Canada’s population growth has slowed sharply following Ottawa’s decision to scale back immigration targets — a move that is beginning to ease pressure on housing and stabilize the labour market, according to a new report from TD Economics.
“The federal government’s revised immigration plan is starting to pay dividends in restoring balance to a stretched social infrastructure,” said Beata Caranci, TD’s chief economist.
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In response to mounting concerns that rapid population gains were worsening housing affordability and labour shortages, the federal government tightened its targets for both permanent and temporary residents. TD notes that this policy recalibration has already reduced population growth from a record 3.2% in Q2 2024 to just 0.9% year-over-year — the slowest pace in years.
Cooling rental markets
With fewer newcomers entering the country, demand for rentals has eased. TD now forecasts rent growth of 3% to 3.5% in 2026, nearly half the pace seen in 2024. Caranci added that lower interest rates are encouraging more Canadians to purchase homes, while increased government support has boosted new rental construction.
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TD’s analysis suggests that if population growth had stayed at 2024 levels, rents would have been roughly two percentage points higher between 2025 and 2027. “The average Canadian renter would be paying about $1,100 more annually for a one-bedroom apartment by 2027,” Caranci noted.
Demand for condominiums, both for ownership and as secondary rentals, is also weakening, pushing down asking rents in major markets like Ontario and British Columbia — regions that previously attracted large numbers of international students and temporary workers.
Labour market stabilizing
The tighter immigration policy is also helping to steady the labour market. Between July and September 2025, Canada saw a net loss of 40,000 jobs, with another 40,000 potentially at risk. Yet, TD expects the unemployment rate to rise only slightly before improving in 2026, as slower labour force growth offsets weaker hiring.
“If immigration levels had stayed elevated, unemployment could have exceeded 8% instead of the current 7.1%,” Caranci said. She emphasized that immigration policy must remain flexible, adjusting to economic cycles and evolving skills needs.
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