Is immigration causing Canada’s housing crisis?

The housing crisis in Canada has reached a peak this year.

A report released in June by the Canada Mortgage and Housing Corporation (CMHC) shows that over 22 million housing units will be required by 2030 to help achieve housing affordability for everyone living in Canada. This is 3.5 million additional units to the current national housing plan.

The shortage comes while Canada pursues record levels of immigration, causing concern among both Canadians as well as newcomers. The fear is that a rapid population increase is driving up demand, lowering supply and raising prices to the point where homeownership is out of reach in Canada.

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But is the housing crisis linked to an increased number of immigrants? Overall, both the government and economists say no but urge caution and balance all the same.

Affordability a key issue

Affordability is a leading obstacle in the housing crisis. According to the Canadian Real Estate Association (CREA), the average price of a home in Canada was $668,754 in July 2023, up 6.3% from July 2022. This is unattainable for many Canadians and newcomers alike. The average price of a home is higher still in Ontario and British Columbia, where the majority of newcomers choose to settle. Homes in these provinces cost $856,269 and $966,181, respectively.

A report by the Environics Institute released in October 2022 showed that 15% of Canadians believe that immigrants are driving up home prices and making them unaffordable for others.

However, a report by the Royal Bank of Canada (RBC) disagrees with this and says that the housing shortage can be attributed to a higher residential construction price. The report says the price index has increased by 51% since the start of the pandemic in 2020. Prices are higher because of a shortage of skilled workers, a low supply of raw materials (leading to higher costs) and increased input costs.

Additionally, the report says that labour costs are higher due to a high number of job vacancies within the construction sector. Many skilled trades workers in Canada are approaching retirement and leaving gaps in the workforce that employers must work harder to fill. Potential employees are seeking higher wages because they have more options. Increasing the number of skilled workers could create more competition for jobs among workers and potentially lower production costs.

Government continues to raise immigration levels

Canada's government also believes that high numbers of immigrants are key to solving the housing crisis.

Canada aims to admit up to 500,000 new permanent residents each year by the end of 2025. This is the most ambitious immigration target in Canada’s history. The country also hopes to welcome 465,000 new permanent residents by the end of 2023. A report released on July 26 by TD says that Canada’s population boomed by 1.2 million people over the last 12 months.

Housing is a top concern for newcomers as well as Canadians. Canada’s Minister for Housing and Infrastructure, Sean Fraser says limiting the number of newcomers to Canada is not the answer to increasing housing and driving down cost. Speaking with CBC last month, Fraser said that continuing to build the national labour force is critical to solving the crisis.

“When I talked to developers, in my capacity as a minister of immigration before today, one of the chief obstacles to completing the projects that they want to get done is having access to the labour force to build the houses that they need,"

Canada’s new immigration minister, Marc Miller agrees. He has said that immigration can act as a solution to Canada’s most pressing issues such as housing, in addition to the current shortage of healthcare workers in the country.

Despite the urgency of Canada’s housing shortage, Prime Minister Justin Trudeau has said that housing is not primarily a federal responsibility and rather, the jurisdiction of the provinces. He says they need to be doing more to build affordable housing.

Canada’s government does have a national strategy that aims to improve access to affordable housing. It is expected that housing will be a top discussion point at the current Cabinet retreat in Prince Edward Island as experts on housing in Canada will address cabinet to offer insights.

Economists urge balance

Canada's economists also argue that immigration can be a solution to the housing shortage. The CHMC report says the housing crisis is heavily impacted by:

• significant delays between when a project is proposed and when it starts due to long approval processes.
• skill shortages and supply-chain challenges are pushing up costs and lengthening the time it takes to build, in the short term.
• increase in supply will put pressure on the cost of construction.

However, the TD report says that Canada’s immigration strategy is increasing the number of newcomers too quickly, particularly in light of the increased facilitation of more non-permanent residents.

“We estimate that a continuation of a high-growth immigration strategy would widen the housing shortfall by about a half-million units within just two years.” the report says. “Recent government policies to accelerate construction are unlikely to offer a stopgap in this short time period due to the natural lags that exist in adjusting supply.”

It also recommends that Canada look inward to close gaps in the labour force rather than continuing to increase the number of admissions. For example, making more affordable daycare spaces so more women, typically the primary caregivers in a family, can return to the workforce full-time. It also recommends making it easier for newcomers who are already here to get the necessary licensing or accreditation needed to practice a skilled trade in Canada.

Conclusion

Despite the short-term issues caused by a rapid population increase, both economists and the government agree that without more skilled workers in the labour force, Canada will not be able to move forward on the housing crisis.

They say bringing in skilled newcomers to build more homes will help but it is not the only option. Some economists say Canada can use the workforce it already has if they are given the right tools to gain the necessary accreditation or their time is freed up from familial obligations.

Still, job vacancies in the skilled trades and construction sector mean it is taking longer for homes to be built and increasing the cost of construction. Bringing more newcomers to Canada can help fill these job vacancies and increase the number of housing starts, in turn relieving demand and lowering prices.

Neither option offers an instant solution. A developing and launching a faster accreditation system takes time, and processing newcomer applications, even those who arrive through the new Express Entry skilled trades category selection draws, can take upwards of six months.

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