Why is Canada capping foreign students and who will be impacted?

Canada on Monday announced a two-year cap on the intake of foreign students after an explosive growth in recent years aggravated the housing shortage. Last year Canada issued nearly one million study permits, about three times that of a decade ago, according to government data and the new proposal will cut the intake by nearly a third.

Here is how the new plans will work and what's at stake.

Canada's Immigration Minister Marc Miller said the Liberal government will introduce a temporary, two-year cap on student visas, which will result in the issue of about 364,000 visas in 2024.

The new proposals will also set limits on post-graduate work permits issued to foreign students, which will likely encourage them to return to their home countries. The permits were previously seen as an easy path to securing permanent residency. People pursuing master's or post-doctorate programs will be eligible for a three-year work permit.

Spouses of international students enrolled in other levels of study, including undergraduate and college programs, will no longer be eligible, Miller said. The acceptance of new study permit applications in 2025 will be subject to reassessment at the end of the current year, he said.

Canada has emerged as a popular destination for international students since it is relatively easy to obtain work permits after finishing courses. But the surge in international student led to acute shortage in rental apartments, which pushed up rents. Just in December, rents nationwide rose 7.7 per cent from a year earlier, according to Statscan.

Prime Minister Justin Trudeau's popularity has taken a hit mainly due to the affordability crisis, and the opposition Conservative Party leader Pierre Poilievre has taken a commanding lead over Trudeau in opinion polls ahead of an election next year.

Apart from the rental crisis, the government has also been concerned about the quality of education provided by some of the institutions.

International students are also a cash cow for universities as they bring in about C$22 billion ($16.4 billion) annually and the move will hurt many institutions that had ramped up their campuses in the hope of a continued inflow of students. Ontario, the most populous province, received the biggest share of international students. Some businesses, including restaurants and retail sectors, have warned that a cap on foreign students will create shortage of temporary workers.

Restaurants across Canada are grappling with labour shortages with nearly 100,000 vacancies, and international students made up 4.6 per cent of 1.1 million workers in the food service industry in 2023, a lobby group told Reuters last week.

Canadian banks had benefited from the influx of new students, as each student was required to have a Guaranteed Investment Certificates (GIC) of more than C$20,000, a prerequisite for international students to cover living expenses.

The vast majority, about 40 per cent, of foreign students come from India, with China coming in second with about 12 per cent, according to official data from 2022.