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Analysis | Rising immigration, rising rents?

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Rent prices across the country increased, on average, by 8.2% from October 2022 to October 2023 , according to Statistics Canada.

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Inflation slows down across the country, but housing costs are exploding. Rent prices increased, on average, by 8.2% from October 2022 to October 2023, according to data released Tuesday by Statistics Canada. And the strong demographic increase in the country would not be at all unrelated to this situation.

There is no precedent where the peak of rent inflation has exceeded the peak of overall inflation, wrote the chief economist of the National Bank, Stéfane Marion, in a note. analysis published Tuesday. Unless Ottawa lowers its immigration quotas, we don't expect much relief for the 37% of Canadian households that rent.

In Stéfane Marion's opinion, the imbalance in the housing market is caused by an unprecedented increase in the working age population. Over the past 12 months, 874,000 people have been added to the labor force in Canada, a record surge.

Currently, the economist says there is one housing start for every 4.2 people in the country's working-age population. Historically, this ratio is one housing project per 1.8 people. Under these conditions, he writes, people have no choice but to increase the price of a dwindling stock of rental housing.

Experts agree: we need to build a lot more housing in the country to meet demand. The federal government announced measures in its economic statement to stimulate housing construction, including the enhancement of the Apartment Construction Loan Program, which should enable the construction of 101,000 new housing units by 2031-2032. /p>

The statement also provides for the addition of 7,000 new affordable housing units by 2028, and the addition of tens of thousands of rental units thanks to low-cost financing from CMHC and the construction of housing on federal lands.

But is that enough? CMHC estimates that, to return to an affordable market, we must build 3.5 million additional housing units in the country by 2030. We are far from the target and it will be difficult to have the necessary workforce to do so. arrive.

This is why the chief economist of the National Bank advocates a review of short-term immigration levels in the country. This housing crisis, amplified, according to Stéfane Marion's analysis, by the strong demographic surge, is causing a gap between rents and the general consumer price index which has never been so high in 60 years. /p>

The largest year-over-year rent increases in the country are in Nova Scotia (+14.6%), Alberta (+9.9%), Quebec and British Columbia (+9.1%). Data from and Urbanation shows a significant increase in rents on rental apartments. The average price in Canada in October was $2,178, up 9.9% from the same period last year. Rent prices are reaching new heights, month after month.

In addition to rents, Statistics Canada says that the cost of mortgage interest (+ 30.5%) is one of the main elements driving inflation in the country. The rise in interest rates at the Bank of Canada has been rapid over the past year and a half, and Canadian citizens are fully feeling the effects.

This is 45% of all current mortgage loans in Canada which will have to be renewed within two years, CMHC recently explained, that is to say 2.2 million mortgages. Average monthly payments will increase, in many cases, by 30 to 40%.

Furthermore, property taxes (+4.9%) are also rising sharply. Rising costs, which are hitting municipal governments hard, are leading to property tax increases not seen in 30 years. Tax growth, of 4% in Quebec, 5.3% in Ontario and 7.5% in British Columbia, is the largest since October 1992.

In interview Tuesday evening at Economy Zone, I asked Federal Finance Minister Chrystia Freeland if the current housing crisis and rising rents were not attributable to her government's policy of high population growth.

For her, what fuels inflation is the lack of labor, and not the rapid growth of the population. When I am in Quebec, when I speak with businesses across the country, but especially in Quebec, they talk to me about the labor shortage. This is a pressing problem for the Canadian economy, and it is one of the causes of inflation. We need people, and Canada is very lucky to be able to attract them.

This approach is contested; I talked about it last week in a text. It is not clear that increased immigration is the best solution to the labor shortage. However, in the case of the housing crisis, economists are sounding the alarm about the government's demographic ambitions.

When I insisted on the effect of the increase in immigration rates on the housing crisis and rent prices, the minister simply said this: If we want to be a growing country, and I think that is a good thing to be a growing country, we have to build more housing, and we are in the process of doing that.

Okay. But before accelerating population growth in the country, shouldn't the Trudeau government have checked all the elements of the equation, starting with our ability to build enough housing to accommodate everyone?

Not only has Ottawa not done it, but most of the plan presented for housing in the economic statement will come into force in 2025 and 2026. Does the Trudeau government understand the basic economic principle, in this moment, which is to calm demand and increase supply?

Economy zone: interview with the Federal Minister of Finance and Deputy Prime Minister, Chrystia Freeland

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