To address housing crisis, Canada needs to lower immigration intake
Canada needs a new approach to the housing crisis because we’re spinning our wheels in solving it.
For the next few years we must reduce our immigration intake, following the example of other immigration-friendly countries.
In doing so, we would finally address the demand side of the housing equation, after fixating with increased supply.
To be sure, we are embarked on the herculean task of building more housing supply than ever in our history. But the going is slow.
In the meantime, it is heartbreaking to learn of immigrants who are returning to their homelands because even with two jobs in Canada they cannot afford to live here.
With all the urgency in the world, we still cannot quickly enough marshal the funding, skilled construction tradespeople and co-operation among governments and the private sector to properly match a rapidly growing population with adequate housing.
“It takes about a decade for municipalities to identify, service and allocate land for housing, then auction that land for developers to construct and sell houses on,” CIBC economist Benjamin Tal said in a February report on the housing crisis.
Continued immigration is essential to our current and future prosperity. Absent immigration, our diversity and magnitude of skills would diminish and Canada will also shrink in population.
Canada’s acute shortage of construction workers to conduct a housebuilding boom has been calculated at as many as 80,000 workers by 2030, so that even as Ottawa reduces total inflows it must more aggressively recruit skilled tradespeople from abroad.
But our total record immigration inflows of the past two years have been too much of a good thing, too quickly, for recent immigrants and longtime Canadians alike.
Average Canadian rents rose eight per cent last year and 5.6 per cent the year before, according to a recent report by the Canada Mortgage and Housing Corp. (CMHC).
Compare that with the 2.8 per cent average annual rent increase in the three decades prior to the pandemic.
And Canadian house prices will hit a new high next year, says the CMHC, as buyers return to the
market after this year’s expected easing of mortgage rates. That could raise house prices to new levels of unaffordability.
The Canadian construction industry has built roughly 250,000 new homes in each of the past three years, the fastest pace since the mid-1970s, another period of high immigration.
And yet that’s woefully insufficient.
Last year, the CMHC warned that depending on the strength of the economy, Canada will need between 3.1 and four million new homes to restore affordability by 2030. And that’s over and above the current level of homebuilding.
CIBC’s Tal believes that range is an underestimate and that we need closer to five million new homes by 2030.
So, we must address the demand side of the supply and demand imbalance.
Justin Trudeau has said as much. “We’ve seen a massive spike in temporary immigration,” the prime minister said in an April 2 press conference.
“(It) has grown at a rate far beyond what Canada has been able to absorb.”
And so, Ottawa has announced a 20 per cent reduction in new temporary residents — international students, temporary foreign workers and refugee claimants — over three years, to a still sizable two million.
Yet Ottawa is determined to further increase housing demand with its targets of 485,000 permanent residents in 2024, and 500,000 in each of 2025 and 2026.
That plan to add close to 1.5 million more permanent residents by 2026 follows the record population increase of 1.2 million in 2022-23.
Instead, Canada needs to lower annual immigration intake to about 300,000 permanent residents in each of the next few years. That was the level as recently as 2020.
The U.K., Australia and New Zealand, all coping with the same housing crises as Canada after surges of newcomers, are each planning to reduce immigration levels.
Rishi Sunak, the British PM, has said U.K. immigration inflows are “far too high” after recent government reports that immigration soared to a record 745,000 in 2022.
Australia plans to cut its migrant intake by about 50 per cent over two years, after welcoming a record 510,000 immigrants in the year ending June 2023.
And New Zealand Prime Minister Christopher Luxon said his country’s net immigration increase of 118,835 people in the year through September “doesn’t feel sustainable for New Zealand at all.”
Luxon said his government will focus on “infrastructure” — that is, prioritizing adequate housing and social services for immigrants rather than posting big migration numbers.
U.S. immigration policy is already restrictive and would likely become more so in a second Trump presidency.
A new Canadian housing strategy would match immigration targets with realistic expectations of increased housing supply.
A meaningful reduction in newcomers for a few years would give us the chance to develop that balanced model — to determine what types of new housing we need and where to build it.
In time, we can carefully raise immigration levels again once we’re confident that newcomers and those already here will have an affordable, decent place to live.