An economist from Capital Economics has raised concerns that the federal government's updated immigration targets outlined in the recent budget could negatively impact Canada's economic growth. The revised plan to reduce temporary residents may have unintended consequences for the rental housing market and broader economy.
Impact on Rental Construction
The federal budget's strategy to tamp down on temporary residents would likely discourage new rental apartment construction, according to the Capital Economics analysis. This comes at a time when Canada faces significant housing affordability challenges across major urban centers.
The connection between immigration levels and rental construction is particularly crucial given current market conditions. With rental vacancy rates remaining tight in cities like Toronto, Vancouver, and Montreal, any reduction in construction activity could exacerbate existing housing shortages.
Economic Growth Implications
The economist's warning suggests that the refreshed immigration targets could weigh on overall economic growth. Canada has historically relied on immigration to fuel population growth and economic expansion, making any significant changes to immigration policy potentially consequential for the nation's economic trajectory.
The analysis points to broader implications beyond just the housing market. Reduced immigration levels could affect labor market dynamics, consumer spending patterns, and long-term economic productivity. These factors collectively influence Canada's competitive position in the global economy.
Context and Timing
The warning was issued on November 11, 2025, as part of ongoing economic analysis following the federal budget release. The timing is significant given current economic uncertainties and the government's efforts to balance multiple policy objectives including housing affordability, economic growth, and sustainable population increases.
The federal government faces the complex challenge of managing immigration levels while addressing housing market pressures. The Capital Economics assessment provides important context for policymakers and stakeholders evaluating the potential trade-offs between different policy goals.
As Canada navigates these economic considerations, the debate around optimal immigration levels continues to evolve. The economist's analysis adds valuable perspective to discussions about how demographic policies intersect with economic outcomes and housing market dynamics.
