Canada’s Immigration Cuts Are Easing Housing And Labour Pressures, New TD Report

Last Updated On 29 October 2025, 9:58 AM EDT (Toronto Time)

The federal government’s bold policy pivot to curb immigration levels is reshaping Canada’s economic landscape and delivering tangible wins for housing affordability and labour market stability.

A new report from TD Economics, released just yesterday (October 28, 2025), dives deep into the data, showing how dialling back non-permanent residents (NPRs) and permanent resident targets is easing strains that had pushed the country to the brink.

This report comes just in time when the federal government is ready to provide their next immigration levels plan 2026-2028.

Titled “Is the Dial-Back of Immigration Having the Intended Impact in Canada?”, the analysis by Chief Economist Beata Caranci and Economist Marc Ercolao paints a picture of measured relief—coupled with one intriguing outlier: household spending that’s defying gravity.

This comes at a critical juncture for Canadians grappling with skyrocketing rents, youth unemployment spikes, and whispers of a broader affordability crisis.

As population growth plummets from a blistering 3.2% in Q2 2024 to a more sustainable 0.9%, the report asks the million-dollar question: Is the immigration reset working? Spoiler: Mostly yes, with some plot twists.

🏠 Housing Market Finally Getting Breathing Room

For renters across major cities like Toronto, Vancouver, and Montreal, the news couldn’t be timelier.

Canada’s rental crisis—fueled by a torrent of newcomers—has been a flashpoint, with purpose-built rental prices surging at double historical averages.

The TD report credits the immigration slowdown with directly moderating this frenzy.

Under the baseline forecast, purpose-built rental growth is projected to cool to 3-3.5% in 2026, a sharp halving from 2024’s blistering pace.

But to spotlight immigration’s role, TD ran a “what-if” scenario: What if high population inflows had persisted? The result?

Rent hikes averaging 5.5% from 2025-2027—two full percentage points steeper than reality.

For the average one-bedroom apartment, that translates to an extra $1,100 annually by 2027, further squeezing household budgets.

Condo markets, long a magnet for investors and temporary workers, are feeling the pinch too.

Asking rents are dropping fastest in British Columbia and Ontario, where temporary foreign workers (TFWs) and international students make up a larger slice of the pie.

Charting the correlation, TD shows a clear link: Slower population growth equals softer condo prices, as demand from secondary rentals evaporates.

Of course, it’s not all policy magic. Falling interest rates are nudging folks toward buying, while government incentives have ramped up purpose-built rental construction.

Still, without the immigration throttle, experts warn affordability would remain a pipe dream.

“This isn’t a silver bullet for structural shortages like land scarcity in urban centres,” the report notes, “but it’s buying precious time for developers to catch up.”

💼 Labour Market Stabilizing Under Lower Immigration Levels

Shift to the jobs front, and the immigration recalibration shines again. The post-pandemic boom in arrivals—peaking at nearly four times pre-COVID labour force growth—initially plugged critical gaps in sectors like healthcare and hospitality.

But by mid-2024, the scales tipped: Job vacancies normalized, hiring slowed, and unemployment climbed a full percentage point from 2022 levels.

Enter the policy U-turn, timed like a well-placed chess move.

With net job losses hitting 40,000 between July and September 2025 (and another 40,000 potentially at risk this year), the unemployment rate is edging up only modestly.

Why? Slower labour force expansion—averaging 10,000 monthly additions in 2025 versus 30,000 earlier—acts as a buffer.

TD’s counterfactual modelling drives it home: Maintain 2023-2024 immigration surges, and today’s unemployment could have spiked to 8%, even if employers scooped up 30% of new entrants.

A more optimistic 50% absorption still lands at 7.5%. “Immigration policy can’t be set-it-and-forget-it,” the economists caution.

It demands agility to match skills shortages without flooding low-wage sectors, where newcomers (especially youth on study permits) have borne the brunt of rising joblessness.

This balance is key: Too many inflows can deter business investment in training or tech upgrades, favouring cheap labour instead.

Regular tweaks, TD urges, will safeguard long-term growth.

💳 Consumer Spending Defies Expectations

Perhaps the biggest surprise: Canadians are still spending.

Despite a collapse in population growth, aggregate household spending in early 2025 matched or exceeded last year’s pace.

Lower interest rates, a drawdown of pandemic-era savings, and a domestic tourism boost kept the economy resilient.

TD’s analysis explains why the slowdown in immigration didn’t drag consumption lower:

Recent immigrants increasingly arrived as temporary residents, accounting for 70% of population growth between 2022 and 2024, peaking at 7.6% of the population in late 2024.
Many worked in lower-wage sectors such as food services, retail, and accommodation, with limited discretionary spending.
Their initial spending focused mainly on housing—already strained by affordability issues—leaving less room for broader consumption.

Because these new residents spent less than earlier cohorts, the aggregate spending impact of slower immigration was muted.

In fact, real per capita spending is now rising after two years of decline and is on track to exceed its mid-2022 peak by next year.

Had immigration growth remained elevated, TD estimates this milestone wouldn’t have arrived until 2027.

Without the slowdown, per capita spending wouldn’t crest its 2022 peak until mid-2027. As it stands? It’s on track for next year.

“The drag from throttled immigration was muted,” the report explains, “letting broader economic drivers take the wheel.”

🔍 Key Takeaways from the TD Economics Report

Indicator	Before Policy Shift	After Immigration Dial-Back	TD Estimate of Counterfactual Impact
Population Growth	3.2% (Q2 2024)	0.9% (2025)	—
Rent Growth (2026 forecast)	≈6–7% (2024 pace)	3–3.5%	Would be 5.5% if immigration unchanged
Unemployment Rate Impact	Rising 2022–2024	Stabilizing in 2025	Would be ≥1 ppt higher
Real Per-Capita Spending	Falling since 2022	Rising in 2025	Would recover only by mid-2027

What It Means for Canada’s Future: A Timely Reset Amid Global Headwinds

Bottom line? The immigration dial-back is no panacea for deep-rooted challenges like densification mandates or U.S. policy ripples, but it’s a savvy, timely fix.

It’s unclogging rental pipelines, cushioning job losses, and—against odds—keeping wallets open.

As Canada eyes productivity boosts and economic transitions, flexible immigration remains a powerhouse tool for resilience.

For policymakers, the message is clear: Stay nimble. For everyday Canadians, it’s a glimmer of hope in tough times.

Will this momentum hold through 2026? TD’s lens suggests yes—but only with vigilant stewardship.

This article draws exclusively from the TD Economics report dated October 28, 2025, and original synthesis. For the full report, visit TDEconomics.com.

Share this article with your family or friends if you’re feeling the squeeze—or the relief. What’s your take on the immigration reset?

Frequently Asked Questions (FAQs)

What did the new TD Economics report say about Canada’s immigration slowdown?

TD Economics concluded that Canada’s decision to reduce immigration and non-permanent resident targets is working.
Population growth dropped from 3.2 percent in 2024 to 0.9 percent, easing pressure on housing and labour markets.
The report says rent growth is slowing, unemployment is lower than it would have been under higher immigration, and household spending remains strong.

How is the immigration dial-back affecting Canada’s housing market?

The slowdown in immigration has reduced demand for purpose-built rentals and condominiums, especially in Ontario and B.C.
TD Economics forecasts rent growth of 3 to 3.5 percent in 2026 — about half of 2024’s pace.
Without this policy change, rent growth would have averaged 5.5 percent, costing the average renter about $1,100 more a year for a one-bedroom by 2027.

What impact does lower immigration have on Canada’s unemployment rate?

According to TD Economics, Canada’s unemployment rate would likely be at least one percentage point higher if immigration growth had continued.
By moderating the labour-force expansion, the government helped prevent unemployment from breaching 8 percent.
This adjustment has allowed the job market to stabilize while giving employers time to absorb existing workers.

Why hasn’t consumer spending dropped despite fewer immigrants?

The report found that consumer spending remained resilient because of lower interest rates, strong savings drawdowns, and domestic tourism.
Recent newcomers were mostly temporary residents in lower-wage sectors, with less discretionary income.
As a result, the spending pullback from fewer arrivals was small, and real per-capita spending is now rising after two years of decline.

What does TD Economics recommend for Canada’s future immigration policy?

TD Economics says immigration policy should remain flexible and data-driven, adjusting to labour-market needs rather than fixed quotas.
Too-rapid inflows can discourage companies from investing in productivity, while too few newcomers risk labour shortages.
The report calls for a balanced, sustainable approach that matches immigration levels with housing, job, and infrastructure capacity.

Kamal Deep Singh, RCIC

Kamal Deep Singh, RCIC (Regulated Canadian Immigration Consultant) licensed by CICC (formerly known as ICCRC) with member number R708618. He brings extensive knowledge of immigration law and new changes to rapidly evolving IRCC.