Immigration Fueling Housing Price Hikes and Inflation, According to Bank of Canada Report

July 29, 2024 TruthUSA

Canada’s addition of 2.3 million new immigrants in recent years is driving up housing prices, increasing spending, and exacerbating inflation, a Bank of Canada report says.

The report highlighted three main areas impacted by increased immigration numbers: housing, labour markets, and consumption.

“Strong population growth in recent years has boosted demand for housing. This is adding to existing pressures on house prices and rents,” the bank said in its July 24 report, as first reported by Blacklock’s Reporter.

While newcomers increase demand for all types of housing, the report noted the largest impact is typically seen in the rental market, because most newcomers start out as renters. Immigrants aren’t likely to own a home until they’ve been living in Canada for 10 years, the report said.

“Growth in housing supply has not kept up with the strong increase in demand, with construction activity remaining close to pre-pandemic levels,” the report added. It also pointed out long-standing issues that further hinder housing supply, such as municipal zoning restrictions, high development fees, and a shortage of skilled construction workers.

Canadians previously voiced concern over the federal immigration policy, urging the government to reduce the influx to help ease the housing crisis, according to a March 26 Privy Council report.

Focus group participants, who were asked about the most significant housing challenges that require government attention, suggested “temporarily reducing the rate of immigration” as one way to alleviate housing demand. Other suggested solutions included building more homes, providing greater assistance to first-time homebuyers, lowering interest rates, and banning real estate speculation.

The federal government plans to accept 485,000 new permanent residents this year, 500,000 in 2025, and maintain that level in 2026.

“Guided by the Immigration Levels Plan for 2024–2026, we will continue to align immigration with housing capacity and labour market needs,” Immigration department spokesperson Sofica Lukianenko said in a July 29 email statement to The Epoch Times.

Labour Supply

The federal government has said new immigrants play a key role in addressing gaps in Canada’s labour market, a view partly supported by the Bank of Canada. The Bank said bringing in newcomers helps the economy grow without causing inflation. However, it also noted that many new immigrants face significant challenges in integrating into the Canadian labour market.

Immigrants face challenges such as not having their foreign degrees and work experience recognized in Canada, which leads them to take jobs that don’t match their skills, the bank said. It also added that Canada’s weakening job market is making it harder for newcomers to find and keep jobs.

The imbalance in consumption is identified as the third major effect of massive immigration. While it may take time for newcomers to contribute to aggregate supply, their impact on demand starts immediately, the Bank said.

When asked about these challenges, Ms. Lukianenko pointed to Immigration Minister Marc Miller’s March 21 announcement to reduce the population of temporary residents (TR) in Canada over the next three years, with a goal of limiting it to 5 percent of the total population.

“This work towards TR reductions has already begun,” Ms. Lukianenko said.

Additional policies to address the issue include a cap on study permit applicants announced in January.

“Early signs indicate that application numbers for study permit applicants that are subject to the cap are well below the cap and we have seen a decrease in intake, approvals, and confirmations in 2024 compared to 2023,” Ms. Lukianenko said.

The department noted that because the changes to the international student program have not yet been in effect during the summer and early fall—the busiest times for processing permits—it’s too soon to fully understand their impact. Most study permits are issued in August and September, according to the spokesperson.

In addition to the cap on international students, Ottawa has also restricted work permits for the spouses of students, allowing only the spouses of graduate students and those in professional programs to work.

“These measures are in addition to forthcoming measures that will be announced, for example, with respect to post-graduation work permit eligibility,” Ms. Lukianenko said.

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