Top economists warn that Canada’s housing shortage is being exacerbated by the influx of newcomers to the country.
RBC’s chief economist Richard Hogue published a report in April saying that Canada would need to double its housing construction to meet the demand of newcomers.
According to Hogue’s calculations, Canada must build a minimum of 320,00 housing units annually from now until 2030 to keep up with the demand.
“Higher deliveries would need to happen in the near term given our expectation for peak population growth in 2023-2024,” writes Hogue.
The population grew by 411,000 people in the first quarter of this year, marking a 47% increase over that same period last year,at a time when Canada is facing a housing supply crisis.
Toronto alone saw a 67% increase in immigration from the first quarter of 2024 compared to 2023.
“The crest of the Millennial cohort is around 33 years old, or right in their household formation and family-building years,” BMO chief economist Douglas Porter told STOREYS in an interview.
“So, with the construction industry already building at full speed to satisfy domestic demand, we clearly don’t have the infrastructure or ability to meet the additional demand created by historic immigration levels. That is reflected in a worsened affordability problem.”
Canada’s population burst is almost entirely the result of immigration, which accounted for 97.6% of growth last year.
The last time Canada saw its population grow at this rate was in 1957.
“The result is not only still-high resale prices, but surging rents across many markets, including smaller cities with universities,” said Porter. “The catch is that driving down prices will incent less supply; and at the same time, heightened immigration flows designed to ease labour supply pressure immediately add to the housing demand they are trying to meet.”
“The infrastructure in place and the industry’s ability to build clearly can’t support unchecked levels of demand, so the affordability conundrum continues.”
While factors like interest rates and unemployment can sway the housing market in the short term, Porter said that over the long term, “demographic trends have the biggest weight on home prices.”
Hogue’s analysis is similar, his findings suggest that if immigration, either temporary or permanent begins to somewhat neutralize, then housing pricing will ease as well.
“In and of itself, lower immigration should ultimately help improve affordability but there are many other factors at play that will have a bigger impact,” Hogue told STOREYS, also citing interest rates as a major factor, but said that focusing on reducing demand should be a priority.
“Managing the population inflow to match what can be reasonably supplied,” added Porter. “On that front, Ottawa’s recent steps to bring net new immigration back in line with historical norms (i.e., closer to 1% of the population) is at least a step in the right direction — assuming they are able to stick to the new plan.”