Ottawa’s Immigration Cuts Relieve Housing and Job Market Pressure

Ottawa’s recent decision to significantly reduce immigration has eased pressures on both the housing and labour markets, according to a report by TD Economics. The Canadian government acknowledged in 2023 that the previous levels of immigration were unsustainable given the capacity of the country’s social and economic infrastructure. This shift has resulted in a marked decrease in population growth, from a multi-decade high of 3.2% in the second quarter of 2024 to just 0.9%.

The report, authored by Beata Caranci, Senior Vice President and Chief Economist, and Marc Ercolao, Economist at TD Economics, highlights the impact of these immigration cuts. As unemployment rates rose by more than a full percentage point between 2022 and 2024, businesses struggled to adapt to a rapidly growing workforce. The housing market, in particular, faced significant strain, with affordability reaching critical levels.

Housing Market Adjustments Following Policy Changes

The reduction in immigration has led to a more manageable housing environment. According to the TD report, the slower influx of newcomers is expected to temper rent growth, with forecasts suggesting an increase of only 3-3.5% in 2026, approximately half the growth rate anticipated for 2024. A decrease in demand for condominiums, especially in provinces like British Columbia and Ontario, has also been noted. These regions, which have historically attracted a large number of temporary foreign workers and students, are witnessing a decline in asking rents across major cities.

The report elaborates that while non-permanent residents (NPRs) have limited participation in the homeownership market, they typically gravitate towards condominium units. Consequently, a reduction in NPR inflows has a pronounced effect on this segment. Furthermore, recent immigrants have shown a tendency to purchase detached homes during their initial years, but their ownership rates tend to stabilize around 50% between renting and owning by their fifth or sixth year in Canada.

Labour Market Implications and Consumer Spending Trends

The impact of Ottawa’s immigration policy on the labour market is equally significant. During the pandemic recovery, an influx of immigrants helped fill critical job vacancies. However, as the workforce expanded at a rate nearly four times greater than pre-pandemic levels, the capacity to integrate these new workers diminished. By mid-2024, indicators showed that job markets were cooling, with vacancy rates normalizing and an uptick in unemployment.

The report indicates that the adjustment to immigration targets has come at a crucial juncture, especially as net job losses of 40,000 positions were recorded between July and September 2025. An additional 40,000 job losses may still be on the horizon. Despite these challenges, the unemployment rate is projected to rise only slightly before gradually decreasing next year, as slower labour force growth mitigates more severe increases.

Consumer spending has also demonstrated unexpected resilience amidst these changes. During the first half of 2025, household spending exceeded forecasts, bolstered by lower interest rates and a revival of housing demand. Notably, around 1.4 million NPRs entered Canada during this period, with approximately 400,000 arriving as students and another 300,000 working in sectors with lower wages, such as retail and accommodation.

The TD report concludes that while the federal government’s revised immigration policy is beginning to restore balance to Canada’s strained social infrastructure, it serves as a reminder of the need for ongoing evaluation of immigration strategies. The interplay between immigration and economic conditions necessitates flexibility to support long-term growth.

Overall, the findings indicate that Ottawa’s policy changes are yielding positive outcomes in both housing and labour markets, critical for sustaining Canada’s economic resilience.