The era of explosive population growth has come to an end. The federal government has released updated immigration planning targets that point to a net outflow of newcomers over the next two years. Rapid population growth has been linked to an unaffordable housing market, concerns about social services and infrastructure capacity, and slack in the economy and labour markets. Earlier this year, the government committed to reducing the non-permanent resident share of the population to five per cent, implying low but still positive population growth. The intention is to slow the number of permanent resident admissions from approximately 470,000 in 2023 and 485,000 this year to 395,000 in 2025. This will likely bring population growth to a halt next year, marking a huge policy swing from the 3+ per cent increase seen in 2023.
Lower population growth will have both direct and indirect impacts on the economy. A net decline in migration will curb headline economic growth and consumer demand. However, if the government successfully pivots towards increasing economic class migration, per capita output could rise with higher average productivity. Meanwhile, the slack in the labour market could close more quickly, curbing the unemployment rate and improving prospects for younger workers. Overall, this is likely a wash for the economy over the coming year.
The housing market will experience a more pronounced impact, particularly in the rental market where many newcomers and temporary residents reside. Declining demand should alleviate pressures for renters, especially given the additional supply from both new construction projects and investor-owned units, along with potential rent cuts over the next year. We expect this will be most pronounced in markets that rely heavily on student housing, particularly in communities that see a significant shift in college student enrollment. Lower-income renters will benefit the most from these changes. Since most immigrants are renters before becoming homeowners, we expect a modest impact on demand and prices due to declining interest rates.
In the short-term, this move provides some breathing room to address housing supply issues and the lack of government support for new Canadians. However, we must still confront the challenges of an aging population and its impact on the dependency ratio. The federal government’s focus must ultimately shift toward tackling our poor productivity levels.
Housing Affordability Watch
CMI monitors the latest developments and offers insights on solutions to Canada’s housing affordability crisis
Budget 2024 advanced plans for a national flood reinsurance program by proposing a CMHC subsidiary to manage its delivery. However, key details remain unclear, and funding appears insufficient. With 1.5 million Canadians at risk and concerns growing over recent flood zone maps, it’s crucial for CMHC to address this uncertainty and clearly communicate how it intends to implement the program. Will the current plan be enough to protect homeowners, or could continued inaction deepen the housing crisis?
Read our latest Housing Affordability Watch instalment to learn more: Flood Reinsurance: Wading into the Deep End
Independent Opinion
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