Canada’s Housing Crisis: Why supply, not foreign buyers, is the core issue

For years, whenever housing affordability became an issue, foreign buyers were often blamed. The prevailing narrative held that overseas investors were driving up prices and making it harder for local families to buy homes. In response, the federal government introduced the Prohibition on the Purchase of Residential Property by Non-Canadians Act in January 2023. The legislation prohibited most foreign nationals and companies not controlled by Canadians from purchasing homes in major Canadian cities, a restriction later extended to January 1^st, 2027. Now, as that deadline approaches, Ottawa is signaling a policy shift.

Rather than reopening the market entirely, the federal government is reportedly looking to Australia’s model to guide post-2027 policy. In Australia, foreign buyers are largely barred from buying existing homes, but are incentivized to invest in new construction, redevelopment, and vacant land that expands the housing supply. If implemented in Canada, this targeted approach could help revive Ontario’s struggling new-home sector, providing builders with crucial financial backing through well-regulated foreign investment.

Research indicates that even before the ban, foreign buyers accounted for about two percent of Canada’s housing market, fewer than 10,000 homes out of about 460,000 sold annually. Given such a small share, banning foreign buyers was unlikely to resolve the affordability crisis.

Turning to immigration, Canada faces a rapidly ageing population. With baby boomers retiring in unprecedented numbers, fertility rates well below the replacement level of 2.1 children per woman, and rising life expectancy, the country’s workforce is at risk of shrinking. Without continued immigration, economic growth would falter, and governments would collect less tax revenue to fund healthcare, pensions, and essential services. Ultimately, immigration is not just a matter of social policy, it is an economic imperative.

Canada’s housing shortage is a complex issue decade in the making, driven by more than immigration and foreign buyers alone. Even if population growth slowed, the shortage would persist because too few homes have been built to meet demand. The biggest barriers include slow, complex approval processes for zoning, planning, and permits, which add costly delays for developers and push prices higher as labour and material costs rise.

Canada is building about 259,000 homes per year, but CMHC estimates that restoring affordability requires 430,000 to 480,000 new homes annually over the next decade. Canada should not have to choose between immigration and housing affordability; it needs both. The key is to coordinate immigration policy with a bold national housing strategy that accelerates construction, streamlines approvals, expands infrastructure, and invests in skilled trades. When population growth and housing supply are aligned, immigration remains an economic asset.

The shortage is also about the types of homes available. Developers are building more small shoebox condos, driven by high land prices, rising construction and financing costs, and hefty fees, which make larger, family-sized units less profitable. While these smaller units appeal to investors and first-time buyers, they don’t meet the needs of growing families, creating a mismatch between supply and demand.

The path forward requires a balanced, strategic approach. By encouraging foreign investment that directly increases housing supply; while safeguarding home availability for Canadian buyers and generating revenue for affordable housing and infrastructure, the country can address both demand and supply challenges. Ultimately, success will depend on aligning housing policy, immigration, and investment to ensure every Canadian has access to a home that meets their needs.