By Mata Press Service

Canada’s decision to slow the record pace of immigration growth is beginning to reduce pressure on housing and labour markets, according to new economic analysis, even as public opinion shows the country becoming more divided over how many newcomers it can support.

A new report from TD Economics says the sharp tapering of population growth is showing early signs of easing rental costs and preventing a more severe rise in unemployment. The federal government began lowering targets for temporary and permanent immigration last year, following warnings that the housing market, social programs and employment landscape were struggling to absorb rapid demographic expansion.

Canada’s population growth reached a multi-decade high of 3.2 percent in mid-2024. That pace slowed to 0.9 percent after new caps and screening measures were introduced. The report estimates that without the policy shift, rent growth would have continued at punishing rates that pushed affordability further out of reach for many Canadians. The slowdown is expected to reduce the pace of rent increases by about two percentage points over the next two years, preventing roughly $1,100 a year in additional rental spending for the average one-bedroom tenant by 2027.

The pullback is also preventing a stronger rise in unemployment. The jobless rate had begun to climb in 2023 and 2024 as businesses struggled to absorb the hundreds of thousands of non-permanent residents entering the labour pool. TD’s modelling suggests that without the slowdown in immigration, Canada’s unemployment rate would likely be at least one percentage point higher today.

But while the shift is achieving some of its economic goals, a broader political and social challenge is emerging. Canadians are increasingly divided on immigration levels, the pace of newcomers entering the country and the strain on housing, public services and community cohesion.

A national survey released this fall by the Environics Institute found that a growing number of Canadians feel the system is being mismanaged. While a majority still believe immigration benefits the economy, concern is rising over housing affordability and government capacity to manage settlement and integration. The survey found that more than half of respondents now say Canada is accepting too many immigrants. Anxiety is highest in regions facing steep rent increases and long wait times for medical care.

The disconnect is revealing. People are not rejecting immigration in principle. They are responding to what they see around them: rising rents, crowded services and declining confidence that planning is keeping up with growth.

Economists and immigration researchers point to one central issue. Canada expanded immigration at a historic pace without matching that rise with corresponding levels of housing construction, funding for municipal infrastructure or expansion of social programs. Temporary residents grew particularly quickly. International students, foreign workers and other non-permanent residents accounted for more than 70 percent of net population growth between 2022 and 2024.

The rental market absorbed that surge directly. In cities such as Vancouver, Toronto and Calgary, large clusters of newcomers settled in neighbourhoods with already stretched housing supply, pushing rents sharply higher. Developers and policymakers were slow to respond. The TD report notes that purpose-built rental construction has begun to accelerate, but those units take years to complete. Condo investors, once reliable suppliers of secondary rental stock, pulled back as interest rates rose.

The labour market story is similar. Early in the pandemic recovery, Canada needed workers. Immigration helped fill shortages in health care, construction, food services and logistics. But as the pace of arrivals accelerated, employers absorbed fewer new workers. Job competition increased in low-wage sectors. Youth unemployment rose faster than the national rate. Many temporary workers found themselves in positions with limited stability and little chance to transition to permanent residency.

This is where the public mood has shifted. The issue is less about welcoming people and more about ensuring the economy and social systems can support them.

The Environics study shows that Canadians who express concern about immigration are more likely to point to the cost of living, housing shortages and access to doctors than cultural identity or border security. The debate is increasingly practical, not ideological.

The federal government, meanwhile, has begun recalibrating programs. Caps have been placed on international student permits. New criteria are being developed for work permits tied to high-demand sectors. Provinces are revising settlement funding formulas to respond to spikes in regional population growth. Ottawa is also under pressure to improve oversight of private colleges and labour recruitment networks that have profited from the surge in temporary immigration.

But economists warn that dialing immigration down too far carries its own risks. Canada’s workforce is aging. Growth in the labour pool is critical for long-term economic resilience, tax generation and funding social programs. The TD report emphasizes the need for flexibility rather than strict caps. Immigration, it notes, is not a lever to be set once. It must be adjusted to match economic cycles, housing supply, labour demand and regional realities.

The path forward may hinge on balance. Researchers argue that Canada needs a more deliberate approach to the mix of permanent and temporary immigrants, clearer planning for where newcomers will live, and stable long-term funding for the institutions that support them: housing, transit, health care and education.

Public trust will also matter. When people believe systems are well managed, support for immigration rises. When they believe governments are improvising, support weakens.

The next year will be pivotal. Rental markets will indicate whether construction and policy changes are gaining traction. Labour force data will show whether younger workers see improved stability. And public opinion will continue to track whether Canadians feel the pace of immigration matches the country’s capacity to make it work.

Canada is redefining how it grows. The goal now is to grow steadily, not suddenly, and to ensure that the promise of immigration is matched by the capacity to uphold it.