Reduced immigration has eased housing affordability and unemployment: report
A reduction in Canada’s immigration intake has led to “evidence of easing pressure on the social and economic infrastructure,” according to a new report from one of the country’s largest banks.
A reduction in Canada’s immigration intake has led to “evidence of easing pressure on the social and economic infrastructure,” according to a new report from one of the country’s largest banks.
TD Economics released a report on Tuesday that found Canada’s decelerating immigration has “moderated demand for purpose-built rentals and, consequently, rent growth.”
Fewer immigrants also mitigated the rise in unemployment, with the report saying that Canada’s current unemployment rate would have been at least one percentage point higher “if immigration growth had continued unabated.”
The unemployment rate was 7.1 per cent as of last month, marking an uptick from 6.9 per cent in August. A recent study found 37 per cent of respondents said jobs and unemployment should be Canada’s top priority, a figure that has doubled in the past nine months.
Two-in-five Canadians said they were concerned that they, or someone in their household, might lose a job due to the current economy.
“Re-adjusting immigration targets came at an opportune time. Employer demand for new workers has recently made a U-turn, with net job losses amounting to 40k positions between July and September 2025. We believe another 40k is still at risk this year,” reads the report.
“We estimate today’s unemployment rate could have breached eight per cent. This is with an assumption that employers absorb 30 per cent of the new labour supply, reflecting the recent trend of weakening demand. Even under a more generous assumption that employers absorb 50 per cent of the new labour supply, the national unemployment rate would still have risen to over 7.5 per cent.”
With regards to housing and affordability, “drastically slower immigration inflows underpin” the report’s more optimistic rent growth forecast, which it projects will be between 3 to 3.5 per cent next year.
If true, that would be roughly half of 2024’s growth rate.
Had it not been for Ottawa’s reduction in the Liberals’ previous immigration levels, the report projects the average growth of purpose-built rental prices would be two percentage points higher.
It suggested a potential pace that would have “run nearly twice as high as the historical average, further crippling rental affordability.”
“We estimate that the average Canadian would have been paying an additional $1,100 per year to rent a one-bedroom apartment by 2027,” it said. “Beyond the purpose-built rental space, lowering the cap on newcomers has also lowered condo demand for both homeownership and the secondary rental market.”
B.C. and Ontario are the two provinces that have benefited the most from a slower inflow of temporary foreign workers and students.
This change comes at a crucial time, as the Canadian Mortgage and Housing Corporation reported a dramatic 16 per cent drop in housing starts in August compared to the month before.
According to TD’s Senior Vice President and Chief Economist Beata Caranci, the recently revised immigration policy is “beginning to pay dividends in returning balance to a stretched social infrastructure.”
“Although the policy alone does not resolve all of Canada’s structural issues, it was an important reform at the right time in the economy. It has contributed to easing pressure in the national housing market—particularly in rentals — and has stemmed a harsher run-up in unemployment during a challenging economic period,” writes Caranci.
“All told, these developments are proving timely as the country simultaneously navigates a policy shock from the United States.”
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