Canada’s housing market is feeling a policy shock as federal caps on international students and stricter limits on temporary workers start to bite into the demand pipeline.
Ottawa set a 2025 ceiling of 437,000 new study permits, a 10% trim from the 2024 cap, and for the first time embedded targets for temporary residents in the national immigration plan.
The aim is to pull the share of temporary residents down over time after a rapid run-up during the post-pandemic expansion.
The crackdown began in January 2024, when Ottawa moved to stabilize international student inflows at about 360,000 permits for that year and required provincial attestation letters to curb abuses in the system. This year’s allocations cement a second year of restraint.
The government says usage of the Temporary Foreign Worker Program has fallen sharply following 2024–2025 measures, including tighter caps in low-wage streams and stiffer enforcement.
Updated guidance this fall restricts employers in capped industries to one or two low-wage TFW hires, depending on the sector, reinforcing a trend toward lower inflows.
Fewer temporary workers translates into less immediate demand for entry-level rentals and shared housing.
The national housing agency expects vacancy rates to rise through 2025 as population growth cools and as new purpose-built rental supply meets softer demand, particularly in areas around post-secondary institutions.
In its mid-year rental update and outlook, CMHC highlighted slower international migration and changing employment conditions as key drivers of this shift.
That combination is already reshaping leasing dynamics in Ontario and other student hubs.
None of this means affordability has been solved. Even as rent growth eases and vacant units become easier to find in some cities, CMHC warns that price levels remain historically high and turnover units still reprice sharply.
Investors and REITs focused on purpose-built rental could see longer lease-up times but steadier operating conditions if supply keeps arriving.
Provinces and institutions are adjusting, universities face smaller international cohorts after years in which foreign students carried much of the enrollment growth.
That could relieve pressure on private rentals in campus neighborhoods, although any relief will be uneven and tied to the pace of permit issuance and the mix of local supply.
Analysts have long cautioned that student-driven rental demand would slow only gradually, a view that aligns with Ottawa’s phased targets for temporary residents.
Ottawa’s immigration strategy remains in flux, with federal targets set out to 2027 and additional program tweaks possible if labor markets or inflation surprise.
Internal government assessments have already underscored the scale of the housing shortfall and the limits of tax tweaks to spur building.
As those debates continue, the near-term direction of travel is clear: fewer temporary arrivals and fewer new students than in 2022–2023, and a rental market that finally has a chance to catch its breath internal documents flagged a grim outlook for Canada’s housing crisis last year, and Ottawa’s caps are one reason conditions look a shade less overheated today.
Meanwhile, arguments over the efficacy of a housing GST rebate remain unresolved as supply and financing constraints persist.
IRCC’s provincial allocations will steer where student demand softens most in the 2025–2026 academic cycle, with spillovers likely in mid-priced neighborhoods that catered to roommates and recent arrivals.
On the labor front, any further tightening in the low-wage stream or shifts in wage thresholds could trim worker inflows again.
If these caps hold and construction financing continues to support new rentals, the market narrative in 2026 could be about absorption and pricing power returning to tenants, not landlords.
