Canada shows Australia how to solve rental crisis: ‘Clear lessons here'

News.com.au

2 days ago

Canada's dramatic immigration freeze has coincided with a sustained fall in rents, in a move experts say presents an obvious path out of Australia's own rental crisis.
Figures from Statistics Canada last week showed population growth slowed to a crawl in the first quarter of 2025.
From January 1 to April 1, the population increased by just 20,107 people — statistically flat at 0.0 per cent — to reach 41,548,787, the smallest quarterly growth since border closures at the height of the Covid pandemic in 2020.
It marked the sixth consecutive quarter of slower population growth, after immigration reductions were first implemented by the Liberal government last year under former Prime Minister Justin Trudeau and his successor Mark Carney.
'Canada admitted 104,256 immigrants in the first quarter of 2025,' Statistics Canada said.
'This was the smallest number admitted in a first quarter in four years and reflects a lower total permanent immigration target for 2025. However, prior to 2022, Canada had never welcomed more than 86,246 immigrants in a first quarter (which occurred in the first quarter of 2016).'
Meanwhile, national average rents in May were 3.3 per cent down from a year earlier at $CA2129 ($2381), marking the eighth consecutive month of year-on-year decreases.
The monthly report from Rentals.ca and Urbanation found asking rents were flat compared with April with a 0.1 per cent month-on-month increase.
Rents for purpose-built apartments were two per cent down year-on-year to $CA2117 ($2368), condominium apartments fell 3.6 per cent to $C2192 ($2452), rents for houses and townhomes fell seven per cent to $CA2196 ($2456).
Urbanation president Shaun Hildebrand said the easing was due in part to a surge in supply with new apartments being completed, a slowdown in population growth and a heightened level of economic uncertainty, The Canadian Press reports.
'The easing in rents this year across most parts of the country is a positive for housing affordability in Canada following a period of extremely strong rent inflation lasting from 2022 to 2024,' Mr Hildebrand said in a statement.
Despite the easing, average asking rents in Canada are 5.7 per cent higher than two years ago and 12.6 per cent higher than three years ago, according to the report.
It added that over the past five years, average asking rents in Canada have increased by an average of 4.1 per cent annually, outpacing average wage growth of around three per cent.
'We've argued all along that the explosion in population growth — to nearly 1.3 million people within a year at one point — was playing a major role in many economic issues Canadian policymakers have been struggling with,' Robert Kavcic, senior economist at Bank of Montreal, in a note to clients last week, per The Globe and Mail.
'New immigration targets set last fall are clearly now having an impact. The impact is already being seen on the ground, perhaps most vividly in loosening rental markets.'
Like Australia, Canada's post-Covid border reopening led to a record surge in migration — from 2021 to 2024, the population grew by an average of 217,000 per quarter, sparking widespread concerns about access to housing and healthcare.
Opinion polls in late 2024 found nearly 58 per cent of Canadians felt there was 'too much immigration', with three in four blaming immigration for housing and healthcare pressures.
In October, Mr Trudeau announced dramatic cuts to Canada's immigration targets in an effort to 'pause' population growth.
The country had previously planned to let 500,000 new permanent residents settle in the country in 2025 and 2026. But those targets were revised down to 395,000 next year and 380,000 for 2026. It set the 2027 target at 365,000.
According to the last census in 2021, 23 per cent of Canada's population was foreign-born.
Statistics Canada said that as of 2021 most immigrants were from Asia and the Middle East, but an increasing share were coming from Africa. Nearly one in five recent immigrants were born in India.
Mr Trudeau said Canada needed to stabilise its population to give 'all levels of government time to catch up, time to make the necessary investments in health care, in housing, [and] in social services to accommodate more people in the future'.
'Even with the reductions starting in 2024, international migration accounted for all of the population growth in the first quarter of 2025,' Statistics Canada said.
'This was because natural increase (births minus deaths) was negative (-5,628), meaning that there were more deaths than births. This is consistent with an ageing population, a decreasing fertility rate and the higher numbers of deaths that typically occur during the winter months. Natural increase has been negative in every first quarter since 2022.'
The abrupt shift in Canada's population growth has been driven by a decline in temporary residents.
There were nearly 2.96 million temporary residents in Canada as of April 1, accounting for 7.1 per cent of the total population — down from a peak of 7.4 per cent in October.
The number of temporary residents has dropped by 61,111 since the start of the year, led by a 53,669 fall in study permit holders.
At the end of 2024, there were close to one million international students in Canada. The government in September imposed a cap on international students, aiming to slash the number of study visas issued by 300,000 by the end of 2026. It also restricted work permits for spouses of master's degree students and foreign workers.
The number of people holding only a work permit remained at a high level of more than 1.45 million, after a slight fall of 5114 in the first quarter.
'Conversely, the number of asylum claimants, protected persons and related groups in the country increased for the 13th consecutive quarter, reaching a record high of 470,029 (+12,744) on April 1, 2025,' Statistics Canada notes.
Mr Carney, who won election in April after vowing to address 'unsustainable' immigration, earlier this month proposed even tougher laws that would restrict some asylum claims and give authorities more power to suspend processing applications en masse.
'There's a lot of applications in the system,' Immigration Minister Lena Metlege Diab told CBC News.
'We need to act fairly, and treat people appropriately who really do need to claim asylum and who really do need to be protected to stay in Canada. We need to be more efficient in doing that. At the same time, Canadians demand that we have a system that works for everyone.'
The Strong Borders Act would bar asylum claims made more than a year after the person first entered Canada. It would apply to anyone, including students and temporary residents, regardless of whether they left the country and returned.
The bill would also require people entering Canada illegally from the US under the Safe Third Country Agreement to make an asylum claim within 14 days for it to be considered.
MacroBusiness chief economist Leith van Onselen said Canada provided 'clear lessons here for Australia, where policymakers and the media continue to paint the housing crisis as a 'supply issue''.
'The latest State of the Housing Report from the National Housing Supply and Affordability Council (NHSAC) forecasts that Australia's cumulative housing shortage will worsen by 79,000 dwellings over five years,' van Onselen wrote on Tuesday.
But he pointed out NHSAC's population forecasts were based on the Centre for Population's projections, 'which assume permanently high levels of immigration'.
'However, NHSAC's sensitivity analysis showed that if Australia's population grew by just 15 per cent less than forecast over the next five years, then the projected 79,000 housing shortage would turn into a 40,000 surplus,' he wrote.
'NHSAC's sensitivity analysis and Canada's experience are further evidence that cutting immigration is the only realistic solution to the housing shortage and rental crisis.'
But Dr Bhanu Bhatia, lecturer in economics and business at Charles Darwin University, said that was a 'dangerous lesson to take'.
'These migration patterns that you see, in the background of that is also skills shortages,' she said.
'So if you try to control the housing [pressures] with this freeze, that then impacts our employment. Look what happened in Covid, how many shortages we saw in terms of labour.
'So I think it's a dangerous lesson. It's not going to solve our problems in the long term and it can also increase our problems in some other sectors and impact economic growth, impact our productivity, which are lagging anyway.'
Dr Bhatia said in addition to skilled migration it was important to consider 'family migration and all those sorts of things'.
'If we try to freeze that, that's going to again not have a good impact on our society,' she said.
'So I think the solutions are more internal in terms of trying to build that housing capacity. We need to look at our labour force participation rate, so we're not reliant on overseas migration, how to do skills training. There are a lot of long-term structural issues the government needs to solve, rather than these short-term solutions about freezing migration.
'The migration numbers we have, they are led by a lot of economic and social logic that we shouldn't be tinkering with just to solve a housing problem.'
Dr Bhatia said there was 'no denying' that overseas migration had contributed to the housing crisis but it was a 'bit of a distraction'.
'There's so many other factors — natural increases, internal migration. There's very poor planning that's been in place to accommodate [increase in demand],' she said.
'Covid was another big factor, it fuelled demand for single-family homes. Building approvals have not kept pace. It's all been driven by the market, but the government should have had some oversight in terms of how our numbers were growing, how our cities were growing, how we're going to plan for this future. It's just been very dependent on short-term fluctuations … completely profit-led.'
Net overseas migration added 340,800 people to Australia's population in 2024 — or 931 new residents per day — according to figures last week from the Australian Bureau of Statistics (ABS).
That's down from a peak of 555,800 in the 12 months to September 2023, and net overseas migration of 68,000 in the December 2024 quarter — after falling for five consecutive quarters — was about 7000 lower than Treasury's forecast due to fewer arrivals.
The Albanese government has sought to rein in international student numbers, which make up the lion's share of Australia's net overseas migration, by increasing the student visa charge and implementing a range of integrity measures.