a profound population pivot

For the first time since the Confederation of Canada in 1867, the population of Canada is expected to decline next year. That was the major takeaway from the federal government’s 2025-2027 Immigration Levels Plan, which marked an historic shift in Canadian immigration policy. A steep reduction in permanent resident admissions and substantial outflows of non-permanent residents (a.k.a temporary residents) will usher in two years of population decline before the country returns to growth in 2027.

The significance of this can’t be understated–nationwide population decline is a concept unbeknown to Canada. Over the past 157 years, Canada has never seen an annual decline in population. Looking at more granular quarterly data back to World War II, only once has there been a quarter-over-quarter decline in population, which occurred near the onset of the Covid-19 pandemic in Q3 2020. That’s just one quarterly decline in the last 314 quarters.

The profound change in the trajectory of Canada’s population is a response to the equally profound population increase experienced in recent years. Between 2022 and 2023, the country added the equivalent of three City of Vancouver’s worth of people (2.2 million). This was driven almost entirely by a surge in international migration and, more specifically, a surge in non-permanent residents (i.e., international students, foreign workers, and asylum seekers). Through 2024, that trend has largely been maintained with growth of more than 500,000 people in the first six months of this year. That was higher than full-year growth in 47 of the last 52 years.

Such rampant population growth has put significant strains on housing, healthcare, and other government services. As well, it has led to increasingly negative sentiment toward immigration. In an effort to address these frustrations, the latest Immigration Levels Plan will limit international migration to Canada over the next three years via a significant reduction to its permanent resident targets and, for the first time ever, by setting targets for non-permanent residents.

Canada is expected to welcome 485,000 permanent residents in 2024, followed by a sharp decrease to 395,000 in 2025, 380,000 in 2026, and 365,000 in 2027. Notably, the government’s plan for 2025 and 2026 represents a significant adjustment from the previous 2024-26 Immigration Levels Plan, which targeted 500,000 new permanent residents in each of these two years.

As for the non-permanent resident targets, outright declines in the temporary resident population are expected over the next two years. Earlier this year, the federal government announced its intention to reduce the number of temporary residents living in Canada to 5.0% of the national population by 2027. At the time, this figure was estimated to be around 6.3%. Since then, however, continued robust international migration has only pushed the temporary resident population higher and the government further away from its target. At the end of Q2 2024, there were a little more than 3 million non-permanent residents living in Canada, equivalent to 7.3% of the population.

To achieve its 5.0% target by 2027, the federal government is planning for net decreases of roughly 446,000 non-permanent residents in both 2025 and 2026, followed by a slight increase of approximately 17,000 in 2027. These reductions will be implemented via a combination of fewer new temporary resident permit issuances, letting more temporary resident permits expire, and transitioning more temporary residents to permanent residents. To put the magnitude of these declines into perspective, Canada saw a net outflow of about 96,000 temporary residents in the pandemic year of 2020.

All told, these policy adjustments are expected to usher in two consecutive years of population decline, putting an end to 157 consecutive years of growth. Canada’s population is projected to decline by 0.2% in both 2025 and 2026 (equivalent to roughly 85,000 people per year), and return to more modest growth of 0.8% in 2027 (about 330,000 people). This is sure to have a range of implications for housing, especially rental housing via reduced demand from temporary residents who predominantly rent. By its own estimates, the government expects that this will reduce Canada’s housing supply shortage by 670,000 homes by the end of 2027. Here's but another measure for the real estate industry to navigate in what has been a tumultuous few years for population (and policy).