One of the most destructive and contentious issues in the United States over the past couple of years has been the question of immigration and how to limit or control it. To some, it’s a mindset of "We’re here, you’re not, let’s keep it that way."

It’s a weird argument considering immigration has been the backbone of growth for many North American cities from New York to Los Angeles and Toronto to Vancouver. The value of immigration and the effect on real estate can best be seen in one of the most unlikely of cities, Winnipeg, in the Canadian prairie province of Manitoba.

Over the most recent decade, in Canada (as in the United States) immigrants tend to settle to the East, in Toronto, or in the West, in Vancouver. To overcome that imbalance, Canada created the Provincial Nomination Program (PNP), which allows provinces to nominate individuals who wish to immigrate to Canada and are interested in settling in a particular province.

Manitoba was the first province to embrace the program, and Winnipeg, in particular, took to it in a big way. Winnipeg, with 780,000 people in the metro, is Canada’s largest city between Toronto and Calgary, but during the 1990s growth stagnated and that is why Manitoba looked to the PNP. The goal was for an influx of 10,000 immigrants annually over the first five years and it was quickly met.

"Last year, we had about 15,000 to 18,000 people come to Manitoba," said John Froese, a broker with Royal LePage in Winnipeg.

The province is now looking to attract 20,000 immigrants a year by 2016, most of which end up in Winnipeg.

"This influx of immigration has provided for job growth and stimulated the economy," said Dianne Himbeault, housing market analyst for Canada Mortgage & Housing Corp., also in Winnipeg.

It also buffeted the province from the last economic downturn and increased demand to a housing market that was already one of the tightest in the country.

Winnipeg is a provincial capital, which means a lot of government jobs, but the province and the city are economically well diversified with agriculture, mining, manufacturing and transportation services. When other provinces experienced gross domestic product (GDP) declines of 3-4 percent in 2009, said Himbeault, "Manitoba saw less than a 1 percent decline, then it returned to a steady 1.5 percent to 2 percent by the next year."

On the housing side, in 2009, Winnipeg starts dropped 22 percent in single-family and 50 percent in multifamily, Himbeault said. "But the following year we rebounded with a 60 percent increase."

Over the past decade, housing starts in Winnipeg reached 3,371 units (single- and multifamily) in 2007, which then dropped to 2,333 in 2009. Last year, housing starts climbed to 3,331 units, and Himbeault expects even better production in 2012.

Look at those numbers. If you’re producing fewer than 4,000 housing units a year, but more than 10,000 immigrants are moving to Winnipeg, then what you have is a serious supply/demand imbalance.

How serious? The vacancy rate in rental apartments has been about 1 percent annually over the past 10 years.

About 25 percent of new housing for this year is going to rental construction, which is a high percentage compared to other Canadian cities, but it’s not enough and the low production will stay limited because Winnipeg has rent control issues that deters for-rent apartment developers.

"We have the lowest vacancy rate in the country," said Peter Squire, director of public affairs for the Winnipeg Realtors Association. "So, when people come to Winnipeg they find limited choice for rental accommodations. As a result, they move right into the residential resale market. That’s compounding demand."

In comparison to Canada’s other major cities, historically Winnipeg housing has been relatively inexpensive. According to Royal LePage, the average home price in Winnipeg is $251,627. This compares to Toronto at $502,297, Vancouver at $764,153, and even the smaller heartland cities of Saskatoon at $314,697 and Regina at $294,848.

Starting around 2003, Winnipeg has been doing its best to catch up with double-digit increases in prices (no dip even in 2009). Nationally, the Canadian economy has begun to slow down and housing prices across the country are averaging only 0.8 percent increases. Winnipeg remains somewhat hotter with price increases of 6.3 percent, said Froese, of Royal LePage.

"In 2011, Winnipeg residential housing sales topped $3 billion, a record, and individual unit sales were 14 shy of the 2007 record year," Squire said. "Over the past 10 years, we’ve had the tightest market in the country, with lower days and higher sales."

In regard to average time on market, Winnipeg has been trending three to four weeks on average, Squire said. "We have been under 30 days for the last seven years. Inventory is just 1.5 to 2 months."

The question is, why doesn’t Winnipeg just build more homes? The answer is complicated, but most of the causation can be laid to a couple of reasons.

First, back in the early 1990s, Canada experienced a serious economic meltdown and it wasn’t until the tar sands oil industry and other commodity businesses started to accelerate growth and the country’s gross national product (GNP) began to skyrocket. Winnipeg and other Eastern provinces lagged the growth in places like Alberta and British Columbia, so builders and other tradespeople migrated west.

"Winnipeg builders are doing what they can, but they have only so many trades that can build so many homes," Squire said. "They are going flat out."

Froese agreed, saying, "They are building pretty fast, but there is a shortage of trades. Last year, if you wanted to build a house, you had to wait a year."

Secondly, lots have gotten so expensive that builders are for the most part constructing high-end homes.

"Everyone is building new homes, but no one is building starter homes," Froese said. Those higher-end homes are being gobbled up quickly, which is why the average new home in Winnipeg is bumping $400,000, almost $150,000 above the average cost of a home in the city.

The problem is that most immigrants are looking for those modest-priced starter homes, which leaves Winnipeg’s housing market in a conundrum. Yes, the new higher-end homes are being scooped up, but the market needs starter homes as well.

"Many immigrants that are coming have jobs," Froese said. "When you have people and you have jobs, you have people buying homes. That’s the driving force in Winnipeg’s real estate market."

However, immigrants need the right-priced homes to buy, or to rent, and the market is not responding. That’s an immigration problem the United States could use.

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