The housing shortage in Canada could widen by another 500,000 units in just two years if immigration continues at its current pace, according to a recent report from TD Economics.

In the report, economists Beata Karczmarczyk, James Orlando, and Rishi Sondhi noted that Canada’s population grew by 1.2 million over the past year, as of the second quarter of 2023—more than double the pace of population growth in 2019 and previous years.

The federal government has set its sights on receiving another 500,000 people annually by 2025 in hopes of addressing labor shortages and balancing the aging population in the country.

However, economists are questioning whether the "sudden swing in population has gone too far and too fast."

Even before this "sudden influx" of newcomers, economists said that Canadian housing stock was expected to become less affordable nationwide in the future.

If the government’s current high-growth immigration strategy continues, they estimate that the housing shortage in the country could widen by about half a million units in just two years.

The National Bank of Canada released a report on Wednesday echoing those points.

Meanwhile, the chief economist of the National Bank, Stefan Marion, said in a note to investors: "The federal government's decision to open immigration doors during the most aggressive monetary tightening cycle in a generation has created a record imbalance between supply and demand for housing. With ongoing pressures on housing affordability across the country, we believe Ottawa should consider revising immigration targets to allow supply to keep pace with demand."

A recent BMO analysis also pointed out that for every one percent increase in the population, home prices typically rise by about three percent each year. It noted that in recent years, Canada’s population has been growing at an average annual rate of 1.5 percent per year—and 2.7 percent in 2022 alone—which aligns over time with annual gains of five percent in home prices at the top.

In the same context, Michael Skottrud, an economics professor at the University of Waterloo and director of the Canadian Labor Economics Forum, praised banks for presenting the facts instead of taking a more subjective approach to immigration in reports.

However, he pointed out that issues of housing affordability and limited housing supply will exist regardless of the current pace of immigration in Canada, but immigration is likely to be a contributing factor.

The Canada Mortgage and Housing Corporation estimated that the country needs to build 3.5 million more homes by 2030 than it currently has to help achieve some aspects of housing affordability.

Social pressures not limited to housing:

TD’s report emphasized that social pressures are not limited to housing, and other areas such as healthcare and social support systems are not keeping up with Canada’s population growth.

In 2021, the OECD estimated that Canada ranked 31st out of 34 countries in terms of acute care hospital beds per capita.

Economists stated that this "is unlikely to improve" given the rapid population growth in Canada, despite efforts by provincial and federal governments to hire more healthcare workers and fund more hospital beds.

"There needs to be greater consideration and appreciation of the actual absorption rate of population growth. Policy cannot focus solely on the perceived demands of employers, and even educational institutions," they suggested in the report.