Canada’s New Immigration Strategy Brings Stability to Housing and Job Markets
Economists Say the Government’s Policy Shift Is Delivering Results
A recent analysis by TD Economics has found that Canada’s revised immigration policies are helping to ease rental pressures, balance the job market, and maintain economic stability without hurting household spending.
The report, authored by Beata Caranci and Marc Ercolao, reveals that the reduction in both temporary and permanent resident admissions has resulted in a 36% decrease in projected rent increases and prevented unemployment from rising by an additional one percentage point.
The findings arrive as the federal government prepares to unveil its upcoming Immigration Levels Plan, shaping Canada’s immigration targets for the next three years.
Housing Market: A Cooling Trend
The most noticeable impact of Canada’s immigration recalibration is on the rental housing market.
The slowdown in population growth has provided much-needed relief, particularly in provinces like Ontario and British Columbia, which host the largest populations of international students and temporary workers.
According to the TD report:
- Rental price growth between 2025 and 2027 is now projected at 3.5%, down from the previously expected 5.5%.
- This moderation is equivalent to saving renters approximately $1,100 per year on a typical one-bedroom unit by 2027.
- Population growth was nearly flat at 0.0% in Q1 2025 and only 0.1% in Q2, largely due to reduced temporary resident admissions.
The decrease stems from significant policy changes introduced throughout 2024–2025, aimed at curbing the influx of international students and low-wage temporary workers.
Labour Market: Preventing a Steeper Slowdown
Canada’s unemployment rate stood at 7.1% as of September 2025, a figure that could have exceeded 8% if immigration inflows had continued at previous levels.
Between January and August 2025, worker arrivals dropped by nearly 49%, with 146,000 fewer new entrants to the job market than the same period in 2024.
Economists credit this immigration reset for helping to stabilize employment levels, giving local workers better access to jobs while avoiding over-saturation in the labour market.
Despite this, the country still faces a modest rise in unemployment, which experts expect will level off by next year as labour force growth slows naturally.
Spending: Resilience Amid Fewer Newcomers
Interestingly, even with fewer newcomers, Canada’s household spending remains strong.
Aggregate spending in the first half of 2025 exceeded most forecasts, thanks to:
- Lower interest rates
- Households drawing from savings
- Increased domestic tourism
- Renewed housing demand
The TD report notes that this resilience reflects the higher spending power of the remaining population, as earlier population growth had been driven primarily by lower-wage international students and workers who typically have less discretionary income.
As a result, per-capita spending—after two years of decline—is expected to surpass mid-2022 levels by next year, rather than being delayed until 2027, as previously projected.
Population and Policy Adjustments
Canada’s temporary resident population fell to 3.02 million as of July 2025, accounting for 7.3% of the total population, down from 7.6% the previous year.
This drop is largely due to many temporary residents either leaving the country or transitioning to permanent residency.
The federal government’s policy changes during 2024–2025 have been key drivers of this decline. These include:
- Tightened Post-Graduation Work Permit (PGWP) eligibility.
- New language proficiency requirements for PGWP applicants.
- Restricted spousal open work permits (SOWPs) for certain student and worker categories.
- A moratorium on low-wage LMIA applications in regions with unemployment above 6%.
- Increased wage thresholds for high-wage positions under the Temporary Foreign Worker Program (TFWP).
Collectively, these measures are projected to result in over 300,000 fewer permit issuances between 2025 and 2027, supporting the government’s strategy to reduce temporary resident numbers while preserving economic balance.
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