and private stakeholders can take actions to reduce transaction costs. [ABSTRACT FROM AUTHOR]