There's a riddle at the centre of Toronto's housing affordability crisis: What is causing huge chunks of the city to lose population at the same time as the overall population is booming?

The answer, according to economist Paul Smetanin, chief executive officer of the Canadian Centre for Economic Analysis, is a phenomenon known as "overhousing." According to his firm's model of the local housing market, there are five million spare bedrooms in the Golden Horseshoe region, more than two million of them just in the Toronto area.

The extra bedrooms Mr. Smetanin has identified aren't about to be rented out. Most are owned by seniors living in empty-nest neighbourhoods (70 per cent of the overhoused population is 65 years old and up). But they illustrate the strange predicament of a city booming in population but where many neighbourhoods are actually losing density. "If you could return those areas back to 2001 density levels, you'd create about 80,000 homes straight-away," he says.

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The rate of depopulation that created the spare bedrooms in Toronto's low-rise neighbourhoods is stark: "Since 2001, about 52 per cent of the land mass of Toronto has reduced in density of population by about 201,000 people," Mr. Smetanin says. "Other parts of Toronto have grown by 492,000."

The numbers grow more startling in the wider Greater Toronto and Hamilton Area, with a loss of 478,000 people in an area covering about 58 per cent of the region's land mass, while about 1.9 million people have been added to the growing areas.

It's not just newcomers who are missing out, as urban planner Cheryll Case argued in a report published in 2017; depopulation hurts the level of civic services for existing residents, too. She and her colleague Tetyana Bailey wrote in the report Protecting the Vibrancy of Residential Neighbourhoods that in recent years, there has been underenrolment and school closings in 48 per cent of the city's neighbourhoods, making areas of the city designed for families increasingly less family-friendly.

"This is a long long-term issue we've been dealing with for a very long time. First of all, the city needs to acknowledge there is a supply issue," Ms. Case says.

She argues the city has not adopted zoning that reflects the smaller family sizes prevelant in the city today, but acknowledges the solution is tougher and more political: "The city needs to develop policies that would develop more housing in neighbourhoods."

The existing zoning rules make that difficult, she says. About two-thirds of the city's residential land permits only one household per structure, and the city's official plan specifies that it hopes to maintain "stable" neighbourhoods by paying attention to "character."

According to urban planner Gil Meslin – who coined the term Yellow Belt to indentify Toronto's development-frozen low-rise neighbourhoods – the new draft of the city's official plan (OPA 320) could further limit development of new multiresidential homes. OPA 320 defines character this way: "The prevailing building type will be the predominant form of development in the geographic neighbourhood."

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Because many of the low-density neighbourhoods losing population are predominantly single-family dwellings, Mr. Meslin says the plan's definition is essentially a one-way ratchet that will rule out new multiunit dwellings – the kind of "missing middle" or gentle density that could turn a single family home into a four-family home – in any area where they don't already "prevail."

"One of the challenges we have in our city right now is that because we've locked off all of our neighbourhoods for so long, we've locked out anything mid- and small-scale," Mr. Meslin says. "The whole development sector has either bifurcated into people who renovate and flip homes or people who build huge, lot-assembly condominium developments building 30- and 40-storey towers and 500-unit buildings. It doesn't leave that kind of grassroots or smaller-scale developers."

But making that kind of change – to the official plan; to long-frozen neighbourhoods; to the entire political culture of the city – seems like a longshot. In the United States, lawmakers in communities dealing with similar affordability challenges have pondered radical moves, such as California's SB 827 ballot initiative, which would set density minimums overriding local ordinances. In Minneapolis, leaders are considering opening every neighbourhood in town up to the potential development of fourplex spaces.

Mr. Smetanin sees the current trend in Toronto continuing for 15 to 20 years if there's no policy intervention, although he holds out hope that things can change.

"There may be a demographic compromise at some stage, and this great city that we live in might be able to turn that corner and start creating vibrant communities," he says.