Economists with TD Bank are suggesting the federal government needs to achieve a better balance between the rationale driving its heightened immigration targets and its considerations on the resulting impacts of immigration on housing affordability and supply.
Following the already-elevated numbers of 2021 and 2022, the immigration targets moving forward are even higher at 465,000 in 2023, 485,000 in 2024, and 500,000 in 2025. By 2025, under the new targets, over 60% of the admissions of new permanent residents will be within the economic class.
The federal government’s targets are strategically intended to directly address Canada’s aging demographics, low birth rate, and the dire labour supply shortage, which is greatly exacerbated by the pandemic. Economic growth, tax revenues, and the social system will be highly strained over the long term without immigration.
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As a result of federal policies, Canada’s population has grown by 1.2 million — now reaching more than 40 million residents — over the past 12 months, which is the same growth the United States saw over the same period with 10 times the total population. Following last year’s historic numbers, Canada’s population is expected to further grow by another over one million more people in 2023.
According to a new TD Bank report, at this rate of population growth and the inability for new housing supply to meet real demand, Canada faces a housing shortfall of about 500,000 units within the next two years.
A national deficit of 500,000 homes is equivalent to the total number of homes that currently exist in the province of Saskatchewan. It would also be equal to 3% of the total of 16.3 million homes in existence in the country, according to the 2021 census.
“The speed at which [immigration growth] unfolded was not telegraphed and caught many economists off guard,” reads the report. “Evaluations of the future housing stock, be it for ownership or rental, were already pointing to worsening affordability across the country even before this sudden influx… 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.”
“While the right hand has been solving for labour market shortfalls, the left hand has not put in place the appropriate infrastructure to absorb this large influx of people, particularly if the intention is for a continuation on a longer-term basis. Policy needs to strike a balance with sustainable growth, lest we tip into the drink.”
Canada has also far exceeded its pre-pandemic target for increasing the number of international students. There were 240,000 international students in the country in 2011, just before the target of growing to 450,000 over the span of a decade by 2022 was established. But Canada’s educational institutions reached the target well in advance in 2017, and continued pushing further in more recent years, with the number of student permits reaching 807,000 in 2022. While international students add to housing pressures, they have also been a major source of much-needed labour.
Most job vacancies in the country are in lower pay positions and lower-skilled industries. The report suggests governments need to lower the barriers for entering the workforce in order to introduce new labour supply from the existing population.
Other than housing supply, the impacts of high immigration levels should also account for the resulting strained infrastructure, healthcare, and childcare systems. It is estimated Canada will have a deficit of between 243,000 and 315,000 childcare spaces by 2026.
“Greater thought and estimation needs to occur on what’s a true absorption rate for population growth. Policy cannot be singularly focused on the perceived demands of employers, and even educational institutions,” continues the report.
“While population growth is a good thing and a necessary remedy to aging domestic demographics, the benefits erode if it occurs too fast relative to a country’s ability to plan and absorb new entrants within the economic and social infrastructure. Chronic tensions can quickly become acute for provinces and cities that absorb a higher population share. Dislocations widen, creating an even larger come-from-behind strategy in addressing housing affordability and quality of life issues.”
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