CIBC's Benjamin Tal alerts that CMHC's forecast misses the mark by 1.2 million homes, risking a major planning gap
In a critical analysis, Benjamin Tal, deputy chief economist at CIBC, warns that the Canada Mortgage and Housing Corporation (CMHC) has significantly underestimated the growth in Canada's population, especially from temporary residents.
Tal's calculations suggest that CMHC's forecast for the number of homes needed by the end of the decade is short by 1.2 million.
He points out that the CMHC projected a base population of 38.9 million, which is 1.2 million less than the actual official population. Even in their “high growth scenario” of 44.15 million, the agency would still fall significantly below the actual population count by the decade's end.
According to The Globe and Mail, the CIBC report emphasizes that this underestimation is largely a planning issue, with “official planning targets falling notably short of actual population growth.” It warns of a potential significant housing planning gap if these forecasts are not corrected.
The report also notes that the federal government's recent cap on international students might slow population growth, but the increase in other types of non-permanent residents could lead to around six million more international arrivals in the next seven years.
CMHC forecasts are vital for municipalities and provinces in planning the construction of new homes. The report identifies Ontario and British Columbia as the regions with the most demand for new homes.
Statistics Canada's latest data shows that the population has exceeded 40.8 million as of a recent Wednesday, with immigration contributing to the first fall in the average age in Canada since 1958.
Aled Ab Iorwerth, CMHC's deputy chief economist, acknowledges that their forecasts were largely based on the federal government's plan for permanent residents. However, he admits that some of the statistics analyzed were subject to a “time lag.”
Ab Iorwerth supports Tal's analysis and reveals that CMHC plans to update its forecasts in June. He notes that the “3.5 million reflects the current government immigration policy,” but their report also included a “high population scenario of 44.1 million”, which puts the supply gap at 4 million, closer to Tal's figures.
The CIBC report indicates that non-permanent residents account for 90 percent of the forecasting gap and disproportionately have a higher need for housing.
This situation mirrors a similar underestimation a decade ago when CMHC forecasts did not fully account for the surge in non-permanent residents.
Immigration Minister Marc Miller has recently capped the number of international students and signaled plans to tighten the number of temporary foreign workers, though not in the construction field.
Tal comments on this development, stating that “after years of half measures,” the government is showing a determination to address home affordability for both buyers and renters.
He argues for a “much more dynamic population growth forecast framework,” which should be updated more frequently to reflect policy changes.
Henry Lotin, founder of Integrative Economics and a former federal economist who contributed to Tal’s analysis, highlighted that more than one million international arrivals in 2022 almost all required their own housing.
He points out that “about 96 percent of Canada’s population growth, and an even greater share in demand for new households, is generated by international arrivals.”
