I am calling it now: Canadian post-secondary institutions are very close to the end of the road on international student number growth.  It’s not because demand is going to dry up or anything like that.  There is still room for hundreds of thousands more international students if we wanted them, and probably demand to match as well.  It is simply that too many institutions have become too greedy, and they are imposing intolerable externalities on their surrounding communities.  A backlash is building.

I want to be clear about what’s not going to drive the backlash.  First, it’s not going to be about foreign students “taking spots from deserving Canadian students”.  This is a talking point in some places, but there are no post-secondary institutes and only a very few faculties nationally where one can genuinely point to domestic student numbers falling for any reasons other than demographics.  The spaces being taken up by international students are all spaces that exist only because international students are there, paying full freight for them.  The counter-factual to spots taken up by international students is – given current government funding practices – no spots at all, not spots taken up by domestic students.

Nor is it going to be from all those recent stories in outlets like The Walrus, the Toronto Star, the Globe and Mail etc.  about the exploitation faced by international students in the local labour market, about the incredible hardship many endure since tuition fees here are sometimes many times their parents annual income back in their home country (which, in these stories, is usually India, most often Punjab).  Clearly, we all decided in that very passive-aggressive Canadian way of ours – which is to say, we never had a discussion and agreed to a thing, we all went around self-interestedly and created a situation, then called it a consensus – that we were OK with creating a new class of immigrants who could evade the whole points-based immigration system simply by coming to Canada, paying some money to support our post-secondary system and gutting it out in low-wage jobs for a few years.   Exploitation?  Maybe.  But many ethnic groups who have immigrated to Canada over the past 150-odd years followed similar, gruelling, dues-paying periods in their history, so not many people are too fussed about it.  

No, the blowback is going to be about housing, and the way that some institutions have been packing in students without regard to local housing supply, which contributes to the steep rise in housing costs not just for international students but for all renters and first-time home buyers.  I discussed this a few weeks ago in the context of some new reports from my colleague Mike Moffatt at the Institute for Smart Prosperity: we are letting in hundreds of thousands of students, and not building any new housing.  Combined with a variety of other factors that are taking low-income housing off the market, it does not take a degree in economics to realize that there will be a shortage of spaces for anyone looking for low-rent housing.  This is, in effect, an externality that institutions are imposing on their neighbours: universities and colleges gain from tuitions, while local tenants are effectively paying a tax through higher housing costs.  

I suppose one could argue that the pros of having a thriving post-secondary institution in the neighbourhood outweighs the cons of these kinds of externalities, and on aggregate that’s true.  But rents aren’t paid on aggregate: they are paid by a very specific sector of the population – one which has a large overlap with the most vulnerable sector.  It is becoming an issue that politicians are hearing on doorsteps when they talk to voters.  In some communities, politicians are starting to relay those concerns to university and college leaders.  

Now, you might ask why opprobrium would rain on universities and colleges when they are far from the only culprits here. Long-term NIMBY-ism run amok leading to a catastrophic failure to build, the financialization of the housing market, the accumulated 30-year impact of the federal government leaving the affordable housing market and provinces failing to pick up the baton: there are indeed all sorts of supply-side issues that we can and should worry about at least as much as educational institutions juicing demand.  

But here’s the difference: none of the other players in this field spend their time shouting at the top of their lungs about how much they benefit the community.  And not just in financial terms; institutions are increasingly using communications tools like the UN Sustainable Development Goals to articulate not just how research and its dissemination helps to improve the world, but also how their local community benefits directly through more concrete actions (purchasing) and co-creation of knowledge.  Colleges have always anchored their value-proposition in terms of their value to local communities, but for many universities this is a more recent shift, one accelerated by COVID but in a larger sense driven by the dawning realization that all the money and research invested in higher education (worldwide, not just in Canada) isn’t exactly leading to the paradise of economic prosperity we all thought it would 30 years ago and that alternative ways of explaining value propositions to voters are needed.

This “good neighbour” policy makes eminent sense; it’s also why the international student/rental housing policy nexus is so deadly. Some institutions – and there’s no way to put this politely – are clearly acting as “bad neighbours”.  And once they get that labelled with that tag, it’s going to be hard to shed.  There are, of course, many institutions who are doing their best to get housing efforts started in their communities – though universities in Nova Scotia seem significantly more seized of this issue than those anywhere else – but new housing takes time to come on-stream.  It can take years, decades even, given the inanities of planning and land-use in this country’s big cities.   But those international students are showing up now, and in growing numbers, year after year.   Institutions that continue to pile pressure on local housing markets by adding more students are playing with fire.

So here’s my call: the international student market is not headed for a “bust” of any kind – remember, demand is still strong – but institutions will stop growing if they wish to maintain good community relations.  That’s a big problem, because international student dollars have essentially been the sole source of increased funding in Canadian post-secondary education since about 2015, and I don’t see governments lining up to backfill.  To some extent, institutions can mitigate this by upgrading services and charging higher fees to international students, but increasingly aggressive cost-containment strategies will need to be part of the solution as well.  At some institutions at least, this will come as a shock.

But this is the path we have been on since at least 2008 when provinces stopped increasing funding in real terms, but institutions kept on increasing spending by 2% per year after inflation.  For a long time, we used international students as a get-out-of-jail free card.  No more.  The reckoning is at hand.