CMHC forecast underestimates population rise and housing need, economist warns

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The federal agency that forecasts how many new homes are needed in Canada has significantly underestimated the growth in Canada’s population from temporary residents, a top CIBC economist is warning.

The Canada Mortgage and Housing Corporation’s forecast for how many homes will be required by the end of the decade falls 1.2 million short, according to calculations by Benjamin Tal, deputy chief economist at CIBC.

The CMHC estimated in September that by 2030 an additional 3.5 million homes would be needed to meet demand, on top of what is already being built. But that assessment is “already obsolete,” the CIBC report says.

“This projection assumes a base population of 38.9 million – no less than 1.2 million short of the actual official population,” the CIBC report says. Even the agency’s “high growth scenario of 44.15 million would be significantly below the actual population count by the end of the decade,”

The CIBC report says the housing shortage is largely a planning issue with “official planning targets falling notably short of actual population growth.” If not corrected, the forecasts could lead to a significant housing planning gap, it warns.

The analysis says that even though the federal government’s recently announced cap on international students may slow population growth, the increase in other non-permanent residents could lead to around six million more international arrivals over the next seven years.

CMHC forecasts are used by municipalities and provinces to help plan how many new homes will need to be built to accommodate the population. The CMHC report found that most demand for new homes is in Ontario and British Columbia.

According to Statistics Canada, the population reached over 40.8 million as of Wednesday. Statscan published figures showing that temporary and permanent immigration to Canada has led the average age in Canada to fall for the first time since 1958.

CMHC deputy chief economist Aled Ab Iorwerth said the agency’s forecasts were largely based on the federal government’s plan for the number of permanent residents to be welcomed in Canada. But he said some statistics it analyzed were subject to a “time lag.”

He said of Mr. Tal’s report, “I support and understand his analysis,” adding that CMHC plans to update its forecasts in June.

“The 3.5 million reflects the current government immigration policy,” he said. But he added that the agency’s report also included a “high population scenario” of 44.1 million that put the supply gap at 4 million, which was closer to Mr. Tal’s figures.

The CIBC report says that non-permanent residents account for 90 per cent of the forecasting gap and “disproportionately have a higher need for housing.”

CMHC population forecasts a decade ago also underestimated the population that has been boosted by a surge in non permanent residents.

Immigration Minister Marc Miller recently capped the number of international students and has signalled plans to further tighten the number of temporary foreign workers, though not in the construction field.

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Mr. Tal said that “after years of half measures” the government is finally showing a determination to tackle the issue of the affordability of homes for both buyers and renters.

But he told The Globe that the lack of accurate population forecasts means municipalities cannot plan for needed housing.

“We need a much more dynamic population growth forecast framework, " he said. “It should be updated more frequently and should have the flexibility to change quickly enough to reflect changes in policy.”

Henry Lotin, founder of Integrative Economics and a former federal economist, contributed to Mr. Tal’s analysis. He said there were more than one million international arrivals in 2022, almost all requiring their own housing.

“About 96% of Canada’s population growth, and an even greater share in demand for new households, is generated by international arrivals,” he said in a statement.