Is immigration the underlying cause of Canada’s housing crisis?

 

The Canadian housing crisis has reached a tipping point this year.

According to a research released in June by the Canada Mortgage and Housing Corporation (CMHC), approximately 22 million housing units would be needed by 2030 to help achieve housing affordability for all Canadians. This adds 3.5 million housing to the present national housing plan.

The scarcity occurs as Canada pursues record levels of immigration, raising concerns among both Canadians and newcomers. The danger is that rapid population growth would drive up demand, reduce supply, and drive-up prices to the point where homeownership will be out of reach in Canada.

Is the housing crisis, however, linked to an increase in the number of immigrants? Overall, both the government and economists say no, but they advise caution and balance.

Affordability is a critical issue.

Affordability is a major impediment in the housing problem. According to the Canadian Real Estate Association (CREA), the average price of a property in Canada in July 2023 was $668,754, a 6.3% increase from July 2022. This is out of reach for many Canadians and newcomers. The average housing price in Ontario and British Columbia, where the bulk of newcomers choose to settle, is even higher. These provinces’ median home prices are $856,269 and $966,181, respectively.

According to a research released in October 2022 by the Environics Institute, 15% of Canadians believe that immigrants are driving up property prices and making them unaffordable for others.

However, according to a Royal Bank of Canada (RBC) analysis, the housing scarcity can be attributable to increasing residential development costs. According to the research, the price index has risen by 51% since the epidemic began in 2020. Prices have risen due to a scarcity of trained labour, a scarcity of raw materials (resulting in higher costs), and rising input costs.

In addition, the survey claims that labour expenses are higher due to a significant number of job openings in the construction sector. Many skilled trades workers in Canada are nearing retirement, exposing workforce gaps that employers must work harder to fill. Because they have more options, potential employees are looking for better pay. Increasing the number of competent workers may increase labour competition and potentially cut production costs.

The government keeps increasing immigration levels.

The Canadian government also believes that a large number of immigrants are critical to resolving the housing crisis.

By the end of 2025, Canada hopes to welcome up to 500,000 new permanent residents every year. This is Canada’s most ambitious immigration goal in its history. By the end of 2023, the government wants to have welcomed 465,000 new permanent residents. According to a TD report released on July 26, Canada’s population increased by 1.2 million individuals in the previous year.

Housing is a major problem for both newcomers and Canadians. Sean Fraser, Canada’s Minister of Housing and Infrastructure, says limiting the number of newcomers to the country is not the solution to growing housing and driving down costs. Fraser told CBC last month that continuing to develop the national work force is key to resolving the situation.

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

Marc Miller, Canada’s new immigration minister, agrees. He has stated that immigration can help solve some of Canada’s most pressing problems, such as housing, as well as the country’s present shortfall of healthcare staff.

Despite the urgency of Canada’s housing shortfall, Prime Minister Justin Trudeau has stated that housing is primarily a provincial issue. He believes that more should be done to construct affordable homes.

The Canadian government does have a national strategy aimed at increasing access to affordable housing. Housing is likely to be a major topic of discussion at the current Cabinet retreat in Prince Edward Island, as experts on housing in Canada will address cabinet to provide insights.

Economists urge for balance.

Economists in Canada believe that immigration can help alleviate the housing scarcity. According to the CHMC research, the housing issue is being exacerbated by:

1)      Due to lengthy regulatory processes, there are considerable delays between when a project is proposed and when it begins.

2)      In the short term, skill shortages and supply-chain issues are driving up costs and increasing the time it takes to build.

3)      Increased supply will put upward pressure on construction costs.

However, according to the TD research, Canada’s immigration strategy is raising the number of entrants too quickly, especially given the increased facilitation of more non-permanent residents.

“We estimate that continuing a high-growth immigration strategy would increase the housing shortage by about 500,000 units in just two years,” the paper adds. “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 suggests that instead of increasing the number of admissions, Canada should look inside to fill labor-force deficits. Making more inexpensive childcare spaces, for example, so that more women, who are often the primary carers in a family, can return to work full-time. It also suggests making it easy for existing arrivals to obtain the appropriate licensing or accreditation to practice a skilled trade in Canada.

Conclusion

Despite the short-term challenges generated by high population growth, economists and the government believe that Canada will be unable to address the housing crisis unless more qualified individuals enter the labour force.

Bringing in talented newcomers to build more homes is one solution, but it is not the only one. According to some economists, Canada can utilise its existing workforce provided they are given the correct tools to get the requisite accreditation or their time is freed up from familial commitments.

Still, job openings in the skilled trades and construction sector mean that homes are taking longer to build, raising the cost of building. Increasing the number of newcomers to Canada can assist fill employment openings and boost the number of house starts, relieving demand and cutting prices.

Neither approach provides an immediate remedy. It takes time to build and launch a speedier accreditation system, and processing newcomer applications, even those received through the new Express Entry skilled trades category selection drawings, can take up to six months.