When it comes to forecasting anything, accurate data is important. When it comes to projecting housing needs in already challenged markets such as those in the Greater Toronto Area and Hamilton (GTAH) and surrounding communities, it’s absolutely essential.

It’s hard to fathom, then, that on a subject so vital to Ontarians in every way, our federal and provincial governments have been so badly out of sync, that it’s contributed to the drastic undersupply and affordability challenges we’re facing here.

It sounds like a recipe for disaster. Or, what the Smart Prosperity Institute (a national research network and policy think-tank based at the University of Ottawa) titled its new report for the Building Industry and Land Development Association, Forecast for Failure: How a Broken Forecasting System is at the Root of the GTAH’s Housing Shortage and How It Can Be Fixed.

We sat down with Mike P. Moffatt, senior director, policy and innovation at the Institute and author of the report, for further insights on this quandary, and where governments, homebuilders and even buyers, go from here.

Your report revealed some very surprising results – that forecasts have underestimated population growth and overestimated housing completions, meaning municipalities have been planning for growth using inaccurate or outdated assumptions. Predictably, we’ve ended up with a severe shortage of housing and infrastructure to support new residents. How, in the 2020s, could this happen?

The problem goes back a decade or more and is a classic Canadian problem of different levels of government being out of sync with each other. When it comes to population growth, there are two important actors. The first is the federal government, which sets rules around immigration, including immigration targets, as well as rules involving temporary foreign workers and international students. The second is post-secondary institutions. Much of our population growth is coming from international students who attend our colleges and universities, and it is ultimately up to each institution on how much they will increase enrollment.

But when it comes to housing supply, two other sets of actors are important. First, you have the provincial government, which sets a framework for housing growth for the Greater Golden Horseshoe (GGH) under the province’s Growth Plan for the region. Second, you have the municipal governments, both inside and outside of the GGH, which have their own planning processes.

In short, you’ve got four different sets of actors, two of which affect population growth, and the other two which affect housing supply, and there’s a real lack of coordination between them.

How encouraged are you that we will now “get it right” going forward, when it comes to matching population projections with housing needs? The report says, “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.” That doesn’t sound too promising…

I’m cautiously optimistic. The first step to fixing the problem is understanding it, and the response we have received from policymakers on the report has been overwhelmingly positive. There’s a need for better tools and better data, and both the provincial government as well as mayors, have identified these as issues.

How do you view the recent recommendations from the Housing Affordability Task Force?

The task force did a fantastic job with the mandate it was given. Its 55 recommendations recognize that there is not going to be one policy that fixes everything. The current mess was years in the making, and it will not be fixed overnight. Recommendations 51 through 53 deal with population forecasting and data gaps, and are quite aligned with the recommendations we make in Forecast for Failure.

However, the province has its work cut out. It has set a target of 1.5 million new housing units over the next decade. That’s double what we have built over the last decade. The recommendations are a good start, but those alone likely will not be enough.

What more could, or should, the Task Force focus on?

The Task Force’s mandate was to examine bottlenecks to increasing the housing supply built by the private sector, and it fulfilled that mandate well. There is still a need to look at demand-side issues, particularly the role speculation and money laundering are playing in our housing market. I would like to see either the provincial or federal government examine demand-side issues next. As well, there is also the need to increase the amount of social housing in the province.

One of the biggest bottlenecks to building housing, whether through the private or public sector, will be a lack of skilled tradespeople, particularly given the high numbers that are reaching retirement age. The province has been focused on this issue, but there’s more work to be done.

All of this doesn’t really sound all that encouraging for those looking to buy a new home in the GTA. What advice would you give them?

Be patient, though that’s easier said than done. The combination of a supply shortage along with access to cheap credit has created a great deal of irrational exuberance in this market, as well as fear of missing out. Supply-constrained markets tend to have not just rising, but also volatile prices, so the odds of a price drop are fairly high.

Similarly, given what you now know about all this, what are some new-home markets buyers should look at? Is it simply a matter of looking further and further outside the core of Toronto to find affordability?

Understandably, families have been doing this since 2015, which has driven up prices across southern Ontario. Take London, for instance. Back in early 2017, the benchmark home price was less than $250,000. It has since tripled, to $750,000, in just five years. Any families driving until they qualify must travel much further than they did just a few years ago.

What are some of the other key takeaways from the report that homebuyers – and even the homebuilding industry – should note?

The most important is the need for governments to work together. Policymakers have been making decisions in silos, and that needs to stop. We need not just more transparency, but more accountability.

For both groups, I would suggest that supply shortages will persist, even though home prices will be volatile and experience periods of decline. If we’re building eight new homes for every 10 new families, two are going to walk away empty-handed, and that doesn’t change if the price is $500,000 or $2 million. Ultimately, you cannot have more households than houses, and we will continue to see young families move out of the GTA if supply cannot keep up with population growth.

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