Australia's rental market is in crisis, with soaring rents and record-low vacancy rates squeezing tenants, particularly low-income households. In 2022 and 2023, Australia experienced an unprecedented surge in net overseas migration, contributing to a severe housing shortage that has driven rental prices to unsustainable levels. Meanwhile, Canada, facing a similar crisis, implemented a three-year pause on population growth starting in 2024, leading to a significant decline in rents. This essay argues that Australia should adopt a similar temporary immigration pause to alleviate pressure on its housing market, drawing on Canada's experience and addressing potential counterarguments.
Canada's recent experience provides a compelling case study. Following the COVID-19 pandemic, Canada saw a record population increase of approximately 800,000 in 2022, driven by high immigration levels aimed at addressing labor shortages and global talent competition. This influx overwhelmed the housing supply, pushing rental vacancy rates to historic lows and causing rental inflation to soar. According to the National Bank of Canada, the nation faced a rental housing shortage exceeding 450,000 units by 2023. The result was a rental crisis described as the worst in living memory, with asking rents in major cities like Toronto and Vancouver consuming roughly 40% of median household income.
In response, the Canadian government, facing intense public backlash, implemented a three-year population freeze starting in 2024. This policy aimed to stabilise population growth by significantly reducing net migration. The results were swift: by Q1 2025, nearly 210,000 temporary migrants had either left Canada or transitioned to permanent residency, and net migration plummeted by over 90% from its 2023 peak. By Q2 2025, quarterly population growth dropped to just 20,100, one of the lowest in recent history. Consequently, asking rents began declining, with a year-over-year decrease of 2.3% by August 2025, marking 11 consecutive months of falling rents. In major markets like Vancouver and Toronto, rents fell by 9.5% and 3.4%, respectively, providing significant relief to tenants.
Australia's rental market mirrors Canada's pre-intervention challenges. In 2022 and 2023, Australia recorded its largest-ever increase in net overseas migration, approaching one million over two years, driven by policies prioritising global talent acquisition and international student inflows. This population surge, coupled with a lag in housing construction, has created a severe imbalance between housing demand and supply. The national rental vacancy rate dropped to 0.9% in September 2022, the lowest since 2006, and asking rents for new tenancies rose by 11% nationally in the year to mid-2023, with capital cities like Sydney and Brisbane seeing increases of 20.9% and 19.6%, respectively.
The National Housing Supply and Affordability Council (NHSAC), projects that Australia's housing shortage will worsen by 79,000 dwellings over the next five years under current population growth forecasts, which assume sustained high immigration. This trajectory exacerbates affordability issues, with renters in capital cities facing median weekly rents of $650 in Sydney and $520 in Brisbane by 2023. Low-income households are particularly hard-hit, with over one-third of Commonwealth Rent Assistance (CRA) recipients still experiencing housing affordability stress after subsidies.
Canada's success in easing rental pressures through a population freeze offers a clear lesson for Australia. By temporarily reducing immigration, Australia could slow household formation, allowing housing supply to catch up with demand. NHSAC's sensitivity analysis indicates that a 15% reduction in population growth over five years could transform the projected 79,000-dwelling shortage into a 40,000-dwelling surplus. This shift would ease competition for rentals, stabilise or reduce rents, and improve affordability, particularly for vulnerable renters.
An immigration pause would also provide breathing room to address structural housing issues. Australia's housing construction has lagged, with a 2.7% reduction in new residences built in June 2022 compared to the previous quarter, and 18.6% fewer dwellings completed in the year to June 2022 compared to pre-COVID levels. Supply chain disruptions and worker shortages have compounded these challenges. A temporary halt in population growth would reduce immediate demand pressures, enabling policymakers to focus on streamlining construction processes, reducing regulatory barriers, and incentivising new housing developments without the urgency of an ever-growing population.
Moreover, Canada's experience demonstrates that immigration reductions can yield rapid results. The 90% drop in net migration and subsequent rent declines within a year of Canada's policy implementation suggest that Australia could see similar relief in its rental market within a short timeframe. This is critical for renters facing immediate financial strain, as evidenced by reports that 70% of Australian renters are cutting back on essentials like groceries and 50% are forgoing medication to afford rent.
Critics of an immigration pause may argue that it could harm Australia's economy, which relies on immigration to address labour shortages and drive growth. However, the current high immigration levels have led to "capital shallowing," where population growth outpaces investment in infrastructure and housing, reducing per capita productivity and living standards. A temporary pause would not eliminate immigration, but recalibrate it to sustainable levels, aligning with housing and infrastructure capacity. Canada's economy has not collapsed under its population freeze; instead, it has seen improved housing affordability, suggesting Australia could achieve similar balance.
Another concern is that reducing immigration could exacerbate labour shortages in construction, further slowing housing supply growth. However, this can be mitigated by prioritising skilled migration for construction-related trades during the pause, ensuring that housing development continues. Additionally, Canada's increased rental completions, spurred by prior government incentives, show that supply-side measures can complement demand-side policies like an immigration pause. Australia could adopt similar incentives to boost construction while moderating population growth.
Some may also argue that alternatives like rent controls or increased rent assistance are preferable. However, rent freezes and caps, as proposed by the Australian Greens, risk reducing rental supply by discouraging landlords from maintaining properties or investing in new ones, as seen in San Francisco, where rent control led to a 15% reduction in rental supply and a 5.1% rise in market rents. Increasing Commonwealth Rent Assistance, while helpful, addresses symptoms rather than the root cause of housing shortages driven by excessive demand. An immigration pause directly tackles this demand, offering a more sustainable solution.
Australia's rental crisis, produced by record immigration and insufficient housing supply, demands urgent action. Canada's three-year population freeze has proven effective, with declining rents and improved affordability following a significant reduction in net migration. By adopting a similar temporary immigration pause, Australia can alleviate pressure on its rental market, stabilise prices, and provide time to address housing supply constraints. While counterarguments highlight economic concerns, the evidence suggests that a balanced approach, reducing immigration to sustainable levels while supporting construction, can mitigate these risks. Australia must act decisively to value housing affordability for its residents, learning from Canada's success in addressing a parallel crisis.
https://www.macrobusiness.com.au/2025/09/canada-cut-immigration-and-rents-fell/