Economist Notes Continued Immigration Increases Are Contributing To The Ongoing Housing Affordability Crisis

This is something much of the political class fears discussing, but continued high levels of immigration will continue to push housing out of reach of many Canadians.

When the housing affordability crisis in Canada is discussed, most of the focus is on supply and demand.

The supply of housing isn’t keeping up with demand for housing, due in part to ‘green belt’ policies, and municipal restrictions.

The demand for housing has increased massively, coinciding largely with a significant increase in the money supply.

As we’ve noted before, the policies of the Liberal government have resulted in disincentives for the production of tangible goods, while flooding the economy with rapidly devaluing money.

People will of course seek to preserve the value of their money, and that has directed more and more money into driving up the housing market.

This is obviously an unsustainable distortion of the Canadian economy, as it doesn’t generate real productivity and causes serious societal dislocations.

But, there is another aspect of the demand for housing that isn’t discussed enough:

Canada’s massive immigration increases.

Canada’s immigration levels were already high – as a percentage of the total population – under the Harper government.

By the end of Harper’s time in power, immigration had reached about 260,000 per year, and that doesn’t even include international students and temporary foreign workers.

Now, those baseline numbers have been raised to 430,000 for this year, reaching 450,000 per year in 2024.

This is where supply and demand comes into play.

If a country brings in a whole bunch of new people year after year, demand for housing will rise.

If supply is not massively expanded, then prices will go up.

And even when prices go down – though still dramatically higher than just a few years ago – it doesn’t fix the affordability issue because the population-based demand is rising.

Further, the economy is so weak – with inflation still outpacing wage increases and Canadians increasingly dependent on debt to try and hold on to our standard of living – that rising interest rates push housing further out of reach for many Canadians.

Now, this is not about blaming new Canadians for the economic problems of the country. You can’t blame people for wanting to live in North America, as even a declining Canada is still a better place to live than many other places. And Canada does need some immigration.

The issue is that our immigration policy has become completely unbalanced. It has been turned into a political tool by the Liberals, who simply raise immigration levels year after year and then accuse any opponents of that policy of being ‘anti-immigrant,’ which is an absurd and factually-incorrect claim.

The longer the policy of endlessly increasing immigration continues, and the more people refuse to talk about it, the more our country will be unable to actually solve the housing crisis

As noted by BNN Bloomberg, economists are starting to discuss this, albeit obliquely and carefully:

““The current decline in house prices will not save us,” Benjamin Tal, the deputy chief economist at CIBC, said in a TV interview Tuesday.

Tal uses two measures to gauge home affordability: the ability for first time homebuyers to enter the market and the available supply of social housing. He anticipates both metrics will continue to show pressure in the housing market.

“This market will remain unaffordable to many, many Canadians,” he said.”

“Tal worries that the rise in interest rates will not stop the increase of home prices in the long run.

“[Interest rate hikes] will not be enough to bring the [housing] market down to where it belongs,” he stated.

The other major roadblock he anticipates is a lack of adequate housing supply for newcomers to Canada.

The projected influx of immigration to Canada will only exacerbate the county’s housing crisis as construction of units which could house these newcomers is nowhere to be found, he said.

“By any stretch of the imagination, this is not the end of the (housing) crisis. This is just the beginning”, he said.”

A conversation that must take place

While it will have to be done carefully – to ensure that there isn’t unfair blaming or hate directed towards new Canadians – it is important that Canada is able to openly discuss and debate how many new Canadians are brought into the country every year.

Canada must ensure that housing is affordable for our Citizens, and the fact is that it is nearly impossible to achieve if immigration levels remain at such an elevated level.

Spencer Fernando

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