Bank of Canada says government efforts to curb housing crisis will help 'gradually'

The Bank of Canada says record levels of immigration are driving up the cost of housing and recent government efforts to cut the number of non-permanent residents and encourage home building will help lower housing costs, but «only gradually.»

«In the short term any increase in population, particularly in an environment of constrained supply, is going to put upward pressure on prices,» said Carolyn Rogers, senior deputy governor of the Bank of Canada.

«What's happened in the Canadian economy over the last year is we had a particularly big surge in population growth through immigration. It came at a time when there was constrained supply. You can see this most clearly in the housing sector, in particular in rents.»

Rogers joined Bank of Canada Governor Tiff Macklem at a press conference Wednesday to release the bank's quarterly snapshot of the economy, the Monetary Policy Report.

The report says mortgage interest costs are rising by almost 30 per cent a year, while rental costs are rising at about 8 per cent annually.

The report also says that while multiple factors contribute to the rising cost of housing — higher insurance and maintenance costs, a shortage of construction workers and cumbersome zoning and permitting regulations — immigration remains a key source of pressure.

«A larger increase in newcomers than in the past is adding pressure to the structural supply constraint in housing,» the report says. «This has helped to push the overall housing vacancy rate to record lows, which has underpinned house prices and led to higher rents.»

In the fall of 2022, the Liberal government announced it was increasing the annual permanent resident target from 405,000 in 2021 to 465,000 in 2022, before stabilizing at 500,000 in 2024 —