Falling Immigration is Cooling Canada’s Rents

Recent data confirms a trend that Canadian investors and economists have long suspected: when immigration slows, so do rent increases. A new analysis by CMHC indicates that Canada’s caps on foreign students and other newcomers – combined with a surge of new housing supply – led to a 2–8% drop in average asking rents over the past year in cities like Vancouver, Toronto, Calgary, and Halifax. In other words, rental demand is finally easing in the areas where population growth has slowed the most.

This is a striking reversal from just a couple of years ago. During 2022–2023, Canada’s population was booming – adding over a million people in 2022 alone – and rents were soaring at the fastest pace in decades. The Bank of Canada noted at the time that “most newcomers rent when they first arrive… pushing up demand for rental housing”, which was contributing to 40-year high rent inflation. In essence, strong immigration was a key driver of the rental housing frenzy. Policymakers were hesitant to explicitly make this link, but today they effectively are.

As one industry observer quipped on social media: “Immigration caps are contributing to lower asking rents… I suppose that means the opposite was true as well – rents were driven up by population growth.” Now, even government sources acknowledge this reality. An internal federal briefing in late 2024 stated plainly that measures to cap international student entries were “already resulting in lower rental prices” – with Vancouver rents down over 10% and Toronto over 8% year-on-year in affected areas.

So what changed? Put simply, Canada tapped the brakes on population growth. After years of record inflows, the federal government pivoted in 2024 to “right-size” immigration levels in response to the housing affordability crisis. Targets for new permanent residents were trimmed and new restrictions were placed on study permits. The impact was immediate: from January to April 2025, Canada’s population grew by only 20,100 people (+0.0%), the slowest quarter in nearly 80 years. In that same quarter, the number of non-permanent residents (which includes international students and temporary workers) fell by 61,000 – the largest drop outside of 2020’s lockdowns.

Notably, the biggest decline was among international students finishing their programs or forgoing Canada, especially in Ontario and B.C.. With fewer people competing for rentals, vacancy rates have begun to rise and landlords are no longer able to push through the steep rent hikes seen in previous years.

However, policy isn’t the whole story behind this rental market reversal. Canada’s economic climate has also cooled for newcomers, which in itself dampens housing demand. Today’s newcomers face higher unemployment and harsh financial realities, which may dissuade some from coming or staying. A recent survey found 14% of recent immigrants were unemployed – double the national average. Many newcomers are struggling with high living costs, and 2 in 5 even report considering leaving Canada for better opportunities. These challenges mean immigration levels might have softened somewhat even without explicit caps, simply because Canada has become a tougher sell. In short, a little of both forces are at play: deliberate immigration policy decisions and organic economic headwinds are together slowing population growth.

For real estate investors, the implications are significant. We’re witnessing a rare moment of balance returning to the rental market. After years of tight supply and relentless demand, vacancy rates are inching up and renters finally have some bargaining power. In the near-term, this will likely translate to flatter rents (or even modest declines) until the excess demand is worked off. Investors can no longer count on automatic rent growth to prop up returns – deal underwriting must assume little to no rent inflation for the next couple of years.

The big question is how long this equilibrium lasts. Policymakers have shown they can cool demand with immigration levers, but they may also choose to re-open the taps in the future. Moreover, Canada is aggressively adding new rental supply – over 6% of existing rental stock is under construction as of 2025, an unprecedented pipeline. That new supply is coming online now, deepening the rent relief, but a pullback in construction down the road could swing the pendulum back if immigration rebounds. Smart investors will watch both sides of this equation.

Bottom line: Canada’s rental market is finally getting some relief, and it’s no coincidence that it comes on the heels of an immigration slowdown. Fewer new arrivals, coupled with more new apartments, means classic supply-and-demand dynamics are asserting themselves. While some of this shift is by design (policy choices), the tougher economic landscape for newcomers is also playing a subtle role. For perhaps the first time in a decade, renters can catch a breath – and investors must adjust to a market where population growth is no longer a given. In hindsight, it’s clear that soaring population was the “secret sauce” behind soaring rents, and now that the recipe has changed, the outcome in the housing market is changing too. The hope is that this breather gives housing supply a chance to catch up. But if and when the immigration engine revs up again, Canada will need to have more homes ready – or risk re-learning this lesson all over again.

Sources: Canada Mortgage and Housing Corp. (CMHC) report on rental market (July 2025); Statistics Canada quarterly population estimate (Q1 2025); Bank of Canada analysis on immigration and inflation (2022–2023); Immigration, Refugees and Citizenship Canada briefing (Nov 2024); CBC/Pollara newcomer survey (Jan 2025).