Federal Estimates on Immigration's Impact on Housing Shortage Questioned by Canada's Budget Officer
According to estimates from the Parliamentary Budget Office (PBO), under Canada's previous immigration targets, approximately 436,000 new residences would have to be constructed annually from 2024 to 2030 to restore vacancy rates to their historical norms, thereby making housing more affordable. This figure stands at nearly double the amount of housing starts Canada has managed to achieve in recent years.
However, the PBO's projections, based on the prior immigration plan, are expected to undergo significant changes. The updated immigration plan, with its reduced figures, is anticipated to considerably lessen the housing gap.
The Canada Mortgage and Housing Corporation's latest data revealed approximately 223,000 new home starts in 2024. Despite this heightened number coupled with the decrease in immigration, Canada still faces a significant challenge. To completely eliminate the housing gap, the country would need to facilitate an additional 110,000 housing starts per year until 2030.
While Canada's revised immigration plan has resulted in a reduced housing gap, the country still has to significantly increase its annual housing starts to fully address this housing shortage by 2030.
In a recent report, the Parliamentary Budget Office (PBO) has outlined one significant variable in the Canadian government's immigration strategy: the uncertainty surrounding whether the current temporary residents in the country will depart once their permits expire.
As it stands, Canada plays host to approximately three million non-permanent residents, all of whom are in the country on temporary work or student visas. The government's immigration plan is predicated on the belief that this number will significantly decrease, with the expectation that all these individuals will leave Canada, as highlighted by the PBO.
According to the report, the government's projections stipulate that over the course of the next three years, 2.8 million temporary residents, roughly 93 per cent of the current non-permanent resident population, will exit the country. The PBO critically evaluates this projection, asserting that there is considerable risk to the demographic forecast presented in the government's immigration plan for the period 2025-2027, specifically with regard to the anticipated outflow of non-permanent residents.
The PBO suggests that the government's immigration plan might be overly optimistic in its assumptions about the departure of temporary residents, thereby creating potential risks to the demographic projections in the coming years.
Specialists in the field have pinpointed several key factors contributing to the escalating housing crisis in Canada, an issue that has led to a doubling in property prices since 2015.
Insightful analysis conducted by RBC Economics in an April report shed light on a myriad of influences, from variable interest rates to a shortage of available housing stock.
Additionally, the report emphasized the significant impact of a recent surge in immigration.
As Canada grapples with these intertwined and complex issues, the housing crisis continues to pose a daunting challenge, demanding comprehensive and sustainable solutions.
