Immigration played a role in Canada's rising home prices and rents: federal study | Daily Hive

Immigration played a modest role in Canada's rising home prices and rents: federal study

Marc Bruxelle/Shutterstock

A new study by the Government of Canada has found that immigration levels contributed to rising home ownership prices and housing rental rates in cities across the country over much of the past two decades, but emphasized the effect is modest and should be viewed in the context of a wide range of other contributing factors.

According to the report by Immigration, Refugees and Citizenship Canada (IRCC), new immigrants accounted for about 11 per cent of the increase in average home prices and rents across all municipalities with populations of over 1,000 residents between 2006 and 2021, based on an analysis of four census periods compared with the share of the population made up of recent immigrants.

This effect was more pronounced in large urban centres — 53 municipalities with a population over 100,000 residents — where such newcomers were responsible for 21 per cent of median home value increases and 13 per cent of median rent increases over the same period.

You might also like:

In such larger communities, a one per cent increase in the number of new immigrants was associated with a 0.376 per cent increase in home values. When it comes to rents, a one per cent increase in the number of new immigrants was associated with a 0.086 per cent increase in rents.

The increase in rents was lower than the upward pressure on home values, possibly because of rent control policies by many provincial governments. At the same time, the report also notes that as many newcomers depend on the rental housing market, their impact on demand and vacancy rates could cause rent increases in certain regions.

IRCC concludes that the link between the number of new immigrants and rising housing prices was only statistically meaningful in the jurisdictions of British Columbia and Ontario.

But overall, they add, these findings suggest that immigration has had a measurable but relatively limited impact on Canada’s housing affordability, with effects vary significantly depending on local housing supply and broader economic conditions.

“The connection between immigration and housing prices varied over time and across regions, highlighting that immigration is not the solitary factor influencing housing prices. Its impact is often conditioned on local economic conditions, housing policies, and supply challenges, along with other regional factors that change over time,” reads the report.

“Influences beyond immigration, such as supply constraints, low interest rates, and speculative investment, play pivotal roles in shaping housing market dynamics.”

IRCC highlighted how Alberta and Saskatchewan saw significant immigration growth between 2011 and 2016, but little change in home values over the same period. In contrast, Ontario saw fewer new immigrants residing in its jurisdiction over this period, but experienced the most rapid increase in home values.

In particular, the report notes that immigration may increase demand for housing, but its impact can be muted or amplified depending on how municipalities respond with new housing construction. On the flip side, the immigration of skilled workers can be important for addressing labour shortages in the construction industry, aiding with the construction of new residential developments.

The report found no significant impact in smaller communities or in provinces where immigrants made up a smaller portion of the population. Conversely, in provinces like Ontario, B.C., and Quebec — where the majority of immigrants settle — the effect was more noticeable, especially in the fast-growing metropolitan areas of Metro Vancouver, Greater Toronto, and Greater Montreal.

Overall, the research underscores the importance of building more housing as the population and economy grows.

“The ongoing debates on immigration’s role in housing price dynamics often lack definitive empirical evidence, and establishing such evidence is a challenging task. It is difficult to disentangle the specific impact of immigration from a multitude of factors that shape housing markets,” continues the report.

“Regional variations in housing markets are substantial, and the connection between immigration and housing prices can vary widely due to local economic conditions, housing supply constraints, and other region-specific factors. Additionally, immigrants are attracted to areas with strong economic performance and promising housing market potential, suggesting that rising housing prices may be more a side effect of a flourishing economy, which draws immigrants, rather than a direct consequence of immigration.”

The post-pandemic immigration, population, and housing cost surges are out of this particular study’s scope.

Between 2018 and 2021, Canada’s population increased from approximately 37 million in mid-2018 to over 38 million by July 2021 — an increase of over one million people, or roughly 3.2 per cent. Driven by the federal Liberal government’s ambitious immigration policies emerging out of the pandemic, from mid‑2021 to the end of 2024, the population rose further to over 41 million, adding more than three million people or about eight per cent growth over that period. Due to public and political pressure, the Liberals began to reverse course on their immigration policies in 2024, with Prime Minister Mark Carney most recently solidifying that direction.

Stimulating economic growth and addressing the severe labour shortage that emerged during the pandemic were key drivers behind previous federal immigration policies. These needs were further compounded by long-standing concerns predating the pandemic — namely, that Canada requires higher immigration levels to offset a declining birth rate, maintain a strong workforce, support economic growth, and sustain social services in the face of an aging population.

Immigration plays a crucial role in sustaining Canada’s social services as the population ages. With more retirees and fewer births, there are growing demands on healthcare and pensions but fewer working-age people to fund them through taxes. Immigration helps offset this imbalance by bringing in younger, working-age individuals who contribute to the labour force and public finances.

In the Canadian context over a broader, long-term view, immigration is seen as a vital component of ensuring long-term fiscal and social sustainability amid demographic decline.

However, critics argue that the rapid pace of the most recent immigration — exceeding even the elevated levels seen just before the pandemic — has outstripped Canada’s capacity to provide sufficient housing, infrastructure, and public services. This has contributed to growing pressures on affordability and job opportunities, particularly for young people in major urban centres like Metro Vancouver and the Greater Toronto Area, and led to a sense of discord and resentment. Such criticism has also been coming directly from provincial and municipal governments, which have a more direct role in providing the day-to-day services and needs of Canada’s population than the federal government.

IRCC’s report also cites previous research that found a positive correlation between immigration and home prices in Vancouver and Toronto from 1971 to 1996. Based on previous census data, it was suggested that a one per cent increase in the percentage of immigrants in the total population of a census area was associated with an increase in home prices of 0.1 per cent to 0.12 per cent. During this period in the latter decades of the 20th century, Canada saw substantial immigration from refugees fleeing the Vietnam War and then from Hong Kong over the 13-year lead up toward the British colony’s handover to the People’s Republic of China.

When it comes to rents a one per cent increase in the number of immigrants in a province increased the average rent by 0.14 per cent to 0.17 per cent from 1983 to 2010.

You might also like: