Toronto's middle class is packing up and moving out at such a rapid pace that the city's population is dropping. Montreal and Vancouver are also in the midst of a similar outmigration.
It's not only bad news for those cities; it also harms the country as a whole by slowing economic growth, straining our health care system, and increasing political polarization.
This migration out of cities is not just a Toronto story. While the City of Toronto saw 40,000 more people move out to other parts of the country last year than moved in from elsewhere in Canada, Peel Region lost even more, at 45,000.
These two regions, along with the Vancouver Regional District and Montreal, saw 137,000 more people move out than move in, more than double the number a decade ago.
Big city leavers are not a general cross-section of the population – they're disproportionately adults in their mid 20s through early 40s, with children under the age of five.
Canada has done a poor job of studying what's driving this trend, but given that they disproportionately move to communities that have built large numbers of single-detached homes and townhomes that are more affordable than in urban centres, attainable housing is clearly a large factor.
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Other parts of the world are seeing similar movements and have put more effort into researching the causes. For example, the State of California experienced a net loss of 250,000 residents to other U.S. states in 2024 alone.
A recent study from the University of California found that those who move out of the state are disproportionately middle class and move to neighbourhoods in other states where home prices are roughly half of what they were in the California neighbourhood they left. Due to cost differences, those who leave are 48 per cent more likely to own a home seven years after the move than similar individuals who stay in California.
Toronto has much to learn from California's research, as in both cases regulatory constraints prevented family-home construction from keeping pace with population growth, causing prices to skyrocket and pricing out the middle class.
In both cases, this outmigration causes population growth to lag behind the rest of the country, leading to California losing a congressional district and Toronto losing a federal electoral riding.
Families are making the decision that is best for them, but that decision comes at a cost. Historically, parents have moved for job opportunities, but instead, workers are moving to smaller communities with weaker, less diverse labour markets. Productivity slows across the country as workers are unable to live where their talents are most needed.
There are both benefits and costs to the smaller communities receiving the big city leavers. The new arrivals are often highly skilled and earn higher incomes than existing residents, which can help revitalize local retail, and their economic activity increases the municipal tax base.
That wealth, however, can price out local residents, and rapid growth, particularly when unexpected, can strain access to health care and social services.
The dynamics are reversed for the cities losing talent. A study from the Washington-based Economic Innovation Group, a public policy organization, found that, collectively, the net leavers from U.S. big cities had a taxable annual income of US$68-billion, representing a substantial loss of economic activity and tax revenue for these communities.
A form of durable inequality emerges in these cities, as the middle class ispriced out, leaving only those who are rich enough to stay and those too poor to leave.
Access to social services can then erode in these cities, despite reduced demand from residents who are leaving. When nurses, physical therapists, and teachers can no longer afford to live in a community, staffing schools, daycares, and hospitals becomes an even greater challenge.
This can create a doom loop, where a lack of services for the middle class causes more middle-class families to move out, accelerating inequality.
The rise in inequality and opportunity driven by unaffordable housing in our cities has political consequences, including the rise of populism. A 2019 study published in the West European Politics journal found that inequality caused by regional spikes in home prices helped explain the rise of Brexit in the U.K. and of the far-right leader Marine Le Pen in France. The authors concluded that "populism is primarily a politics of place, and place is a product, in part, of the housing market."
When cities price out their middle class, their health care and education get worse, their municipal tax base erodes, and they lose political representation, as they grow more slowly than other parts of the country. In addition, productivity slows as workers are unable to live where their talents are needed most, and political polarization rises.
These problems can all be addressed, if cities would allow for more housing to be built.
Mike Moffatt is the founding director of the Missing Middle Initiative and co-host of the Missing Middle podcast .
