So says the rulebook (or something like that, I don't have it in front of me) yet when I set a 5 player game up last night to figure the rules out 5 cities and towns in the north were empty.
Let me know which cities you found to be empty and I'll let you know who is supposed to be there.
And for reference,
Rulebook, under 3.6 Set Up wrote:
Note: In 5-player games there are no unoccupied cities.