Affordable Housing Crisis

Incongruent federal policies making housing unaffordable

I recently read a CBC article published on January 11th entitled, “Immigration is making Canada’s housing more expensive. The government was warned 2 years ago” which described how federal public servants from the department of Immigration, Refugees & Citizenship Canada (IRCC) warned the government of a misalignment of population growth and housing supply in 2022. The federal government decided to ignore warnings provided by IRCC when it increased the number of permanent residents it welcomes each year. I found the article alarming, not due to the record levels of immigration, rather, because the federal government ignored warnings provided by its own public servants that record levels of immigration would create a supply shortage and inflation in Canada’s housing market. To be clear, immigration is essential to Canada’s economic growth as our country’s population would be in decline without it. Immigration is unambiguously positive for our country, both culturally and economically. However, should we not expect our federal government to have the foresight to strategically align immigration levels with housing affordability? Should we not demand the left hand know what the right hand is doing?

Source: National Bank Financial

In this week’s chart, we provide historical context for the record increase in Canada’s population. The blue line represents Canada’s annual population growth going back to 1945. Notice the largest annual increase in Canada’s population prior to 2023 occurred in 1949, due to the province of Newfoundland joining Confederation. In 2023, our population grew by more than double the largest growth year ever recorded. This occurred as our country was already facing a housing crisis created by high interest rates, elevated building costs and low affordability. The Bank of Canada also linked the increase in housing costs to record immigration levels. In a December speech, deputy governor Toni Gravelle warned that strong population growth is pushing rents and home prices upward. Government documents obtained by the author of the article revealed Canada’s immigration targets have exceeded expert recommendations, including the Century Initiative, an organization created for the sole purpose of growing Canada’s population to 100 million (~2.5 times current population) by the end of this century. When immigration targets exceed levels recommended by an organization whose ‘raison d’etre’ is to more than double the country’s population, common sense dictates reviewing the numbers to ensure they’re aligned with other government priorities (i.e. housing affordability). Even a basic level of competence from our federal government should be able to align immigration levels with housing supply, thereby reducing inflation, and creating room for the Bank of Canada to reduce interest rates.

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