Canada’s So-Called “Housing Crisis” Is Over – At Least For Now

Nobody will argue that housing is not a necessity, particular in places like Canada with a cold and wet climate.

Canada had a housing crisis in the 1940s, after a decade and a half of depression and war, and with the population of its cities surging from returning soldiers, immigration, the movement of Canadians from farms to cities, and the beginning of the Baby Boom. Nearly everyone agrees that Canada has had a housing crisis in the last couple of years, and it was a major election issue earlier this year.

Housing has been an issue for over a decade. Harper’s government made changes such as reducing amortization over a decade ago, but nobody said we were in a housing crisis then.

In 2024, the Trudeau government effectively admitted that immigration-driven population growth had reached crisis levels, and slashed immigration targets and the numbers of new non-permanent residents, especially international students. Nobody said we had an immigration crisis, but it is clear that is what had happened. High immigration created a variety of problems, including demand for housing outstripping supply. Canada’s GDP per capita was also dropping, while US GDP per capita rocketed ahead.

So, Canada’s so-called housing crisis has really been part of a larger crisis of excess immigration. Claims from YIMBYs and others that Canada’s rate of construction has been the main cause of Canada’s housing woes are imported from YIMBYs in the US, particularly California. In fact, Canada has been building 40-year records of housing. Measured as a percentage of GDP, the construction of new housing in Canada is roughly double that of the US, UK, or the OECD average.

This year, Canada has had roughly zero net population growth, in large part because the numbers of non-permanent residents leaving has equalled the number of newcomers we let in. At its peak, the percentage of non-permanent residents reached approximately 7.4% of Canada’s population, and the Carney government has promised to cut this proportion to below 5%. However, permanent immigration this year is set at 395,000, dropping to 365,000 in 2027, still far above the Harper era levels of around 250,000. The government has yet to announce the targets for the next three years, but Canada will soon return to high population growth after the current pause is over.

So, the immigration crisis seems to be ending, but did we really ever have a national housing crisis? And even if we did, are we still in crisis?

For one thing, rents are now dropping in Canada, by 2.3% according to one measure. The six largest cities are all seeing declines in rent, though Winnipeg and Regina saw increases. Vacancy rates are also increasing from a low of 1.5% in 2023, and large numbers of new apartment units are being built, which will boost the housing supply over the next couple of years.

Increasing vacancy rates, decreasing rents, and large numbers of new apartments being built are hardly signs of a housing crisis.

There is also a massive glut of unsold condos, and more condo supply will also be completed in the next few years, even though housing starts have dropped and are at very low levels in Toronto and Vancouver. The resale housing markets in these cities are also seeing massive price drops. The number of sales is still low, but is starting to recover.

Meanwhile, Carney has promised to double housing starts from around 250,000 to nearly 500,000 over the next few years, which seems insane given how much of GDP housing already consumes. A country cannot build a healthy economy based on housing construction.

Cutting permanent immigration back to below 250,000 would be a faster and more effective way to deal with any housing crisis, since dense or large new buildings are a significant time investment to build.

To be sure, the problem is not restrictive zoning, particularly in Ontario with the Ontario Land Tribunal (OLT) almost always siding with developers. Toronto (416) has 740,000 units in applications, enough for 1.5 million people, or a 50% increase in population – in a city which already has the worst congestion on the continent.

Canadians are told that there is a massive shortage of housing, but it is hard to see this as true. Canada’s level of housing units per 1,000 people is well below many European countries, but is about on par with the US, Australia, New Zealand, the UK, and Ireland. Canada, like our New World peers, has housing units that are larger, with more rooms and bedrooms on average than in Europe.

Homelessness is a serious problem, but the total numbers of people on the street are comparatively low. Compared to World War Two or just after, there is no lack of housing evident in the US or Canada. Predictions of future housing shortages are based on incorrect assumptions about a current shortage, and an additional assumption that immigration will return to high levels.

The simple truth is that the housing crisis, if that was ever the proper way to describe it, is now over or ending. There is no need to double housing construction, and we should instead focus on raising incomes and GDP per capita.