OTTAWA - RBC says a recently announced cap on new study permits won't lead to an outright decrease in demand for rental housing from international students this year.

But a new report from the bank about the cap finds the expected increase in rental demand from international students could fall by about 50 per cent as a result of the policy.

Immigration Minister Marc Miller announced a temporary cap on new study permits over the next two years, as the federal government tries to get a handle on sharp growth in international student enrolments at Canadian post-secondary institutions.

The number of new visas handed out this year will be capped at 364,000, a 35 per cent decrease from the nearly 560,000 issued last year.

“Even though we're going to be limiting the number of international study permits to about half in 2024 relative to what was issued in 2023, that likely won't translate to an immediate fall in the total number of international students in Canada,” said economist Rachel Battaglia, the author of the report.

“And because of that, it likely won't lead to an outright decline in the number of rental units demanded by international students in Canada this year.”

The Liberal government plans to allocate student permits to provinces in proportion to population share.

The report says the cap will have a larger effect on rental markets in Ontario and British Columbia, given international student admissions in those provinces outweigh their share of the population.

If the cap for this year is extended beyond 2025, RBC says it would lead to a decline in the number of international students in the country and thereforerelieve pressure on the rental market more meaningfully.

“In the meantime, post-secondary institutions and other stakeholders must find creative ways to grow the student housing stock amid challenges in quickly building new structures,”the report says.

The Liberals' immigration policies, including the international student program, have come under heightened scrutiny as the country experiences rapid population growth.

That growth, fuelled by permanent and non-permanent immigration, has added pressure to the housing market.

According to new data from and market research firm Urbanation, average asking rent for all property types increased by 10 per cent annually to $2,196 in January, reaching another record high.

Rent prices in Canada soared last year as supply struggled to keep up with demand, leading to the lowest national vacancy rate on record since the Canada Mortgage and Housing Corp. began tracking that data in 1988.

The federal housing agency said in a reportlast month that the vacancy rate for purpose-built rental apartments sat at 1.5 per cent during the first two weeks of October 2023, when it conducted its annual survey.

That was down from 1.9 per cent a year earlier, which at the time had been the lowest national vacancy rate in more than two decades.

The Liberal government has rolled out new policies since the fall aimed at increasing housing supply, including lifting GST charges on new rental developments.

It announced last month that it will invite post-secondary institutions to apply for low-interest loans to build student housing starting this fall.

This report by The Canadian Press was first published Feb. 14, 2024.