Bank of Canada Governor Tiff Macklem gave a speech to the Canadian Club where he suggested that Canadian rents would probably have started to decrease if not for the Liberal government’s record-high immigration targets. 

“Canada’s housing supply has not kept up with growth in our population, and higher rates of immigration are widening the gap,” said Macklem while speaking at Toronto’s Royal York Hotel on Dec. 15.

Macklem’s talk was a routine economic update, speaking before Canadian business leaders, and warning them that next year will be “difficult for many.”

“Consumers will continue to hold back spending, businesses will see weak demand (and) the unemployment rate will likely increase further,” said Macklem.

While on the one hand, a slowing economy helps ease inflation, Macklem also noted that the exponential spike in “shelter costs” was out of step with other living costs, which are expected to ease in time. 

“Why is shelter price inflation rising even as the economy slows?” he said.

Last month, the Canada Mortgage and Housing Corporation released a report explaining that it would take an additional 4.4 million homes to get the real estate market back to some semblance of affordability. 

According to Statistics Canada, the country’s population has grown by 430,635 people over the last three months. 

The highest on record since 1956 after Canada took in thousands of refugees following the Hungarian Revolution amidst the post-war baby boom.

Canada only built 219,942 new homes in 2022 and the construction industry slowed down even further in 2023, making it unlikely that it will surpass last year’s numbers.

The Bank of Canada’s interest rate hikes have directly contributed to rising mortgage costs, however, Macklem said that rent and even maintenance costs are on a meteoric incline with no predicted end in the short term. 

“Rent was up 8.2 per cent in October,” said Macklem, making it the highest rent increase in over four decades, according to the National Post.  

The average rent in Canada is already over $2,000 per month, meaning in October rent increased an extra $160 in a single month.

Canada’s overall inflation rate has already pulled back significantly from its immediate highs following the pandemic, coming in most recently at 3.1%, down from 8.1% in June 2022. 

But inflation remains at generational highs for food and “nondurable goods” which includes consumable items like clothing and soap. 

Food price inflation is at 5.4% and as high as 8.3% for things categorized as sugar and confectionery. 

“It’s no wonder that people are still feeling the pressure of higher prices,” said Macklem, who assured the audience that food and non-durable prices would begin to decline soon.

But when it comes to shelter costs, Macklem said they are likely to continue rising for the foreseeable future and it’s all tied to a “structural lack of supply in housing.”

“We do expect shelter price inflation to moderate overtime, but I’ll admit; predicting the timing is difficult,” said Macklem.

Canada already had the most severe housing shortage in the G7 when the pandemic ended and the housing gap has only widened since, due to the unprecedented spike in Canada’s immigration numbers.