The federal government reduced permanent resident targets by roughly 18 percent from peak levels. Canada will accept 380,000 new permanent residents annually through 2028, down from 464,265 actual admissions in 2024 and well below the 500,000 that had been targeted under the previous plan. The government's stated reason was explicit: controlling immigration numbers will help ease pressures on housing, services, and infrastructure.

The question is whether it works.

Let's walk through what actually changed, what the mechanisms are, and whether cutting immigration fixes housing or just shifts the problem somewhere else.

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What Actually Changed

The 2026 to 2028 Immigration Levels Plan introduced three major shifts.

Permanent resident admissions stabilize at 380,000 per year through 2028. The government framed this as stabilization rather than a deep cut, and technically that's accurate. The bigger action is happening on the temporary side.

Temporary residents face sharper cuts. New arrivals under temporary worker programs and the international student program dropped from 673,650 in 2025 to a target of 385,000 in 2026, a 43 percent reduction. International student permits alone were cut nearly in half, falling from roughly 305,000 in 2025 to 155,000 in 2026. The government's goal is to reduce Canada's temporary resident population to below five percent of the total population by the end of 2027.

The mix of who gets in is shifting. Economic immigrants are being prioritized, accounting for 64 percent of all admissions by 2027 and 2028, the highest proportion in decades. Provincial nominee programs and federal skilled worker streams are getting more space. That matters, because a permanent resident arriving with a job offer and settlement funds affects housing differently than a student arriving with limited resources who needs to rent immediately.

The Parliamentary Budget Officer analyzed Canada's immigration trajectory under the new plan and projected that Canada's total population will see flat growth in 2026, before picking up modestly to around 0.3 percent in 2027. Over the medium term, population growth is expected to stabilize around 0.8 percent annually, well below the historical average of 1.1 percent.

Flat population growth for two consecutive years is essentially unprecedented in modern Canada. The last time this happened, the housing market looked very different.

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How Immigration Affects Housing

The relationship between immigration and housing is not simple. Different types of newcomers affect different parts of the market.

Students and temporary workers drive rental demand. These groups arrive with limited savings, need housing immediately, and typically rent rather than buy. They compete directly for purpose-built rentals and investor-owned condos. Economic immigrants with PR status eventually buy, but the timeline varies. Skilled workers arriving through Express Entry or provincial programs often transition to homeownership within three to five years. They represent future demand for ownership housing, not immediate pressure.

Family reunification and refugees create different patterns again. These groups may rely on existing family networks for housing or require government-supported settlement services. Their market impact is real but harder to quantify.

TD Economics, analyzing the immigration cuts, identified the purpose-built rental market as the most immediately affected segment. Slower immigration inflows underpin their forecast of roughly 3 to 3.5 percent rent growth in 2026, about half the pace seen in 2024.

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What Is Already Happening

The rental market is already showing the effects.

The national vacancy rate for purpose-built rental apartments rose to 3.1 percent in late 2025, up from 2.2 percent in 2024 and above the national ten-year average for the first time in recent memory. Average asking rents dropped for twelve consecutive months through September 2025. Landlords in Toronto and Vancouver began offering incentives that would have seemed absurd two years ago: months of free rent, move-in bonuses, waived pet fees.

These changes coincide with the immigration reductions that began taking effect in late 2024 and accelerated through 2025. The timing is not coincidental. Immigration fell 18 percent year-over-year in 2025, the largest annual decline on record.

The picture for ownership markets is less clear. National benchmark home prices fell 4.9 percent year-over-year through January 2026, with Ontario down 7.0 percent and British Columbia down 4.9 percent. But that decline reflects a combination of factors: higher interest rates, economic uncertainty, and reduced immigration. Attributing it to immigration policy alone overstates the case.

In other words, the rental relief is real and measurable. The ownership market is a different, more complicated story.

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The Supply Side Problem

Immigration cuts reduce demand. They do not increase supply.

Canada has a housing shortage that accumulated over decades. Even after accounting for reduced population growth from the new immigration plan, the Parliamentary Budget Officer estimates Canada still needs to build roughly 1.2 million additional units by 2030 to close the housing gap. The immigration cuts are projected to reduce that gap by about 534,000 units, or 45 percent, but a large gap remains.

And there is a catch. Fewer newcomers means fewer people needing housing, but it also means fewer construction workers, fewer homebuyers, and fewer consumers supporting the broader economy. The PBO projects that the immigration cuts will reduce real GDP by approximately 1.7 percent by 2027, while simultaneously raising per capita GDP. The tradeoffs are real.

CMHC's Housing Market Outlook expects housing starts to slow in 2026, with a more significant decline in 2027 and 2028. Part of that reflects reduced demand from population slowdown. Part of it reflects developers pulling back in response to higher vacancy rates and weaker rent growth. When fewer units get built now, the supply problem reasserts itself later.

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What This Means for Different Markets

The impact varies by market type and location.

Toronto and Vancouver rentals are feeling the relief most. These cities absorbed the largest share of temporary residents and saw the sharpest rent increases during the boom years. They are now seeing the fastest softening, with Vancouver vacancy reaching 3.7 percent and Toronto at 3.0 percent by late 2025.

Smaller markets with less exposure to temporary immigration see less change. If your city was not a major destination for international students or temporary workers, the cuts matter less to your local rental market.

Ownership markets are affected more indirectly. Lower immigration means fewer future first-time buyers, but that effect takes years to materialize. The immediate impact on home prices is muted compared to the rental effect, and is entangled with interest rates and broader economic conditions.

Student housing faces its own reckoning. Universities and investors that expanded capacity based on pre-cut international student projections are finding themselves with empty beds. Purpose-built student housing in cities like Toronto, Hamilton, and Waterloo has felt this most acutely.

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The Economic Tradeoffs

Housing is not the only thing affected by immigration policy, and the federal government acknowledged this openly. The immigration levels announcement framed the cuts as a balancing act between economic needs and infrastructure capacity.

Immigration drives labour force growth. With an aging population and a birth rate well below replacement level, Canada has relied on newcomers to fill jobs, pay taxes, and support social programs. Reducing immigration addresses housing pressure but creates other pressures: a smaller workforce, reduced GDP growth, fewer people contributing to healthcare and pension funding.

The PBO estimates the immigration cuts will result in 1.3 billion fewer hours worked by 2027. That has real consequences for industries like construction, healthcare, and agriculture that depend heavily on temporary labour. You can't solve a housing shortage partly by cutting the workforce that builds houses.

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What Happens Next

The immigration cuts are policy, not permanent law. Future governments can adjust targets up or down, and already have done so multiple times over the past five years.

The current approach assumes that reducing demand gives supply time to catch up. But construction cycles are long. Purpose-built rentals completing in 2026 were planned in 2021 and 2022. Decisions made now will not produce housing units until 2028 or later.

Meanwhile, the population slowdown is temporary. By 2027, growth resumes at around 0.3 percent, climbing toward 0.8 percent annually over the medium term. If supply does not increase significantly by then, pressure returns. And the early signs are not encouraging. CMHC expects construction starts to slow further in 2027 and 2028 as developers respond to today's weaker conditions, which means the units needed for tomorrow are not being built today.

Reducing demand without increasing supply is a delay tactic, not a solution.

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What This Means for You

If you are renting, the immigration cuts are working in your favour right now. Reduced competition means more options, better prices, and landlords willing to negotiate. The window is open, but it will not stay open indefinitely.

If you are thinking about buying, the cuts reduce urgency but do not eliminate it. Population growth resumes within a couple of years, and the underlying shortage in ownership housing has not been resolved by immigration policy alone. Modest affordability improvements in the interim are real, but dramatic price declines require more than a temporary demand reduction.

If you are an investor, the math has changed, particularly for markets that depended heavily on student and temporary worker demand. Those segments have contracted sharply. Purpose-built rental returns have compressed with rising vacancy and softer rents, and the construction cost environment remains challenging.

If you work in construction or real estate, the next few years may feel slower. But the long-term demand picture has not fundamentally changed. Canada's aging population still needs housing, and the structural shortage does not disappear because immigration slowed temporarily.

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The Bottom Line

Canada cut immigration to ease housing pressure. In the rental market, it is already working.

But the fundamental problem is not just demand. It is demand that has outpaced supply for decades, in a country that has consistently failed to build housing at the scale it needs. Reducing demand without increasing supply is a temporary fix, not a solution.

The immigration cuts of 2026 will likely be remembered as a policy that made renting more manageable for current residents while creating real questions about long-term economic growth, labour supply, and housing construction. Whether that tradeoff was worth it depends entirely on what happens next with zoning reform, construction investment, and the political will to build at the scale the country actually needs.

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Coldwell Banker Horizon Realty serves buyers, sellers, and investors across the Okanagan. If you have questions about how national policy trends are affecting your local market, reach out to our team.