Worthless Canadian Initiative
Canada just announced a few days ago that it is capping the number of international student visas; the Times Higher Education and BBC both point out that the main argument used in favor of the cap is that there’s a housing shortage in Canada. Indeed, the way immigration politics plays out in Canada is such that the cap is hard to justify by other means: traditionally, the system there prioritized high-skill workers, to the point that there has been conservative criticism of the Trudeau cabinet for greatly expanding low-skill (namely, refugee) migration; capping student visas is not how one responds to such criticism.
The issue is that Canada builds a fair amount of housing, but not enough for population growth; the solution is to build more – in a fast-growing country like Canada, the finance sector expects housing demand to grow and therefore will readily build more if it is allowed to.
Vancouver deserves credit for the quality of its transit-oriented development and to a large extent also for the amount of absolute development it permits (about 10 units per 1,000 residents annually); but its ability to build is much greater than that, precisely because rapid immigration means that more housing is profitable, even at higher interest rates. The population growth coming from immigration sends a signal to the market, invest in long-term tangible goods like housing. Thus, Vancouver deserves less credit for its permissiveness of development – large swaths of the city are zoned for single-family housing with granny flats allowed, including in-demand West Side neighborhoods with good access to UBC and Downtown jobs by current buses and future SkyTrain.
The rub is that restricting student immigration is probably the worst possible way to deal with a housing shortage. Students live at high levels of crowding, and the marginal students, who the visa cap is excluding, live at higher levels of crowding than the rest because they tend to be at poorer universities and from poorer backgrounds. The reduction in present-day demand is limited. In Vancouver, an empty nester couple with 250 square meters of single-family housing in Shaughnessy is consuming far more housing, and sitting on far more land that could be redeveloped at high density, than four immigrants sharing a two-bedroom apartment in East Vancouver.
In contrast, the reduction in future demand is substantial, because those students then graduate and get work, and many of them get high-skill, high-wage jobs (the Canadian university graduate premium is declining but still large; the American one is larger, but the US is also a higher-inequality society in general); having fewer students, even fewer marginal students who might take jobs below their skill level, is still a reduction in both future population and future productivity. What this means is that capital owners deciding where to allocate assets are less likely to be financing construction.
The limiting factor on housing production is to a large extent NIMBYism, and there, in theory, immigration restrictions are neutral. (In practice, they can come out of a sense of national greatness developmental conservatism that wants to build a lot but restrict who can come in, or out of anti-developmental NIMBYism that feels empowered to build less as fewer people are coming; this situation is the latter.) However, it’s not entirely NIMBYism – private developmental still has to be profitable, and judging by the discourse I’m seeing on Canadian high-rise housing construction costs in Toronto and Vancouver, it’s not entirely a matter of permits. Even in an environment with extensive NIMBYism like the single-family areas of Vancouver and Toronto, costs and future profits matter.
Pedestrian Observations 
Speaking of Vancouver, “but… Vancouver ” seems to be a common anti-yimby argument in some circles, because Vancouver has allowed more housing than some US cities and yet has not-so-great results.
The results in Vancouver are decent by American standards if you look at rents and not prices. Vancouver has a combination of strong fundamentals (it’s open to immigration) justifying a high price-to-rent ratio and a consequent housing bubble, but the actual rents there are so far below coastal American cities it’s not even funny. Those results are not amazing because the high housing production rate is a matter of not just allowing a lot of housing to be built but also those strong fundamentals making it easier for the market to build, but they’re pretty good. Then there’s where the housing is built, where Vancouver is a mixed bag on allowing housing where there’s the most demand (the West Side is criminally underdeveloped, but the overall construction is more city than suburb, unlike in exurbanizing US regions) and truly amazing at allowing it near train stations.
Greater Vancouver’s livability problem is the gross disconnect between incomes and housing costs rather than absolute construction rates. Rents exploded far beyond incomes decades ago, and the region doesn’t build anywhere near enough housing to correct this.
Without spending more than 30% of their income on rent, a person earning the mean wage can only afford a single room with a shared bathroom and kitchen. The impacts on quality of life do not need to be explained.
Anyone who earns much under the mean wage is at significant risk of homelessness. This is driving an epidemic of deaths of despair, both in the form of frank suicides and suicides by drug/alcohol overdoses.
A couple where both partners earn the mean wage can generally afford to rent a one-bedroom apartment, but this is obviously not enough space for them to have children. This is driving a brain drain and demographic crisis as young adults flee the city.
American west-coast cities are worse, but the level of housing stress here is seriously–and very visibly–devouring quality of life.
It might not be a good idea to take the stated reasoning (housing) entirely at face value. It’s almost certain that Ottawa was going to be forced to put some sort of limits on study permits, and sooner rather than later.
This crackdown also isn’t really about universities. It applies to (undergraduate-only) university students, but the impetus for this is the college sector, and the PPP schemes at Ontario colleges specifically.
Ontario colleges outside the GTA, facing stagnant provincial subsidies, figured out in the last decade that they could enroll international students but contract out the teaching to private colleges in the GTA. There are now 125,000 students enrolled at non-GTA colleges but attending private colleges in the GTA through the PPP, a number that has doubled twofold since 2021-2022. (Northern College has, somehow, managed to ramp up international student enrolment sixfold.) This increase has been so large that for the 2023-2024 school year IRCC wasn’t even able to process all the study permit applications, leading many would-be students bound for schools across the country high and dry last September.
Politically, there is a widespread belief (not without reason) that students are enrolling solely to “buy” permanent residency and access to the GTA labour market during and after their studies. (Remember that students can work part time and their spouses get an open work permit during the program and both get a post-graduation work permit afterwards.)
This belief strikes a chord for at least two reasons beyond housing. First, the very Canadian prejudice that there is something untoward, something American about private delivery that makes it bad. These private colleges “must” be fraudulent—even though they’re following the same curriculum as the home campus. It also leaves voters with the icky feeling that these students are “buying” permanent residency—even though it is much less craven than past investment visa schemes and the dangling reward of a work permit and a path to PR was designed to induce international students to consider Canada.
Ultimately, even if the purported reasoning weren’t housing, it’s likely that the Federal government would have felt a political need to tackle this anyway. It’s undermining the political credibility of—and simply the administration of—the study permit system.
The policy being imposed is not ideal, but it also will not matter in most of the country. The per-province capa will not affect Québec and Alberta at all, will result in modest, though meaningful, cuts in NS, PEI and BC, and will create an apocalyptic crisis in Ontario’s post-secondary sector, especially for colleges, likely necessitating a provincial-government bailout.
Agreed. Am Canadian. But even then, some college will be fine, because either they budgeted in case the PPP colleges gets banned (St Clair), or they never really expanded (Fanshawe, Boreal). Conestoga might be screwed though.
Losening zoning requirements will be the last thing ever done.
The BC provincial government, ever ready to fix problems long after they have metastasized into terminal disease, is in the process of banning single family zoning in most urban areas in BC, including Greater Vancouver. Legislation has been passed, and regulations are being written. Given the inevitable court battles and changes in government, however, whether the results will ever be realized is an entirely open question.
Naturally, the fact that the federal government has decided to burn the seed corn by limiting immigration clearly demonstrates that policy changes in BC are too little, too late.
Canada needed a national ban on single family zoning thirty years ago. The kind of drastic action required today, after three decades of neoliberal looting and general mismanagement, is politically impossible.
Honestly? Banning SFR zoning in Vancouver is not that important. It’s useful, but in an SFR area, you need to be able to go to mid-rises and not just townhouses. In the US, usually you need to triple the built-up area for demolition to be profitable, which means that if the preexisting land use is a large house, you need a minimum of three equally large units for redevelopment to happen, which in a rich area like Shaughnessy is probably six apartments rather than the three to four the proposal would allow. Closer to SkyTrain they are proposing to allow six units, but usually closer to SkyTrain the land use already includes duplexes and triplexes, so it’s borderline; the proposal would allow developers to fill in the gaps, knocking down the SFR that does exist near SkyTrain and maybe some lower-end SFR elsewhere, but what the Canada Line and future Broadway extension need is mid-rises (or some high-rises) and not six-unit buildings; new construction in Berlin tends to be seven-story and 20-unit, give or take.
In many places around New Westminster small old homes are considered tear-downs and replaced by larger single-family homes. This was happening more at the peak of the market, but is still common enough. Redeveloping SFR to townhouses is happening regularly where the city allows it.
A reasonably 2018 home is on a nearby lot with a total value of 2.1 million. The land is most of that, at 1.3 million.
The marginal Canadian international student isn’t high-skill these days. Maybe those who got to McGill, Waterloo, and UoT but the people attending Canadian private strip mall colleges don’t necessarily have a high level of skill. College education has become so pervasive in the world that going to college doesn’t mean that you’re high skill. My Canadian friends complain that the university that they graduated from (Waterloo etc.) has lower admissions standards for international students because they pay more and therefore have a lower level of ability native students. And generally students will move into bigger dwellings and therefore increase demand for housing more once they graduate and work full time. The truth is many “students” are there so their spouse can get a work visa and they can also work full time eventually, rather than a desire to study. There is also a perception that students (disproportionately Indian and particularly Punjabi) are integrating and assimilating worse than the refugees. The visa caps are also for non-housing reasons but it is easier politically to say it’s because of housing.
https://indianexpress.com/article/cities/chandigarh/new-canadian-immigration-rules-marriages-punjab-9130901/
To be clear, I don’t think this is the case for every country. For example, in Singapore immigrant students do better on PISA than locals despite Singapore already being #1 in the world on that test. And places like the UK give preferences to elite university graduates over people who graduated diploma mills, even if the university is foreign. If you want very high skill people, its better to give a work visa to all the MIT and Tsinghua grads rather than require people to attend some college in your country.
https://www.gov.uk/high-potential-individual-visa/eligibility
Also, I don’t think it’s entirely fair to compare Vancouver to the average coastal American city. The Vancouver metro area has only 2.6 million people and should ideally compared to similar size metro areas. English-speaking Canadians don’t have the larger LCOL metro areas like in Texas to go to if they can’t afford buying housing in Vancouver or Toronto. Wages are also substantially lower in many fields in Canada such as software development, and there is substantial emigration to the U.S. Many smaller and more remote places in Canada are also more difficult to live in than Vancouver due to very cold weather. And prices are a valid issue, as most Canadians aspire to own a home and not just be renters. And most people see housing in the context of affordability much more than TOD. The National Bank of Canada argues Canada is in a population trap since capital stock per capita is falling, including private non-residential capital stock.
https://www.nbc.ca/content/dam/bnc/taux-analyses/analyse-eco/etude-speciale/special-report_240115.pdf
I generally compare Vancouver with San Diego, which is still incredibly expensive.
San Diego is also the most expensive American metro area of its size. People want to live and work there because of the weather, beaches, and proximity to Mexico and the rest of Southern California.
It’s not weather or beaches – those are consumption amenities, which are associated with lower rather than higher wages; San Diego has high wages, if less high than the Bay Area. It’s just a combination of wealth and restrictive zoning.
Average price per square meter of residential real estate is around 50% higher in Canada than the U.S.
https://economy-finance.ec.europa.eu/document/download/1d96091d-919a-4526-8096-d390a39c5232_en?filename=dp101_en_houselev.pdf
I guess I can provide something of value to the discussion. I live in Ontario, where the caps are the most severe.
So there’s 5 main tiers of education in Canada for international students: PhDs, Masters, Bachelors, public funded colleges, and privately funded colleges. The last one hasn’t really been a thing before 2018. But because public college finances, they franchise their name out to the private colleges. The private colleges quality is well, questionable. That’s important for later.
So I think everyone agrees that housing is expensive. And we all can agree that students suffer the most. Moving on here.
So because of the poor quality of the private colleges they tend to not able to get decent paying work, forcing them into low paying jobs. And for all students they kinda have to get a part time (low paying) job, because of high tuition.
All of this leads to the students seeing Canada as a scam for low wage labor, and make tiktok/YouTube videos discouraging people from coming. That itself is more damaging than caps, as it discourages the brightest from moving here, and go to the states.
So what’s the solution for a federal government that doesn’t control education? Two things, first is to eliminate work permit eligibility for private colleges. Well, the public also demands caps, so the Feds implemented one, that just so happens (according to Alex Usher of higheredstrategy.com) to match the reduction of the number of students under the private colleges. Also, PhD and masters students are exempted, to allow growth there.
So tl;dr, the federal government has essentially done this caps in a way to minimise damages. It will still cause more damage than people like, because of the spousal work visa eligibility being eliminated.
Question about Ontario, Canada housing: When purchasing a house, do you have to pay provincial sales tax? On a $1,000,000 house purchase, do you pay the government 13% ($130,000) additionally?
Only on new homes. Though there is also a land transfer tax (stamp duty) of around 1-2%, with Toronto’s being higher.
Are all private universities bad, or are there a few good ones that are also some good ones that get caught up in this law. In the US, Harvard is a private university, but I don’t know how the situation is in Canada. Seems like this law should be opposed if only because it will also affect any private college trying to do a good job of educating kids.
There are essentially no private universities of any importance in Canada; beyond TWU and UCW, they’re almost all small schools founded by and catering to specific religious denominations, often as seminaries.
Also, an important language note: in Canada, unlike in the US, there’s a very sharp distinction between a university and a college; a college in Canada is more or less equivalent to an American community college, and while it might offer some four-year degrees, they’re typically vocationally oriented and not well-regarded.
A reminder that Canada already has a ban on foreign purchasing of real estate in order to reduce housing demand/cost. The ban has recently been extended to 2027. [Not sure whether NAFTA provides an exception for US citizens in Canada. Similarly, Article 27 of Mexico’s constitution prohibits foreign ownership within 50km of the ocean or 100km of the border. When NAFTA passed, it was understood that Mexico was not going to change its constitution, so Mexico implemented a scheme where a foreigner could park a land title in a Mexico bank.]