The federal government is overestimating the impact its cuts to immigration will have on the country鈥檚 housing shortage, the Office of the Parliamentary Budget Officer said in a new report.

In the analysis published Friday, the PBO said its projections still indicate the country鈥檚 housing gap should fall by 45 per cent, assuming the Liberal government鈥檚 own population projections in its immigration plan are accurate.

The PBO isn鈥檛 entirely convinced they are, saying 鈥渨e judge that there is significant risk鈥� to the demographic projections the government made in its 2025-27 immigration levels plan.

The PBO cautioned its model assumed some non-permanent residents, whose permits or visas would expire and not be renewed under the new plan, will actually leave the country.

鈥淏oth our estimated reduction in household formation and the housing gap under the (immigration levels plan) are uncertain and likely represent upper-bound estimates,鈥� the PBO warned.

In October, the Liberal government announced it was cutting the number of permanent residents allowed into the country over the next three years.

The plan expects to see Canada鈥檚 population decline by 0.2 per cent in 2025 and 2026, marking the first time Canada would see an annual decline in population, the PBO said.

The PBO now estimates Canada needs to build another 1.2 million homes by 2030 to close the housing gap.

In its report Friday morning, the PBO said the revised immigration plan will reduce that gap by 534,000 units 鈥� or 45 per cent 鈥� by 2030.

The government鈥檚 projections, factoring in its new immigration targets, suggested the population estimates would reduce demand for housing by 670,000 units by 2027, well above the PBO鈥檚 estimates and three years earlier than the PBO鈥檚 timeline.

鈥淭his difference likely reflects several factors, such as the assumed age, region and household structure of the (non-permanent resident) outflows projected under the (immigration levels plan), as well as the time horizon and counterfactual population projection,鈥� the PBO wrote.

In a statement, Immigration Minister Marc Miller鈥檚 office said the PBO report confirms the government鈥檚 immigration levels plan will reduce the housing supply gap, and that the report鈥檚 projections are in line with the department鈥檚 own expectations regarding the housing supply gap for this year.

鈥淲hile an adjustment in immigration levels is helping to reduce the strain on our housing supply, it is also true that immigration and newcomers to Canada will continue to have an important role to play in helping us grow the housing supply,鈥� Miller鈥檚 office said.

鈥淚mmigrants are not to blame for the housing crisis and they, like everyone who lives in Canada whether temporarily or permanently, deserve to be set up for success while they are.鈥�