Home Rental industry Canada’s Immigration Problem: Not Enough Housing for Newcomers

Canada’s Immigration Problem: Not Enough Housing for Newcomers


Immigration to Canada is set to hit a record high in 2022 of 431,000, after entering around 405,000 the previous year, and the country is targeting the entry of an additional 900,000 newcomers in 2023 and 2024 combined. Due to immigration, Canada’s population over the past half-decade has grown at nearly twice the rate of its Group of Seven peers, Statistics Canada said.

The aggressive inflow, however, has impacted Canada’s housing market, which among the G-7 countries has the lowest number of homes per capita, Bank of Nova Scotia economists calculate.

Population growth, housing shortages and low interest rates have helped drive up home prices in Canada’s largest centers, prompting potential buyers to look further afield and drive up prices in more small and remote, unaccustomed to property booms. The cost of a single-family detached home has doubled over the past decade, according to data from the Canadian Real Estate Association. Data collected by the Federal Reserve Bank of Dallas indicates that Canada had, until recently, recorded one of the fastest house price growth rates among major developed economies.

And the pressure of immigration on housing continues to be felt. In the second quarter, Canada recorded the fastest population growth over a three-month period since 1949, when Newfoundland and Labrador joined the country as the 10th province. Immigration accounted for 95% of this growth. Overall, Canada’s population is 38.9 million, up from 34.7 million a decade ago, with immigrants making up more than a fifth of the population.

“We cannot keep up with the volume of immigration coming into the country,” said Christopher Alexander, president of the Canadian unit of Re/Max Holdings Inc., the global real estate listing firm with 140,000 agents worldwide. .

A rush is now underway among Canadian officials to build housing and ease supply constraints. “There was a lack of forward thinking, a lack of planning on the housing side, about what the real [housing] need was going to be,” said Abe Oudshoorn, a professor at Western University’s school of nursing in London, Ont., and leader of a research group that since 2016 has tracked the arrival of 51 families. immigrants to Canada and their journey to home ownership. the families his research group has tracked remain stuck in homes that are too expensive or too small for their growing families.

Kanishka Noorzai and his wife, four sons, parents and younger sister arrived here in February from Afghanistan via Albania and settled in Waterloo Region, an urban center of half a million people. people west of Toronto. After a months-long search that took him through apartments, townhouses and other homes, he found a three-bedroom bungalow – costing nearly $3,000 a month for a one-bedroom lease. year, or “really, really over our budget”, said Mr Noorzai, 43, who currently works part-time as a security guard but is looking for a full-time job.

“I was really surprised,” he said, “because I didn’t think it would be so hard to find a house in Canada. It was a nightmare.” He heard of friends who fled Afghanistan to the United States, where they found reasonably priced housing. The bungalow he has settled into is not ideal, Mr Noorzai said, “but at least it is better than a hotel”, where a local immigration agency had housed his family during their search for lodging.

Real estate agents, homebuilders and economists say housing starts – which last year hit their highest level in more than four decades – need to accelerate further to meet demand fueled by immigration, against a backdrop of higher material costs and labor shortages in the construction industry.

Mike Moffatt, senior policy director at the University of Ottawa’s Smart Prosperity Institute, a think tank, said one of the reasons for the delay in housing starts is that regional and local officials have underestimated population growth and overestimated the number of dwellings. “Our zoning laws were established for a country with low population growth. When our population started to grow, our regulatory environment did not adapt to this reality,” he added.

The national housing agency, Canada Mortgage and Housing Corporation, said the country will need 3.5 million more homes above current housing construction projections by 2030 to restore affordability housing.

“It takes several years to increase housing supply to meet the sudden increase in immigration,” said Aled ab Iorwerth, CMHC’s deputy chief economist.

Representatives of Canada’s immigration and housing ministers said officials were working closely with provincial and municipal governments to set annual immigration targets, and that the government had provided funding to help regions make in the face of housing pressures fueled by immigrants.

“Newcomers play a crucial role in the future of our communities and our economy, and we are doing everything in our power to set them up for success,” the spokespersons said.

Canada intends to spend C$10 billion, the equivalent of about $7.3 billion, to help double the construction of homes over the next decade. Some of the money will be used to encourage municipalities to change zoning laws. Ottawa also wants to tie municipal access to funding for services like public transit and sewage management to a promise to increase housing supply. The City of Toronto, a magnet for immigrants, recently authorized the construction of self-contained residential backyard units, or so-called garden suites, to help ease the housing crisis.

Sharp rate hikes by the Bank of Canada this year have triggered a sharp decline in real estate activity and a deceleration in annual growth in house prices, although economists say immigration and a trend of lower housing households as the population ages will put a floor on the current price drop.

As for the Canadian rental market, it is tightening in major urban centres, reflecting immigration trends and house prices still at high levels. The average rent for all property types in Canada in August rose 11.1% from a year ago to nearly C$2,000, the highest level in three years, the data shows. from Rentals.ca.

“Immigration needs to throw gas on the burning rental market,” said Scott Ingram, a Toronto-based real estate agent. Annual rent increases in Toronto and its suburbs and suburbs range from 10% to 26%, Rentals said. California.

The Toronto Region Board of Trade calculates that one-third of Canada’s immigrants settle in Toronto, the country’s largest metropolitan area with 6.2 million people. For every two immigrants who arrive in Toronto, at least one resident leaves due to high housing costs and limited supply, said Craig Ruttan, the council’s policy director.

“We are sort of in a Catch-22. We need immigration because of labor shortages and the need for new workers,” Ruttan said. “At the same time, we hear and see the housing shortage.

Benjamin Tal, an economist at CIBC Capital Markets who studies real estate trends, said he’s worried Canada doesn’t have the labor capacity to build needed housing. Canada has focused on attracting well-educated and highly skilled immigrants, he said. “We need to rethink immigration in the sense that we also need a segment of newcomers to be less skilled, because that’s where the shortage is. »

The most recent data from Statistics Canada indicates that the construction sector had approximately 82,000 vacancies, for a vacancy rate of 6.5%, higher than the national average of 5.4%. BuildForce Canada, a labor market data provider, predicts nearly a quarter of home construction workers will retire by the end of 2031, forcing companies to hire more than 100,000 new workers to fill the gap. empty.

“Competition for workers is going to be incredibly intense,” said Bill Ferreira, executive director of BuildForce.

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