A recent study from Statistics Canada found that 1 in 6 newcomers rents their accommodation, and those who have arrived more recently are having a harder time finding affordable housing than immigrants who have been in Canada longer.
The study defines unaffordable housing as situations where more than 30% of pre-tax household income is spent on shelter costs. It uses renter data from Census 2021 but when evaluating housing affordability did not include those who arrived after 2019.
It considers recent immigrants to be those who arrived in Canada from 2016 to 2021 and existing renter households as those in which at least one person has lived in the dwelling for longer than one year. It found one-sixth of recent immigrants (16.7%) lived in a recent renter household in 2021.
Statistics Canada says that of the recent immigrant renters, more than one-third (37.1%) were in unaffordable housing, compared with 23.2% of existing renters.
According to the Canada Mortgage and Housing Corporation’s (CMHC’s) 2023 Rental Market Report, the demand for rental housing is spurred by an increase in the cost of home ownership. Simply put, would-be home buyers cannot afford to buy a house, so a higher share of the population has no choice but to search for rental accommodation.
Renting in Canada
Many newcomers need to find rental housing when they arrive in Canada because of the time it takes to establish roots in a new country.
Renting in Canada has become more challenging as the price of rent has significantly risen following the COVID-19 pandemic. The average price of a one-bedroom apartment in Canada is $2,149 according to rentals.ca. However, the price is typically higher in Canada’s largest urban centers, going as high as $2,976 in Vancouver and $2,614 in Toronto.
Census data from 2021 shows that the growth in recent immigrant renter households (+21.5%) was more than double that of owner households (+8.4%) from 2011 to 2021. This means renters were over twice as likely to be in unaffordable housing as owners.
It was also found that among renters who live in poverty, nearly 80% were living in unaffordable housing. The study says a recent rise in evictions, forcing renters to move at a time when the cost of renting is at an all-time high, is a contributing factor.
It says the median shelter cost of recent renters in poverty was $1,400 compared with $1,050 for existing renters in poverty.
Renting a struggle for some newcomers
One of the biggest contributing factors to the lack of affordable housing is that the average income of a newcomer is not keeping pace with rising costs. The average gross (total before deductions) starting salary of a newcomer to Canada is $51,480 according to Talent.com. It based the data on a sample size of 230 newcomers.
The same site offers a net salary (income after deductions) calculator based on province. So, for example, a newcomer in Ontario making the median starting salary will lose 26% of their income to tax and other deductions, making for an annual take-home pay of $37,621.
Divided among 12 months, this means newcomers are pocketing just over $3,100 a month. After rent, this leaves little money to cover other expenses such as food, cell phones, transportation, or other essentials. More specifically, a newcomer in Toronto with a median salary, paying average rent, has around $500 to live on each month.
How is Canada helping to make rent affordable?
Recognizing that the cost of rent is prohibitively expensive for those considered low-income, earlier in 2023 the federal government offered a one-time top-up to the Canada Housing Benefit, amounting to $500.
Also, under the newly introduced Affordable Housing a Grocery Act, developers who build new rental properties may be eligible for a $25,000 GST rebate from the federal government.
However, housing is a provincial responsibility and Canada’s provincial governments have been taking some steps to increase the supply of rental housing to drive down the cost. For example, Ontario announced on November 1st that it is removing the full provincial portion of HST on qualifying new purpose-built rental housing. Earlier this year the province also put a cap on rent increases for existing renters that is below the rate of inflation.
In 2019 British Columbia committed to building 114,000 affordable market rental, non-profit, supported social housing and owner-purchase housing through partnerships through a $7 billion investment over the next decade.
Last April the province also announced a new Homes for People plan to address the housing shortage.
The BC government says it is on track to deliver a projected 108,000 homes completed or under active construction by 2027-28.
IRCC’s strategy to improve housing affordability
Immigration Refugees and Citizenship Canada (IRCC) released the Immigration Levels Plan 2024-2026 on November 1st this year. The department maintained previous targets from 2023-2025 to help stabilize Canada’s population growth, and therefore demand for housing, through immigration. It says bringing in immigrants to fill labour market gaps will help Canada deliver on its National Housing Strategy, a 10-year plan that will invest more than $82 billion in creating more housing in Canada.
The Levels Plan was heavily influenced by the new IRCC Strategic Immigration Report, which says Canada must adopt a “whole of government” approach to immigration levels to facilitate growth.
The report recommends that IRCC build on best practices and adapt an immigration pathway for foreign nationals committed to investing in and building net new housing in Canada. Rigorous design and monitoring for compliance would ensure that benefits are fully realized.
IRCC’s report says the department will explore options to develop a more integrated plan to coordinate housing, health care and infrastructure between federal government departments.