In analyzing the Canadian housing debate, it is useful to distinguish between two time periods: 2000–15 and post-2015.

2000–15: Chrétien, Martin and Harper

Figure 1 illustrates, post-2000, the annual increase in Canada’s population and annual number of housing units completed (all types). Between 2000 and 2015, the ratio of the two was fairly stable, somewhat less than two additions to Canada’s population (most but not all due to immigration) relative to each completed housing unit. Overall, during the Chrétien, Martin and Harper governments, aggregate supply of new housing was adequate. Few people were talking about inadequate housing supply.

Admittedly, there were other housing problems. A price spike took place in 2006–07, when the annual price increase reached 10 per cent (see figure 2). There was not much debate about the cause of the spike: the real estate speculative bubble in the U.S. housing market spilled over into Canada. In 2008, the bubble “popped” and a minor price decline followed in 2009. Post-2008, Canadians prided themselves on the rarity of bankruptcies in Canada as a result of better-regulated Canadian banks.

By contrast, in the United States there was legitimate fear of a worldwide freeze of financial markets as in 1929. The U.S. Treasury bailed out bankrupt large financial institutions, at great cost to American taxpayers. However, explosion of the housing bubble wreaked serious financial damage not only on major financial institutions but also on many middle-class Americans, who had invested in one or more houses on the basis of the conventional wisdom that housing prices always increase, never decline. As a result, much of middle-class America accepted the Tea Party interpretation of events: when house prices collapse, elites get bailed out; ordinary people go bankrupt. The political outcome was the victory of Tea Party Republicans in the 2010 congressional election.

In the early 2010s, the Canadian discussion of house prices was more or less limited to Toronto and Vancouver. These two cities have large immigrant diasporas and are the destination of 40 per cent of new immigrants. Much of the housing debate in these two cities turned on the hard-to-measure effect of wealthy offshore investors buying Canadian housing units as a safeguard for their wealth and a potential source of capital gain. British Columbia and Ontario brought in provincial legislation that attempted to limit foreign investment in housing – for example, taxes on “empty homes.” The two provinces realized modest reductions in house prices.

2016–present: Trudeau

A feature of Justin Trudeau’s government has been to champion multiculturalism and project a doubling of permanent immigration by the mid-2020s. It also encouraged the provinces to expand visa-based immigration. By 2019, the Statistics Canada estimate of the ratio of annual population increase to housing completions had nearly doubled from the 2000–15 ratio.

Given the second price spike in 2021–22, many housing policy analysts looked seriously at the combination of higher permanent resident numbers and visa-based de facto immigration. The articles in Inroads by Anne-Michèle Meggs and Pierre Fortin have made a significant contribution to the debate. The majority of visa-based immigrants have no intention of returning to their home countries; they hope to become Canadian citizens. For the years since 2020, Statistics Canada has been obliged to revise upward its estimates of total population – in 2021 and 2022, the revised estimates of annual population increase have exceeded one million.

It is hardly surprising that when we increase population by a million people annually – as opposed to 330,000, the pre-2015 average – we experience a second house price spike. The drop in house prices in 2023 has been due to a dramatic increase in interest rates.

In its summer 2023 retreat in Prince Edward Island, the Trudeau cabinet finally took note of the unexpected consequence of its post-2015 immigration policy. No doubt, the ministers studied the polls, which display a major change in public opinion. Between the Nanos immigration poll in March and the more recent poll in September 2023, opinion has changed: “accept more immigrants” declined from 15 to 8 per cent; “accept about the same” declined from 46 to 34 per cent; and “accept fewer” increased from 34 to 53 per cent.

As Trudeau repeats often, “Canada is a country of immigrants.” True, but one of the responsibilities of a sovereign country is to reach a compromise that acknowledges the negative as well as the positive implications of large immigration. Because of the Liberals’ under-the-table immigration policy, until recently there has been negligible public discussion of the implications for the housing market of tripling the pre-2015 population increase.

Belatedly, the provinces and Ottawa have now implicitly acknowledged that recent immigration numbers are a major cause of the spike in house prices and rents. To reduce immigration numbers, however, poses political problems for both Ottawa and the provinces. Ottawa has perhaps decided to reduce the number of postsecondary study visas. The federal immigration minister has, for example, acknowledged that 40 per cent of Indian students seeking study visas have fake reference letters. The prospect of universities and colleges receiving fewer foreign students, who pay up to four times the fees of domestic students, imposes sizable financial costs on provincial budgets.

A second problem to tackle is the impact of high rents in exacerbating homeless numbers. Ottawa and the provinces are increasing subsidies to encourage construction of more low- and middle-income rental units. To have a substantial impact, this strategy will require some combination of higher deficits and higher taxes.

At the time of writing (October 2023), no major political party at the provincial or federal level has argued openly for a lower immigration number (permanent residents plus visa-based arrivals).