Economists Say Canada’s New Immigration Policies Achieve the Perfect Balance

Canada’s decision to slow immigration is starting to cool the housing market. A new economic study shows that fewer temporary and permanent residents have helped slow rent increases and ease pressure on the job market.

The research found that reducing the number of new arrivals led to a 36% slowdown in rent growth and lowered unemployment by nearly one percentage point. The authors noted that the population growth rate has flattened, which helped calm demand in cities where rents were rising fastest.

Between January and August 2025, new student arrivals dropped by almost 60%, and new worker arrivals fell by nearly 49% compared to the same period last year. These changes followed a series of federal policy updates introduced through 2024 and 2025 to manage the number of temporary residents.

Statistics show Canada’s population grew by only 0.1% in the second quarter of 2025. Most of this slowdown comes from fewer temporary residents, as many returned home or transitioned to permanent status.

Rent Growth Slows Across Provinces

The report shows that average purpose-built rental prices are expected to grow by 3.5% a year between 2025 and 2027. Without the immigration cuts, the rate could have reached 5.5%. That difference could save the average renter about $1,100 a year by 2027.

The biggest rent changes have been seen in British Columbia and Ontario, provinces that host many international students and temporary foreign workers. While slower population growth plays a key role, experts say lower interest rates and support for rental construction also help.

Job Market Finds Balance

Canada’s labour market has also steadied. There were about 146,000 fewer new workers entering the country between January and August 2025 than during the same period last year. The current unemployment rate stands at 7.1%.

Analysts say that if immigration levels had stayed high, unemployment could have risen above 8%. Even under better hiring conditions, it might still have reached 7.5%.

Employers cut about 40,000 jobs between July and September this year, and another 40,000 could be at risk. However, experts expect unemployment to remain stable and then ease next year as labour force growth slows.

Spending Remains Strong

Despite slower population growth, Canadians continue to spend more than expected. Household spending rose in early 2025, helped by lower borrowing costs, steady housing demand, and increased local travel.

The report notes that, while population growth slowed, many of the people leaving Canada were students and lower-wage workers who typically spend less. As a result, overall per-person spending has begun to climb again after two years of decline.

If immigration had stayed at earlier levels, that recovery in spending would likely have been delayed until 2027.

Policy Shifts Behind the Change

The federal government introduced new immigration rules over the past two years. These include stricter language requirements for work permit applicants, limits on spousal work permits, and a moratorium on some low-wage job approvals in areas with high unemployment.

Officials expect these changes to reduce temporary resident permits by more than 300,000 between 2025 and 2027.