Canada's Population Boom: Solving the Housing Puzzle
Canada's population growth has hit a historic high, surpassing 40 million this summer, with a remarkable increase of over one million in just nine months. This surge, primarily fueled by immigration, raises a pressing question: Where will all these people live?
According to Statistics Canada, the third quarter of 2023 saw the country's population jump by 430,635, marking a 1.1% increase from July and the highest quarterly growth since 1957. This rapid growth, largely due to immigration, brings into sharp focus the need for adequate housing solutions.
The federal government's ambitious immigration targets are set to welcome 485,000 new permanent residents in 2024 and 500,000 in 2025, intensifying the housing demand. However, current construction trends reveal a concerning downturn. The Canada Mortgage and Housing Corporation (CMHC) reports a 22% decline in housing starts between October and November, especially in urban centers.
Kevin Hughe, CMHC's Deputy Chief Economist, points to challenging conditions for builders and predicts a further decrease in housing starts. Additionally, Bank of Canada Deputy Governor, Toni Gravelle, highlights Canada's struggle to recruit skilled labor in construction, crucial for addressing the housing supply issue. Notably, only 3% of new permanent residents work in construction, a stark contrast to the 8% representation in the overall employed population.
Gravelle also underscores the link between immigration and inflation. The population boost from immigration is intensifying shelter price inflation due to the lagging housing supply. This indicates a need for more responsive and flexible building strategies to mitigate the pressure on rent and housing prices.
Another dimension of the housing challenge is the undercounting of non-permanent residents (NPRs), including international students, temporary foreign workers, and short-term visitors. Benjamin Tal from CIBC points out that the actual number of NPRs in Canada might exceed the official count by nearly one million. This discrepancy complicates the assessment of actual housing needs.
Despite efforts to revise data on NPRs, challenges in tracking temporary residents' departure after visa expiration persist. Many NPRs, attracted by employment opportunities, tend to extend their stay, exacerbating the housing crisis.
With the share of NPRs in Canada rising by 14% between July and October to 2,511,437, the greatest quarterly increase since 1971, the housing market faces unprecedented pressure. The influx of work and study permit holders, along with refugee claimants, demands innovative and swift housing solutions.
This population surge presents a critical moment for Canada's real estate sector. It calls for a strategic approach to housing construction and policy-making, ensuring that the nation can accommodate its rapidly growing population without compromising the quality of living. As we move forward, the focus must be on building a resilient and inclusive housing market capable of meeting the demands of both current and future residents.
