Immigration levels, with the exception of skilled workers and trades, must come down quickly before Canada can meet housing demand

In the past year, multiple federal and provincial politicians finally recognized one important reason why Canada’s housing shortage in the last decade became severe, rents soared, and home prices stayed at nosebleed levels: unsustainably high immigration rates, which recent minor reductions have barely begun to address.

In other words, the politicians finally figured out what any first-year economics student could have told them: markets have two sides — supply and demand.

That point escaped many until recently, focused as they were boosting housing supply. The same analysts, policymakers and journalists seemed less keen to address the demand side, which immigration is a part of, lest they be seen as anti-immigration.

That fear was always misplaced. Immigration is a reality and often desirable. But no government should accept new arrivals divorced from the reality of how immigrants and Canadians will be able to find a school for their children, or health care and housing. But that’s precisely the anti-reality utopian approach central planners in the federal government advanced.

To understand how high immigration numbers became, it helps to understand Canada’s main migration intake flows which consist of five broad categories: immigrants or permanent residents; temporary foreign workers; those with study permits; those admitted under the International Mobility Program; and refugees and asylum seekers.

Some hard numbers about several of these categories make the point:

International student arrivals soared from 122,665 in 2000 to 352,325 in 2015 and 1,040,985 by 2023;

Temporary Foreign Worker permits rose from 22,470 in 2000 to a high of 112,475 in 2009, dropping to 46,050 in 2017 before rising again to an all-time high of 188,580 in 2023;

Those admitted under the International Mobility Program rose from 89,030 in 2000 to a high of 382,615 in 2013, 685,435 in 2019, nearly one million in 2022, and 1,573,315 in 2023.

Asylum seeker arrivals were in a constant bandwidth of between 2000 and 2015 with claimants numbering between 20,000 and just over 61,000 depending on the year. That jumped to over 97,000 in 2019 and nearly 198,000 in 2023.

To put these and the other categories into perspective, in total, the number of immigrants residing in Canada — the total “stock” — rose from 643,853 people, or 2.1 per cent of Canada’s population in 2000, to over 3.6 million in 2023, or 9.1 per cent by 2023.

To understand why increasing the housing supply cannot alone solve the problem of the excess housing demand partly caused by high immigration levels, consider the range of housing starts since the turn of the century.

In the year 2000, housing starts numbered 145,873, a figure that peaked at about 215,000 annually between 2003 and 2008. After that, annual housing completions numbered between 175,000 to roughly 200,000 until 2020, rising to 222,670 in 2022 and just under that figure in 2023 — an increase but not a substantial one.

That inability to get housing starts up is why the ratio of immigrant arrivals to housing starts began to approach two-to-one in 2015, to more than double as of 2018, nearly three-to-one in 2021, four-to-one in 2022, and five-to-one in 2023. In other words, immigration was soaring, but not housing starts.

Also of note, substantially higher housing completions are unlikely to occur in the near future as housing starts are declining. From 271,198 housing starts in 2021, the numbers dropped to just 240,627 in 2023. Higher completions and higher supply are unlikely to occur when housing starts are heading down.

In response to all this, politicians finally began to address immigration levels, but far too late.

For example, in 2024 the federal government announced a cap on study permits for international students. Late last year, outgoing Prime Minister Justin Trudeau promised to cut the annual intake of one category — immigrants and permanent residents — to 395,000 this year from a planned 500,000. That’s just one category of the five major flows, and relatively insignificant when considering the total flow of people into Canada from all immigration categories.

On housing supply, in 2024, the federal government new money for municipalities and the 2024 federal budget promised to spend more taxpayer money on government-owned housing and subsidized housing. Provincially, several governments promised to streamline development approvals.

However, political announcements will not change the reality on the ground. Governments can announce all the new construction they want. But media releases are not the same as housing starts or completions. Nor does it matter if governments fund more housing. That doesn’t change the existing supply of labourers, carpenters, bricklayers, plumbers, electricians, and others involved in home building.

If anything, when governments compete with the private sector to build housing, what’s likely to happen is that the same number of housing units will be built but with more at taxpayers’ expense. Also, given the competition for scarce labour between government and private developers, the cost of labour will rise, further boosting housing costs and rent.

The remedy is clear: immigration levels — a substantial part of the demand side — must come down much more quickly with some specific exceptions for the trades and skilled workers, if the housing market in Canada is ever to approach anything resembling balance between demand and supply.

Mark Milke is president and Ven Venkatachalam is a senior economist at the Aristotle Foundation for Public Policy. They are authors of “Too much of a good thing? Immigration trends and Canada’s housing shortage.” Photo: Brantford Ontario, iStock.