Housing insecurity in Canada — defined by affordability challenges, uncertainty with rental leases and inadequate living conditions — has become a pressing issue. Immigration policy will continue to drive population growth despite some adjustments the government has made to slow down the number of people entering the country. At the same time, our deficient housing policy contributes to inadequate supply, which increases affordability challenges and places many Canadians at risk of not having a proper place to live. We need to address this disconnect or face serious social and economic consequences.

Immigration growth versus housing shortages

The government’s immigration strategy prioritizes economic growth and sets yearly targets for permanent residents. In 2025, Canada expects 395,000 new permanent residents, with slightly lower targets for 2026 and 2027. However, housing supply is not keeping pace. The national housing strategy, a 10-year plan that aims to create 160,000 housing units by 2028, falls short given the scale of demand. 

Compounding this issue is the volume of temporary residents, including international students, work-permit holders and asylum seekers. The government has moved to cap the number of study permits and tighten requirements for temporary workers. But none of these groups was ever adequately factored into housing policy targets, which has placed unsustainable pressure on an already constrained supply of homes and left many struggling to secure affordable accommodation.

Regulatory bottlenecks and policy contradictions

Zoning laws and tax policies further widen the gap between supply and demand. Outdated zoning regulations slow down development and increase construction costs. The GST on purpose-built rental housing discourages construction, which contradicts the government’s stated goal of increasing affordable housing stock. These policies work against housing accessibility rather than supporting it.

The impact of inflation and rising interest rates

The housing crisis is not just a supply issue. Inflation, fuelled by domestic policies and global supply-chain disruptions due to COVID-19, significantly increased the cost of living in recent years. Higher costs for food, energy and transportation pushed up the consumer price index, which peaked at 8.1 per cent in June 2022 before beginning to go down. More income directed toward necessities means the proportion available for housing shrinks.

As inflation really took off in 2021, the Bank of Canada started raising interest rates, which went from 0.25 per cent to five per cent, the highest in 20 years. Mortgage payments for many homeowners increased dramatically. Potential homebuyers were priced out of the market and demand for rental units has soared to the point of oversaturation. This has driven up rents and made accommodations even less accessible.

It remains to be seen what effect the bank’s gradual easing of its rates since June 2024 will have. Mortgage and personal debt pressures may have eased somewhat, but a trade war precipitated by U.S. President Donald Trump, if prolonged, will slow the Canadian economy, push up prices and potentially cost hundreds of thousands of people their jobs. These conditions are likely to affect the purchasing power of Canadians and lead to more housing insecurity. 

Speculation and short-term rentals

Real-estate speculation is another major driver of housing insecurity. Investors purchase housing stock as financial assets rather than places to live. This creates competition for potential homeowners in an already supply-constrained market. Additionally, short-term rental platforms like Airbnb remove viable housing units, which reduces supply for permanent residents. These practices favour profitability over housing stability.

The need for successful second-tier cities

Canada’s economic activity is highly concentrated in a few major urban centres, sometimes called tier 1 cities. Toronto, Montreal, Vancouver — and perhaps to a lesser degree Calgary, Ottawa and Edmonton — have a wide range of industries, businesses and more employment opportunities. In 2021, they accounted for about half of the country’s gross domestic (GDP). They also attract immigrants and domestic workers, which further inflates housing demand. Unlike the United States, Canada lacks sufficiently developed tier 2 mid-sized cities that could potentially absorb population growth and ease pressure on larger metro centres.

In the U.S., there are numerous tier-2 cities with robust and thriving economies: Austin, Tex., with its tech industry; Miami, Fla., with trade, tourism and real estate; and Raleigh, N.C., with strong research and biotech sectors. These smaller cities are viable alternatives to more globally renowned American cities. While not immune to housing challenges, they provide economic opportunity and often remain more affordable.

Canadian cities outside the major hubs struggle to offer comparable prospects without facing a housing crunch. Expanding infrastructure and economic opportunities through better transit, business incentives and housing investments in smaller tier 2 cities could help balance demand and reduce housing insecurity in overburdened metropolitan areas. Policymakers might look to Winnipeg, with its emerging tech scene, or Saskatoon, with its agricultural base, as opportunities to develop vibrant cities offering opportunities without the burden of unaffordable housing.

Government must take the lead

Leaving housing entirely to market forces has proven insufficient. While the private sector plays a critical role, government intervention is necessary to address systemic market failures. Our political leaders must bring in measures to increase supply, such as streamlining approval for new developments and providing financial incentives for affordable housing projects. Eliminating the GST on rental housing and reforming zoning laws would also be a step in the right direction.

Additionally, the government must reassess its immigration and housing policies to ensure better alignment. Encouraging regional immigration distribution by offering incentives to settle in underpopulated areas could help relieve demand in major cities. At the same time, addressing regulatory and financial barriers to housing development will be essential to closing the supply gap.

Canada’s housing crisis is ultimately a policy crisis. Without decisive action, the gap between immigration-driven demand and housing supply will continue to widen, making affordability ever more elusive and increasing social instability. The government must take proactive steps to bridge this divide, ensuring that Canada remains a place where housing is not just a privilege but a right for all residents.

This article was written by Kugbeme Isumonah, a doctoral student in sociology at the University of Calgary. It first appeared on Policy Options and is republished here under a Creative Commons license.