Prominent economists from some of Canada’s largest banks are raising the alarm over Canada’s record level immigration targets set by Prime Minister Justin Trudeau’s government.
Despite these warnings, Immigration Minister Marc Miller has said that revising the half a million per year target was out of the question and instead he might even increase the number of permanent residents accepted into Canada.
As Canadians face increasingly unaffordable housing costs, the Trudeau government is feeling the pressure to address the exploding demand for housing. On this issue, however, it’s not the Conservatives who are calling out the Liberals but some of Canada’s most influential economists.
True North has compiled a list of eight prominent economists warning Ottawa about its handling of the immigration file.
CIBC deputy chief economist Benjamin Tal
Benjamin Tal, the deputy chief economist at CIBC Capital Markets, recently warned that the federal government has been underestimating the number of non-permanent residents (NPR) living in Canada by about one million.
Tal’s report, published on Wednesday, reveals that Statistics Canada’s method of counting temporary resident visa holders, such as international students, is flawed. The agency assumes that visa holders leave the country within 30 days of their visas expiring, but many of them stay longer or even permanently. As a result, Canada has a much larger population than officially reported, and therefore a much higher demand for housing.
“The practical implication of that undercounting is that the housing affordability crisis Canada is facing is actually worse than perceived, and calls for even more urgent and aggressive policy action, including ways to better link the increase in the number of NPRs to the ability to house them,” wrote Tal.
His findings have prompted Statistics Canada to revise its data reporting policy.
University of Waterloo professor of economics Mikal Skuterud
In response to recent reports by major banks outlining the impacts immigration is having on housing, University of Waterloo professor of economics Mikal Skuterud said that while other factors are also contributing to the housing crisis, the impact of immigration is undeniable.
“On the housing front, there are underlying issues there that are longstanding and/or independent of immigration levels. For sure, immigration is not helping the issue — it’s probably exacerbating it,” said Skuterud.
“When the population grows faster than the capital stock, then there’s less capital per person and that makes us poor.”
TD Bank chief economist Beata Caranci
A recent report by TD Bank warns that Canada’s high immigration strategy could worsen the housing shortage by half a million units in two years.
The report, written by TD’s chief economist Beata Caranci, says that the population growth of 1.2 million in the past year was more than double the government’s target and caught many economists by surprise.
Caranci argues that Canada was already struggling to meet the demand for housing and hospital beds before the population surge, and that these problems could become more acute for provinces and cities that receive more immigrants.
“Canada was already on its back foot in meeting housing demand, and this was also true in hospital beds on a per capita basis. These chronic tensions can quickly become acute for provinces and cities that absorb a higher population share. As dislocations widen, it creates an even larger come-from-behind strategy in addressing housing affordability and quality of life issues,” said Caranci in an interview for TD Stories.
“To test this theory, we applied an aggressive assumption that homebuilders would be motivated to reach, and sustain, a record level of completions. Even in that scenario, a housing deficit would persist if Canada continued with annual population growth of one million or more. This returns to the earlier point that Canada is already in a “come from behind” position.”
Rosenberg Research chief economist David Rosenberg
Rosenberg Research’s chief economist and strategist David Rosenberg called the Liberal government’s record-level immigration target strategy a “mirage” meant to create the illusion of economic growth.
In reality, Canada’s economy was in dire straits, argued Rosenberg.
“The Canadian economy on a per-capita basis is flat on its back,” Rosenberg told Global News.
“You can create this mirage of economic prosperity, but in the end that’s what it is, a mirage.”
Bank of Montreal chief economist Doug Porter
In an interview with BNN Bloomberg Bank of Montreal chief economist Doug Porter said that data shows that population growth from immigration is driving up housing demand to the detriment of positive effects like reducing wage pressure.
Porter’s analysis found that immigration is actually worsening housing shortages.
“The extra spending and the extra demand for housing is almost instantaneous, whereas it might take a new worker a little bit of time to really act as a dampener on inflation,” Porter said.
“The short-term impact does tend to lift inflation a little bit, whereas longer term, it turns to more of a neutral.”
Scotiabank economist Derek Holt
A Scotiabank economist criticized Prime Minister Justin Trudeau’s immigration target of 500,000 newcomers per year as a factor driving inflation. Derek Holt warned that the high immigration levels are putting pressure on the housing market and other sectors of the economy.
“Alas, no one will win a Nobel Prize in Economics for observing that when you add a massive surge of immigration into a market with no supply, rents and house prices will push higher,” wrote Holt.
“Welcome to Duhonomics! The argument that immigration could invoke balanced effects on demand and supply side pressures on inflation that cancel each other out was never sensible and we’re getting the kind of persistent housing inflation I’ve warned about since last year when immigration numbers were skyrocketing.”
Holt said that adding more people to a market with limited supply would inevitably push up rents and house prices. He also dismissed the idea that immigration would have balanced effects on inflation.
Holt noted that inflation on shelter rose by 0.7% in a month due to higher costs of rent, insurance and electricity. He added that other service categories, such as airfare, recreation and education, also increased.
“It wasn’t just shelter, however, as other service categories also jumped,” said Holt.
National Bank of Canada chief economist Stefane Marion
National Bank of Canada chief economist Stefan Marion has advised the Canadian government to consider revising its record-level immigration targets.
According to Marion, the reason to do this is because the ratio of houses being approved for building compared to the number of working-age people has fallen to a new low.
“Ottawa should consider revising its immigration targets to allow supply to catch up with demand,” said Marion.