Population growth in Ontario has been higher than what was expected years ago, and it could be part of the imbalance between supply and demand for housing in the province’s most populous areas.
A new report released by policy think tank Smart Prosperity Institute finds that the population forecasts used for Ontario’s Growth Plan for the Greater Golden Horseshoe (GGH) from international sources “substantially underestimated” population growth since 2016, specifically immigration and international students. In a five-year period, Ontario’s adult population increased by “several hundred thousand more than forecasted.”
Population forecasts matter because they help to determine the size of the housing supply needed.
“The Growth Plan for the Greater Golden Horseshoe and the municipal plans built on that plan are grounded in housing and population forecasts,” said the report. “These forecasts become stale quickly, as populations grow faster than anticipated, as forecasts do not anticipate policy changes that lead to faster population growth. Municipal plans are not revised to reflect the new reality despite forecasts rapidly becoming outdated.”
The report, titled Forecast for Failure: How a broken forecasting system is at the root of the GTAH’s housing shortage and how it can be fixed was written by Mike Moffatt and Mohsina Atiq, and received funding from the Building Industry and Land Development Association (BILD).
Housing shortages occurred in the Greater Toronto Area and Hamilton (GTAH) because populations grew faster than expected. Relative to a 2012 forecast, international sources underestimated GTAH population growth by approximately 120,000 people from 2016 to 2021.
In 2005, Hemson Consulting Ltd. (Hemson) forecasted that from 2016 to 2021, the GTAH population growth from international sources would be under 400,000 persons. In 2012, this forecast was increased to 480,000, and 607,000 in 2020.
“Despite immigration targets continuing to rise, the continued reliance of Ontario colleges and universities on growth from international students, and advocacy from groups that recognize the need to attract global talent, current Ontario population growth forecasts show little change to growth levels from international sources,” said the report. “This unforecasted population growth causes a shortage of housing, as official plans underestimate housing demand as they are based on population forecasts that are too low.”
Meanwhile, the size of housing stock was overestimated by roughly 26,000 fewer units than what was projected in 2012, the report said. As a result, the combination of an underproduction of new housing supply and higher population growth has led to “excess demand for housing in the GTAH,” high housing prices and young families moving to other areas of Ontario, which was happening prior to the pandemic.
“By performing a series of sensitivity analyses, we find that if current population growth forecasts from international migration are as off as past ones, the GTAH could require over 100,000 additional housing units over the next decade,” said the report.
In the three years before COVID-19, more than 40,000 persons net moved out of the GTAH, more than double the pre-2014 average. In 2012, it was forecasted that 36,000 people would move out of the GGH to other parts of the province from 2016 to 2021, but the actual number was over 100,000.
The lack of available housing has also been a drag on the economy as workers are priced out of the GTAH since they cannot afford to live there, instead opting for low-wage, lower-productivity jobs in other areas of Canada.
“There is a genuine (and we would argue quite likely) possibility that the future may look a great deal like the past and that current forecasts are underestimating population growth and overestimating future housing completions,” said the report.
The Smart Prosperity Institute produced a series of 10 recommendations that could be used to address the issues identified in its report, including federal immigration targets set five years in advance and an open-access online population and housing model for Ontario.
In a story with the Toronto Star, Russell Mathew, a partner with Hemson, defended the numbers the firm produced. He also added that the unanticipated rise in international students only became visible in 2016, while data from Statistics Canada would have become available in 2017 or 2018.
“When it comes to forecasting it’s easy to look back and say ‘You should have gotten the numbers exactly right.’ But there’s always uncertainty,” said Mathew to the Star.
