Emblemic of the “undercounting” is that the Immigration Levels Plan does not include temporary residents (workers and students), an oversight that many are noticing given the rapid rise in their number over the past 20 years.
Housing availability and affordability is the most obvious Achilles Heel of the government’s approach but there healthcare and infrastructure are also significant:
Canada’s explosive population growth from immigration is causing rents to surge in its biggest cities. And there’s another problem: The country isn’t even properly counting the number of people who need homes.
Prime Minister Justin Trudeau’s government plans to welcome 465,000 new permanent residents this year, and increase the annual target to half a million by 2025. But those often-cited numbers understate the pressure on the country’s limited supply of housing —because they don’t include a wave of foreign students, temporary workers and others with non-permanent visas.
The country actually had close to 1 million international arrivals last year, according to an analysis by Canadian Imperial Bank of Commerce that’s based on other data, including visas. It will probably accept a similar number this year, said Benjamin Tal, the bank’s deputy chief economist.
Apartment Rents Are Soaring in Canada’s Cities
Rent increases for two-bedroom apartments, year-over-year
As a result, Canada is experiencing its fastest population growth since the 1970s, and apartments have become extremely hard to find. The vacancy rate on rental buildings is below 2%, the lowest since 2001. In Vancouver, it’s less than 1%. The situation is made worse by rising interest rates that have made buying a home unaffordable for many people, pushing them into the market for rental properties.
“We’re underestimating how many people are here and how many people are requiring real estate,” Tal said in an interview. “If you don’t have official numbers showing the demand accurately, municipalities making allocation for housing based on those are missing the magnitude of the need.”
The consequences of that undercounting can already be seen, Tal said. Rent inflation was nearly 6% in the last two months of 2022, accelerating from 3.1% early last year.
International Migration to Canada Spikes
Landlords in many provinces face legal restrictions on how much they can increase rents on existing tenants. But when a two-bedroom apartment is vacated, the average increase for the next tenant is 18.2%, according to Canada’s national housing agency.
Local government red tape is one reason more apartments aren’t being built, Kenney said, which means housing policy is out of alignment with Trudeau’s approach to immigration.
“Canada was at a point for many, many years where we had housing affordability and you could have open immigration policy. There were ample homes for all,” Kenney said. “The combination of turning up the volume on the immigration front, and turning down the volume on development, has put us in really bad shape.”
Housing costs are causing some to uproot from the priciest cities in search of cheaper locations. Toronto gained people from international migration but also saw a net outflow of nearly 100,000 residents to other parts of Canada in the 12 months ended July 1.
Toronto Sees Growing Outflows Amid Housing Crunch
Some are landing in Calgary and Edmonton, the largest cities in Alberta, which saw a significant increase in migration from other parts of Canada. “It’s rare to be able to find an empty apartment now, unless it’s new,” said Sam Kolias, CEO of Calgary-based Boardwalk Real Estate Investment Trust. “There’s lots of jobs here.”
A spokesperson for Immigration Minister Sean Fraser said the government takes housing into account when it sets immigration policy, and it’s a factor in who it allows in.
“In order to meet housing demands for those who have newly entered Canada, and the nation’s housing needs in general, we have taken great care to ensure our immigration plan selects individuals with the skills to build homes in Canada, and encourage them to settle in parts of the country that have housing capacity,” Bahoz Dara Aziz, Fraser’s press secretary, said in an emailed statement.
‘Get the Numbers Right’
CIBC’s Tal said it’s “misleading” to focus on the number of new permanent residents when calculating housing needs. And there are other quirks of Canada’s statistics-gathering process that may result in underestimating demand for places to live, he added.
It all suggests that “existing policy tools will easily fall short of addressing the current and future increase in housing demand,” Tal said in a report to investors. If there’s no change in how migration data are captured and debated, Canada may find it harder to absorb its rising number of immigrants, he said.
“The official numbers don’t tell you the story. When we think about the housing policy, a precondition is to get the numbers right.”
Very good article by Todd regarding the COVID-19 immigration related impacts on rental rates:
The advertised rent for a two-bedroom apartment has plunged by 15 per cent in the city of Vancouver, one of the biggest drops in Canada, as COVID-19 makes its bewildering way through the economy.
Many of the more than 800,000 tenants across Metro Vancouver were riveted when Rental.ca posted the city’s rent-price declines last week. The average rent demanded for a two-bedroom apartment in the city of Vancouver dropped by almost $450, to $2,478 a month.
While rents in some Canadian cities have declined slightly or even risen in recent months, the country’s two biggest and priciest rental markets, Toronto and Vancouver, have fallen fast because of the pandemic.
Overall, Toronto rents went down by five per cent compared to a year ago and across Metro Vancouver by about nine per cent. A one-bedroom in Richmond, for instance, has briskly dipped a couple of hundred dollars over last year, to $1,621 a month.
But why, exactly, have Vancouver and Toronto and their suburbs been slammed?
“A lack of immigration, a decline in international students, a decline in short-term contract employment, and continued affordability concerns because of job losses are to blame,” said Ben Myers, president of Bullpen Research, an affiliate of Rental.ca, in a commentary.
All of which makes sense. But it needs unpacking.
Vancouver and Toronto are subject to some of the same COVID-19 forces — tremendous job loss and swelling household debt — that weakened countless rental markets in the world because of lockdown.
But Metro Vancouver and Toronto also contain some of the world’s highest proportions of foreign-born residents — immigrants and especially temporary residents, such as international students and guest workers. Most are young. And most rent.
That makes these two large Canadian metropolises more vulnerable to global migration patterns and to Canada’s clampdown on its international border, which has abruptly cut inbound flows of people to a trickle.
That lead Paul Danison, another analyst for Rental.ca, to go so far as to imagine the tenants of Vancouver and Toronto possibly being dug out of the hole they have found themselves trapped in: Rental-vacancy rates of less than one per cent.
“Imagine if you can, Toronto and Vancouver with a healthy three per cent vacancy rate, and rents falling by the end of the year rather than rising. A few months ago, that would have been laughable,” said Danison.
“But because of COVID-19, Canada will have less immigration, fewer international students and, with the border closed, not nearly as many seasonal and part-time workers. All typically are renters.”
Several factors are at play.
Tighter borders means landlords who once offered costly short-term rentals, like those on Airbnb, have been hammered in attractive cities like Vancouver, whose economies rely more than most on travellers.
Short-term rental providers have been moving their often-stylish apartments to the long-term rental market, which has been increasing supply, offering tenants more choices.
Rohana Rezel, a housing advocate and past candidate for Vancouver city council, is part of a group monitoring Craigslist and other real-estate forums. They’ve discovered short-term rentals are “collapsing” and hundreds of units are now switching to long-term rentals.
“People offering their places for rent on Craigslist are now blatantly saying it used to be an Airbnb. They’re boasting it was rated five stars,” says Rezel, who adds that many such landlords started off charging outlandish long-term rents, which they were forced to slash.
As in many cities around the world, many owners in Vancouver and Toronto are also feeling pressure to somehow off-load their homes, either because they have lost wages or are going into deeper debt. But they’re in a bind, because it’s no longer a house-seller’s market.
The Canada Mortgage and Housing Corporation, Moody’s and other analysts are predicting double-digit house price declines over the next year or two. So some would-be sellers are trying to wait out the downturn by renting their places, thus also increasing supply.
Thirdly, and perhaps most distinctly for a desirable cosmopolitan city like Vancouver, there are strong indications many of the region’s young temporary residents (foreign- and Canadian-born) have climbed on planes and headed home, often to live with their parents.
That means a hefty drop in demand for rental suites.
Until recently, at least 100,000 international students have been living and working in Metro Vancouver, plus another 50,000 so-called “international mobility” employees and temporary foreign workers.
“Many temporary residents just packed up and left,” says Rezel, a high-tech professional who first came to Canada from Sri Lanka as a graduate student.
Like me, when Rezel visits the city’s restaurants, pubs and cafés, he says he often asks friendly servers and others about themselves. Four times out of five such hospitality staff invariably answer that they are in Canada on study or work visas.
As colleges and universities began in March to offer their courses only on the internet and most service jobs disappeared overnight, a large portion of these intrepid young people were compelled to leave behind the country and their rental apartments. Rezel’s Japan-born wife, who is involved in her expatriate community in Vancouver, said that’s what happened in her circle, too.
Who knows when or if most of these temporary residents will return?
All of which goes to suggest Metro Vancouver’s suddenly lower rental rates are likely to remain so for at least the medium term.
Multicultural Meanderings 