Front Burner - Immigration and housing costs. What’s the link?

Episode Date: January 17, 2024

After mounting political pressure, last weekend Immigration Minister Marc Miller acknowledged that the number of non-permanent residents in Canada is putting a strain on housing. As Canada brings in a historic number of temporary residents and population growth sets records, some of the country’s top bank economists and even the Bank of Canada say that the federal government’s immigration policy is significantly affecting housing affordability. So how did we get here? What is Canada’s immigration policy? Would a cap on non-permanent residents help alleviate the housing crisis – or could it hurt the economy as some critics say?  Canadian Press economics reporter Nojoud Al Mallees explains.  For transcripts of Front Burner, please visit: https://www.cbc.ca/radio/frontburner/transcripts Transcripts of each episode will be made available by the next workday.

In the Dragon's Den, a simple pitch can lead to a life-changing connection. Watch new episodes of Dragon's Den free on CBC Gem. Brought to you in part by National Angel Capital Organization, empowering Canada's entrepreneurs through angel investment and industry connections. This is a CBC Podcast. Hi, I'm Damon Fairless. It isn't immigrants that raised interest rates, but volume is volume and it's something that we need to look at. That's Immigration Minister Mark Miller speaking with CBC's Rosemary Barton.

He's responding to growing concerns and acknowledging that the number of non-permanent residents in Canada is putting a strain on housing. The challenge with the non-permanent resident targets is there are none. We have to take a look at that and rein it in in many areas. Last week, news broke that the government was warned two years ago by public servants that a significant rise in immigration could impact housing costs. Now, as Canada brings in a historic number of temporary residents and our population growth is setting records, some of the country's leading economists and even the Bank of Canada say that Justin Trudeau's immigration policy is affecting housing affordability. On Monday, the National Bank of Canada economists went even further in

a report that says Canada is caught in, quote, a population trap and needs to rein in immigration significantly. So how did we get here? What is Canada's immigration policy? Would a cap on non-permanent residents help alleviate the housing crisis? Or could it hurt the economy, as some critics say? And how is this issue shifting public opinion on immigration? To talk more about this, I'm joined by Najood Al-Maliz. She's an economics reporter for the Canadian Press. Hi Najood, how are you?

Good, how's it going, Damon? Good, it's good to have you here. Thanks for coming on. Thanks for having me. So you broke that story last week about how the federal government was warned by civil servants a couple years ago about the negative impact high immigration could have on housing. And they weren't the only ones raising flags here. Who else is concerned about this? Well, you know, if you've been reading the news over the last year, you know that housing, population growth and immigration have been a really big hot topic. And we've heard from everyone from economists on Bay Street to academics to policy

experts who have been saying that, hey, population growth is too strong right now, given the state of the housing crisis, because demand is essentially just outpacing supply. And what these internal documents from the Immigration Department show is that these concerns were discussed two years ago within the government, that the Deputy Minister was aware of this when they were setting their annual immigration targets. And so essentially what we know now is that these economists who have been raising concerns about this are not heretics. Their concerns are mirrored within the government as well. You know, similar things coming from now from the National Bank of Canada economists. We've got people on Bay Street, various academics, all kind of voicing similar

concerns, right? Yep, yep, exactly. And so we've seen a lot of analysis from various banks about what kind of pressure immigration is adding to the housing market. And this is actually a big shift, because when you think about it, commercial banks usually are quite pro-immigration. Business groups are quite pro-immigration. And now you're hearing even from these parts of society that are often advocating that we bring more people to the country that, hey, maybe this is too fast. Maybe this is actually not helping when you think about the challenges we have in the country from housing to healthcare to other services. So let's hone in on housing affordability specifically. It's obviously a really complex issue. It's something we've talked a lot about on the show here. And there are a lot of factors that come into play when it comes to, you know, in the housing market. But can you kind of briefly lay out how this surge in immigration specifically has impacted the housing market? housing market? Yeah. So when you think about newcomers, oftentimes they are renters because when you show up to a new country, you're not going to buy a house the first day you get here.

And so we know that when you increase immigration, that tends to add a lot of pressure, particularly on the rental market. And we have seen rent prices skyrocket post-pandemic. But you also see pressure in the buyer's market as well. And this week, there was a survey that came out from Bank of Canada that shows newcomers are actually more likely to say that they plan to buy a home over the next 12 months than overall renters are. And so essentially, the demand is outpacing the supply when it comes to actually purchasing a home. Yep, that's exactly it.

And so when you look at the housing starts we have in the country and the various barriers to building more homes, we're just adding a bit more pressure on that with the increase in population that we've seen over the last two years. And you kind of mentioned this, that a lot of the people who are kind of sounding these warnings, this isn't coming from, you know, folks who are typically against immigration, right? They understand the necessity of having immigration driving the economy. But it is one of those highly politicized issues. So I guess I'm curious how this, you know, extra strain on housing is playing out politically. Are we starting to see waning public support for immigration?

Yeah, so on the anti-immigration point, I mean, that's actually one of the challenges for elected officials when they are talking about immigration policy. When you think about this liberal government, they have championed immigration as a big part of growing the country, growing its economy, positioning themselves as pro-immigration. We're going to continue to be the open, welcoming, prosperous and growing country we've always been. And even when you think about the Conservatives, with Conservative leader Pierre Palliev, he's trying to court various ethnic communities in the country. He's also very careful in how he talks about immigration policy. We've had a wonderful and successful immigration system up until eight years ago.

An excellent, probably the best immigration system in the entire world. And we need more immigrants. But we need to have it done in an orderly and lawful fashion. A million immigrants waiting longer than the acceptable wait time to get into Canada. 20,000 brilliant immigrant doctors blocked from working in their professions by government gatekeepers. 32,000 immigrant nurses blocked from their jobs. But what you hear from experts is that, you know, talking about how to best go about doing immigration policy does not make you anti-immigrant.

One of the challenges there, though, is that we are seeing waning support for high levels of immigration in the country. More Canadians are linking higher immigration to more strain on housing, on health care, on education. And so if you are someone who is pro-immigration, you likely want to make sure that Canadians remain welcoming and supportive of immigration in the country. And that means making sure that people don't feel like they're worse off because of our policies. our policies. There was an interview on the CBC's The House that aired last weekend, and in it, Mark Miller, the minister in charge of immigration, defended the government's general

approach, saying that immigration is needed for the labor force as the population ages. I have a challenge as the Minister of Immigration, Refugees and Citizenship in dealing with something that is looming even heavier over our heads, which is the demographic curve, which is not trending in any country that is similarly situated very positively. But Canada, and you don't need to listen to me,

the Bank of Canada has said as much, we have done a singularly good job in reducing that and making the work forced younger. It has been attributable almost 100% to immigration. That has come with challenges and supply challenges that we are addressing and are making. I guess I'm just wondering if you can maybe help lay out just how important immigration is for the economy. Yeah. So we do have an aging population. There are concerns about how do we pay for things like health care when we have fewer workers paying taxes to the government. There are concerns about, you know, how do businesses find workers to replace those who are retiring. the economic benefits of immigration depend on who you're asking and what metrics you're using. And so when it comes to businesses who maybe are facing labor shortages, immigration is highly

important. Or maybe businesses that rely on temporary foreign workers, you think of agriculture, these policies are very important for them. But when you talk to economists or those who study immigration policy and its economic effects, they'll tell you what matters really is how you use the immigration system. Are you trying to attract the best talent out there in the world, the best students? Or are you filling gaps in the labor market? And I think one of the concerns that have emerged post-pandemic is that there's been a big focus on filling job vacancies. And a lot of economists would tell you that they would rather incentivize businesses to go and innovate and find ways to make up for the fact that there aren't workers.

Ultimately, the more people that you have in the country, the more workers you have, the larger the economy will be. But the goal that economists would tell you is that, is immigration improving living standards in the country? And the way you'd measure that is by real gross domestic product per capita, which measures the size, the slice each person in the country gets of this economic pie. And it's not clear whether immigration actually helps on that front. Is the idea that higher immigration brings about higher living standards, generally speaking, is that true? Is this something that needs to be tweaked?

Help me understand this a little more. Yeah. So I spoke to an economics professor at the University of Waterloo at Macau, and what he told me is that it's a bit of a wash that doesn't necessarily increase living standards, doesn't necessarily decrease living standards. When I looked through those documents from the immigration department, public servants had a similar sense of the economic effects of immigration. They say, you know, if you increase the working age population, it will surely grow the economy. But it's not necessarily the case that that means real GDP per capita grows.

We've seen that over the years, especially recent years, there's been a lot of improvement in terms of the incomes that immigrants earn, particularly in those early years that they're in the country. And so I think there could be a case that there are ways to improve the immigration system to better cater it towards growing the economy. But I think this overall narrative that immigration is the bedrock of our economic prosperity, there are people who are questioning that. In the Dragon's Den, a simple pitch can lead to a life-changing connection. Watch new episodes of Dragon's Den free on CBC Gem. Brought to you in part by National Angel Capital Organization,

empowering Canada's entrepreneurs through angel investment and industry connections. Hi, it's Ramit Sethi here. You may have seen my money show on Netflix. I've been talking about money for 20 years. I've talked to millions of people, and I have some startling numbers to share with you. Did you know that of the people I speak to,

50% of them do not know their own household income? That's not a typo. 50%. That's because money is confusing. In my new book and podcast, Money for Couples, I help you and your partner create a financial vision together. To listen to this podcast, just search for Money for Couops. Canada truly, you know, is built on immigrants, but it's more complex than that, right? So maybe you can take me through what Canada's immigration policy is right now and how it differs from the past. Like, what's changed exactly? So there's two elements here. There are the number of permanent residents coming to the country, and then there are temporary residents.

And when we talk about immigration policy, oftentimes we are talking about permanent residents. Those are people who come to the country and eventually become citizens. In 2025, we're on track to welcome 500,000 permanent residents that year and the same number in 2026. That's almost double the number that we had in 2015. Now, that 500,000 number has caught a lot of attention, and particularly when it was first unveiled. But now a lot of the attention has actually shifted to the spike in temporary residents. And when we're talking about temporary residents, that's international students, that's temporary foreign workers, that's also asylum seekers. What's happened is that population growth is being driven by students

and migrant workers. There are no targets or caps because these programs are demand driven. And so just to illustrate how much temporary residents are contributing to the population growth. StatsCan released a report last month on population growth between July and October. And what we saw is that Canada's population grew by more than 430,000 people. And about three quarters of that was temporary residents. So that just tells you really where this growth is coming from. And so how does this compare with the levels of immigration that we see in the rest of the world or even to what we've done in the past in Canada? So we have one of the fastest growing populations in the world and nearly all our population growth comes from immigration.

We've heard the prime minister and other members our population growth comes from immigration. We've heard the Prime Minister and other members of his government tout that as one of the strengths of Canada. And it's true that other countries are grappling with slowing population growth. Some countries are declining population growth. And that poses real challenges for them as well. Right. Now, Canada hasn't grown as fast as it currently is growing since 1957. This is really a record growth, 2023, outpaced 2022. And so it's a bit of a strange position to be in, to be a growing country when our peer countries are struggling with the opposite problem. But what we're learning is that strong population growth

comes with its own challenges as well. So yeah, I've read, I've read a figure that says something like our population has risen by like 3%, which is like faster growth in China or India. Is that, is that right? Yeah. So we are, we are one of the fastest growing countries in the world right now. And, you know, finance Minister Christopher Freeland, the Prime Minister, when they're asked about immigration and housing and population growth, they say, hey, we're in a good position. Look at all our peer countries who are struggling with the opposite problem. It is a real driver of our country's economic growth. And at a time when all of the industrialized

countries in the world are facing huge demographic challenges, we are extremely fortunate as a that we have the social capacity to welcome immigrants. But again, now the question is, is population growth always great and who is it good for? So let's talk about what the government's doing to respond to all this. So, you know, it clearly something that the housing crisis is not an easy fix. It won't be solved tomorrow if the government fiddles with some stuff today, particularly its immigration policy. But I'm just curious what kind of solutions are being talked about here. Yeah. So there's two ways to approach this. You could try to increase supply when it comes to housing or try to temper demand.

And so on the supply side, we're seeing the government is trying to expand housing stock. It's incentivizing cities through the Housing Accelerator Fund to adopt policies that would make it easier to build homes, to build denser housing. And they're looking at other tax incentives and ways of building more homes. I think there's a lot more that we could discuss there. On the demand side, and we think of immigration policy specifically, the discussion right now is about how do you get a handle on the spike in temporary residents. The government has indicated that that is something they want to do. They do want to temper those flows. And so there have been discussions of whether you put a cap on the international student program, tightening up rules in the Temporary Foreign Workers Program, and they've come out with new policies on the International Student Program, and they've also

threatened provinces to take more action if they don't get a handle on these spikes, particularly by making sure institutions have housing for the students that they bring in, and by ensuring that the institutions bringing in these students are actually offering a good education. On the temporary foreign worker side, we have not heard from the government as much. What can the government do to balance the population growth with housing affordability over the long run? Well, I think what the government said it wants to do is that it wants to align its immigration policy with housing. That's a very general whole idea. We've heard it also from the Conservative leader and it's also an idea you hear from other policy experts and economists.

We need to make a link between the number of homes built and the number of people we invite as new Canadians. and the number of people we invite as new Canadians. It's going to be a challenge to find that right balance because the reality is we have a massive housing deficit in the country. When you think about what the CMHC has told us, the number of homes we need to build by 2030. Canada needs to build about 3.5 million more homes by 2030 to restore affordability. No one thinks that we're actually going to be able to build that, not even the CMHC. And so the challenge right now is that we're already pursuing an aggressive immigration strategy.

I have a hard time imagining a government coming in and really decreasing those levels to match the pace of housing starts, say, in the country. And so it will be interesting to see what the Liberal government does about this and what kind of solutions it proposes, because striking that balance will not be easy at all. In terms of reducing the number of non-permanent residents, there has been some pushbacks. I'm thinking from universities and colleges that are dependent on foreign students. What other kind of pushback are we hearing? Yeah, I mean, this is ultimately something that affects international students very personally.

You hear from a lot of them about the anxiety they're facing with these changing rules regarding how much they can work, changing rules regarding how much they can work. The financial threshold for coming to Canada has been doubled also recently. And these are students that have their own affordability challenges. Some of them are having to work multiple jobs and find ways to make ends meet while paying really high tuition. And so as much as we can talk about this

from a policy perspective, ultimately, it is affecting people's lives very directly. And these international students have their own challenges within the housing market as well. But I think there's overlap between the concerns of international students and the rest of society, because ultimately, you want to make sure that we're welcoming people into the country, knowing that we have housing for them, and knowing that they are coming here to get a good education from a reputable institution rather than coming here on the hope of becoming a permanent resident when maybe that's not actually going to be the case. I was just thinking about an interview that was on Rosemary Barton Live.

She was interviewing the president of the International Students Association at the Université de Moncton. And that woman said that she felt, and I'm quoting here, it was pretty unfair to blame international students for the housing crisis. I feel it is pretty unfair to use them as keep-go-to-air to explain the wrong decisions that our political actors took in the past. So I'm just wondering, you know, the people who are non-permanent residents, the foreign students, the non-permanent workers, they're kind of caught in the middle of this tension, aren't they? students have been reacting to these new policies from the Liberal government with some level of anxiety about what their place is going to be in society, whether international students can

continue to come here and feel welcomed. And so as we debate about where do we go from here in terms of how do we get a handle on population growth, There's a lot at play for these international students who may feel like they're being scapegoated to some extent. And the reality is, when it comes to the housing crisis, it runs much deeper than just population growth. We know we have structural barriers to building homes, whether it's at the municipal level or our tax rules in the country. And so really, the conversation right now is about population growth, adding pressure to a system that already has problems. Ajit, thanks so much for coming on. Really appreciate it.

Thanks for having me. All right, that's it for today. I'm Damon Fairless. Thanks for listening to FrontBurner. I'll talk to you tomorrow. For more CBC Podcasts, go to cbc.ca slash podcasts.