Image of the day: Ontario's housing shortage
By Mike Moffatt
Average housing prices in Ontario tripled over the last 10 years, from $330,000 to $920,000. The graph shows why: homebuilding didn’t keep up with population growth.
Mike Moffatt and Mohsina Atiq have a detailed report (“Forecast for Failure”) describing how Ontario's long-term housing plan is based on old population growth forecasts which are only updated every five years or so, and which didn't take federal policy changes into effect. The net result is that there's not enough housing being built in Ontario. This isn't partisan - the problem with Ontario's forecasts predates Doug Ford, and the federal policy changes predate Trudeau.
Several federal policy changes have made post-secondary education a more attractive pathway to permanent residency. There were many significant changes, including the introduction of the Express Entry system. However, there are two that stand out as being particularly important:
Introduction of the Canadian Experience Class (CEC) in 2008, which provides a pathway for international students to obtain permanent residency. Included in the reforms were rules that allowed international students to obtain a 3-year work permit after graduation, up from the previous 1-2 years.
Reforms that allow international students to work off-campus, for 20 hours a week during study terms, and full-time during regularly scheduled breaks, without applying for a work permit. These reforms went into effect on July 1, 2014, making it easier for international students to finance their studies and accommodations.
It is important to note that these reforms were designed to have post-secondary education be an ever-increasing path to permanent residency. In 2008, then Minister of Citizenship and Immigration, Diane Finley indicated that the federal reforms "will help create a pool of individuals who, with work experience, will find it easier to apply to immigrate to Canada... our ability to retain international graduates with Canadian qualifications, work experience and familiarity with Canadian society, will help increase our competitiveness and benefit Canada as a whole."
In retrospect, the reforms of 2008 and 2014 were more transformative than Ontario policymakers and forecasters recognized at the time. Ministry of Finance population projections did not anticipate population growth driven by international students, nor did Hemson's 2012 population forecasts. The Crombie report of 2015 was (understandably) concerned about falling, rather than rising, population growth from international sources. The report makes no mention of international students at all.
Moffatt and Atiq argue that the problem is lack of policy coherence, not immigration. What we need is better alignment between federal policy, provincial targets, and municipal targets.
Given the housing shortage, we do not doubt that some will conclude that the problem is that immigration levels are too high. They will argue that the GTAH could solve the housing supply issue by simply reducing immigration targets. We believe this is a gross misreading of the situation and would cause substantial economic harm. It misses the mark for four reasons:
Increased immigration targets did not primarily cause Ontario's increased population growth. There were several causes, the largest and most important of which was a series of federal policy changes that increased the number of international students and graduates residing in Canada.
There are substantial benefits to having international talent obtain their credentials in Canada before gaining immigration status due to difficulties assessing the value of foreign credentials.
Ontario's Growth Plan is built on a population growth forecast, and that forecast did not account for increased population growth. Had Ontario's Growth Plan anticipated higher levels of population growth or had a contingency buffer, an adequate supply of housing could have been built in the GTAH to accommodate this growth.
Immigration is necessary for the competitiveness of the GTAH and to ensure an adequate supply of skilled labour to offset population ageing.
Offsetting population ageing is particularly important to Canada's economy. A 2019 study by the Conference Board of Canada estimates that between 2018 and 2040, 13.4 million workers will leave the Canadian labour force due to population ageing, but only 11.8 million Canadians will leave school and join the labour force, a gap of 2.2 million workers. The report suggests that gradually increasing Canada's immigration rate to 1 percent of the population (from the current 0.8 percent level) would "contribute some 5.3 million workers to the labour force and one-third of the economic growth rate between 2018 and 2040."