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As the Canadian government implements tighter immigration measures, recent commentary from officials suggests a direct correlation between a decrease in immigration and a drop in rental prices in major cities like Toronto. However, a closer examination reveals that the relationship is far more complex than suggested. Experts argue that while recent immigration caps may have provided temporary relief to the housing market, they are not the sole reason behind the falling rents, which remain intertwined with broader economic factors and long-standing supply issues.
Recent Trends in Rental Prices
Immigration Minister Lena Metlege Diab recently highlighted what she termed “positive impacts” from recent immigration reductions, asserting that rental prices are experiencing a downward trend. This statement came in the context of a three-year plan, initiated in October 2024 by then Prime Minister Justin Trudeau and Immigration Minister Marc Miller, which aimed to reduce permanent resident admissions by 20 per cent to alleviate housing pressures.
However, the reality of the rental market suggests otherwise. While Toronto’s average rent decreased by 4.5 per cent in January 2026 from the previous year—bringing it to $2,504 per month, according to the National Rent Report—the decline cannot be solely credited to immigration policy.
The Role of Supply and Demand
Randall Bartlett, deputy chief economist at Desjardins, cautions against attributing the complexities of economic phenomena like rental prices to a singular cause. He notes that while recent immigration caps might have alleviated some pressure on rentals, they represent only a temporary fix. The underlying issue of housing supply remains crucial.
Rachel Battaglia, an economist at RBC, echoes this sentiment, pointing out that the chronic undersupply of rental housing in Canada is a significant factor. “Immigration addresses the demand side, but we must not overlook the supply side,” she explains. Recent data indicates that rental construction in the Greater Toronto Area has surged, marking its highest level in 50 years, with nearly 24,900 units under construction as of late September 2025. This increase is partly a response to a shift in development strategies, with many projects pivoting from condominium sales to purpose-built rentals amid a declining condo market.
Migration Patterns and Economic Pressures
Interestingly, the decline in rental prices cannot solely be attributed to reduced immigration. Intra- and inter-provincial migration patterns are also influencing the housing market. Many residents are opting to leave Toronto for more affordable regions within Ontario or other provinces, driven by rising living costs. Statistics Canada reported a net loss of nearly 64,800 people from the Toronto area to other parts of Ontario between July 2024 and July 2025.
Battaglia points out that the weakening labour market has prompted many individuals to move back in with family or seek shared housing to cut costs. This shift in demographics further complicates the narrative surrounding immigration and housing affordability.
Expert Insights on the Broader Picture
A report from Immigration, Refugees and Citizenship Canada highlights that new immigrants contributed approximately 11 per cent to the increase in average home prices and rents between 2006 and 2021 across various municipalities. However, the report emphasises that the influence of immigration on housing prices varies by region and fluctuates over time. Wendy Cukier, a professor at Toronto Metropolitan University, warns against oversimplifying the impact of immigration on housing markets, arguing that conflating immigration with rising prices fuels misinformation and anti-immigrant sentiment.
“Understanding the diverse factors that impact housing prices is essential,” Cukier asserts. “Focusing solely on immigration disregards the myriad of forces, including local economic conditions and housing policies, that play a role in shaping the market.”
Why it Matters
As Canada navigates complex challenges in its housing market, the conversation surrounding immigration and rental prices must evolve. A nuanced understanding of the interplay between immigration policy and housing supply is critical for developing informed strategies that genuinely address affordability. Recognising that multiple factors contribute to housing dynamics can help counteract harmful narratives and promote more effective solutions for those struggling to find affordable homes in a rapidly changing economic landscape. The stakes are high, and the need for comprehensive housing policy has never been more pressing.
