Immigration, rent control, and the housing crisis By David Gargaro
Canada’s immigration policy has often been targeted as a key reason for Canada’s housing crisis. Until recently, home prices and rental rates had climbed to unprecedented levels. The argument is simple: more immigrants mean more competition for housing, especially rentals, which drives up prices and puts pressure on supply. However, this explanation may be ignoring a more complex truth: local policies, such as rent control, play a more significant role in what’s happening in the housing markets, especially in provinces with the worst housing shortages.
Immigration is an easy target Up until last year, Canada had ramped up immigration levels to address labour shortages, promote economic growth, and offset an aging population. In 2023 and 2024, the country welcomed 471,808 and 483,591 permanent residents, respectively. Housing supply has not kept pace with these numbers, which has led some experts to correlate population growth and housing inflation. According to federal data, immigration plays a role in rising housing demand. However, the impact is relatively modest. A report commissioned by Immigration, Refugees and Citizenship Canada (IRCC) estimated that, from 2006 to 2021, immigration was responsible for about 11 per cent of the increase in housing prices across all municipalities with populations of more than 1,000 residents. The effect is greater in large urban centres (i.e., more than 100,000 residents). Newcomers were responsible for 21 per cent of median value home increases and 13 per cent of median rent increases. The stated every 1 per cent increase in new immigrants led to a 0.375 per cent increase in home values and a 0.086 per cent increase in rents. However, immigration did not uniformly impact housing prices across Canada. There were statistically significant increases in BC and Ontario, where most immigrants tend to
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settle. Although Alberta and Saskatchewan also experienced substantial increases in immigration levels, there were minimal changes in home values. Other factors, including local economic conditions and housing policies, seem to be more impactful on housing prices and rents. According to one real estate industry executive, Alberta has more than enough supply, particularly newer, more expensive purpose-built rentals. In fact, vacancy rates are higher in this part of the rental housing market. However, although average rents have dropped, Alberta needs more affordable housing. To help address this imbalance, different levels of government should step in to provide more rental supports to help fill increase occupancy rates.
What about rent control? Rent control appears to be more strongly tied to increasing rental prices than immigration. Ontario and BC, which have strict rent control laws, reported some of the highest year-over-year rent increases in Canada. In theory, rent control should protect tenants from unaffordable rent increases. However, rent control may discourage the construction of new rental units, which can limit mobility within the market. Rent control policies vary across Canada. Ontario caps annual rent increases for most units at or below the inflation rate. BC allows rental property owners to make slightly higher adjustments but
restricts how much rents can be increased for current tenants. Rent control legislation does not always apply to newer units or those built after a certain year. This creates a two-tiered rental market that protects older units and enables newer ones to be priced at market rate. Rental property owners have less incentive to maintain or upgrade older units if they cannot recoup their investments by charging market-rate rents. As a result, rental housing supply declines, demand increases, and rents for existing inventory rise. According to the data, provinces with stricter rent control measures have experienced steeper rent hikes. Interprovincial migration patterns have shown residents moving away from these regions to find more affordable living.
Combined pressure Neither immigration nor rent control alone are responsible for the housing affordability crisis. Together, they may be making the problem worse. High immigration levels increase the need for new housing supply, especially in Toronto and Vancouver. At the same time, restrictive rent policies limit developers’ ability to respond to that demand. Since the housing market supply is low, adding more newcomers without increasing the rental housing supply (while also disincentivizing development) will prevent supply from meeting demand.
One solution is to remove constraints on supply. Creating new construction incentives would allow developers to get the financial assurances required to build more affordable housing stock. Streamlining zoning and permitting, especially for multifamily rental housing, would help to address the supply gap exposed (but not caused) by higher immigration levels. For example, Edmonton is the first Canadian city to use AI-powered technology to auto-review homebuilders’ applications, which has helped to reduce permit approvals from 20 days to one day.
Conclusion If Canada wants growth through immigration, it must adapt its housing policies to match. Blaming immigration for Canada’s housing crisis is easy but does not address the challenges of supply, affordability, and regulation. Provinces with rent control must determine whether their policies are helping tenants or preventing the development of new housing. Immigration targets must also be tied to realistic housing goals and planning tools at all levels of government to ensure supply can meet demand.
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