Debates of Nov. 7th, 1995

Government Response To Petitions

[Peter Milliken, Liberal, Parliamentary Secretary to Leader of the Government in the House of Commons]

Mr. Speaker, pursuant to Standing Order 36(8), I have the honour to table in both official languages the government's response to two petitions.

National Defence

[Fred Mifflin, Liberal, Parliamentary Secretary to Minister of National Defence and Minister of Veterans Affairs]

Mr. Speaker, pursuant to Standing Order 32(2), I have the honour to table in both official languages a report entitled "The Special Commission on the Restructuring of the Reserves".

Petitions

[Paul Szabo, Liberal, Mississauga South, ON]

Mr. Speaker, pursuant to Standing Order 36, I wish to present a petition which has been circulating all across Canada. It has been signed by a number of Canadians from Deloraine, Manitoba.

The petitioners draw to the attention of the House that managing the family home and caring for preschool children is an honourable profession which has not been recognized for its value to our society. They also state that the Income Tax Act discriminates against families that make the choice to provide care in the home for preschool children, the disabled, the chronically ill or the aged.

The petitioners therefore pray and call on Parliament to pursue initiatives to eliminate tax discrimination against families that decide to provide care in the home for preschool children, the disabled, the chronically ill or the aged.

[Chuck Strahl, Reform, Fraser Valley East, BC]

Mr. Speaker, I have the privilege to present two petitions signed by people in my constituency who were outraged over the murder of Melanie Carpenter and who continue to press for changes to the criminal justice system to address what they feel are inadequacies in the system.

The petitioners call on Parliament to permit the use of post-sentence detention orders and to limit the freedoms of high risk offenders. If Parliament hears this petition, innocent people like Melanie Carpenter will remain alive, and dangerous ones like her murderer, if he were still alive, would stay behind bars.

Questions On The Order Paper

[Peter Milliken, Liberal, Parliamentary Secretary to Leader of the Government in the House of Commons]

Mr. Speaker, I ask that all questions be allowed to stand.

[The Acting Speaker (Mr. Kilger)]

Is that agreed?

[Some hon. members]

Agreed.

The House resumed from November 6 consideration of the motion that Bill C-108, an act to amend the National Housing Act, be read the second time and referred to a committee.

National Housing Act

[Jean Augustine, Liberal, Parliamentary Secretary to Prime Minister]

Mr. Speaker, I rise to speak to Bill C-108 at second reading, a bill to amend the National Housing Act.

I can speak from firsthand experience of the federal government's concern in social housing matters. I am pleased to represent the riding of Etobicoke-Lakeshore where the government is funding projects such as Kilcooley gardens co-op and William Kinnett co-op housing, housing residents who are single parents and persons with disabilities.

I am proud to be part of a government that supports non-profit housing which promotes the security of tenure and a sense of community among its members. I can also speak to the benefits of Canada Mortgage and Housing Corporation's mortgage loan statistics.

In my riding of Etobicoke-Lakeshore from 1992 to October 1995 a total of 1,567 homebuyers took advantage of CMHC's mortgage loan insurance. Of these, 708 were first time homebuyers who were able to gain access to their home under the CMHC's first home loan insurance, the 5 per cent down program as we call it.

I am pleased to speak in support of the bill because I understand the crucial importance of it to ensure that CMHC can continue its mortgage loan insurance activity.

I am bewildered why certain members of the House are not able to support the bill. I can only assume it is because they do not fully understand the provisions of the bill and cannot appreciate the important role mortgage loan insurance will play in helping Canadians to gain access to decent affordable housing.

Many of my colleagues have already spoken to this issue. However, it is obvious the message has not gotten through. Allow me to spell it out one more time more clearly for the benefit of those having difficulty understanding why the bill is important to Canadians.

NHA mortgage loan insurance makes home ownership accessible to millions of Canadians regardless of where they live. This access is under similar terms and conditions with the smallest feasible down payment and at the lowest cost to borrowers. CMHC is able to provide this insurance at no cost to the government.

Bill C-108 is required in order for CMHC to continue to underwrite home mortgage loan insurance within the legislative limit. Let me be very clear on this point. If CMHC cannot continue its mortgage loan insurance activity, thousands of Canadians will not have access to home ownership. It is as simple and as serious as that.

NHA mortgage loan insurance works like this. Most lenders cannot make a mortgage for more than 75 per cent of the value of a property without mortgage loan insurance. This means those not able to save a down payment of 25 per cent would be locked out of home ownership without mortgage loan insurance. NHA mortgage loan insurance provides approved lenders with insurance against borrower default or residential mortgage loans.

NHA mortgage loan insurance allows Canadians to take out a mortgage with an NHA approved lender with a down payment of only 10 per cent of the property value or 5 per cent for first time homebuyers.

NHA mortgage loan insurance requires the payment of application fees and insurance premiums. It is not just handed out for free by the government. These premiums are charged as a percentage of the loan based on the amount of the loan and its ratio to the value of the property. Premiums are set so as to ensure the fund always contains enough to cover any claims.

Since mortgage loan insurance protects lenders against default losses, they are able to charge the borrower the lowest possible rate of interest, which means mortgage loan insurance plays a critical role in reducing the cost of home ownership for Canadians. It also plays a critical role in ensuring relative equal access to mortgage financing in all parts of the country. This access is made possible through the cross-subsidization of higher risk business against lower risk business. In this way the mortgage insurance fund is self-financing. In other words, it does not cost the government anything to provide mortgage loan insurance to lenders so Canadians can have access to decent affordable housing.

We recognized a few years ago that even a 10 per cent down payment was difficult for some people to manage which is why the government introduced the first home loan insurance initiative in 1992 and reduced the minimum required down payment to 5 per cent for first time homebuyers. The initiative was introduced for a two-year period but was extended for an additional five years until 1999.

As many members will know, this 5 per cent down initiative has been a tremendous success in helping to increase home ownership in Canada. By further reducing the minimum required down payment, home ownership has moved from a dream to a reality for the many Canadians who can afford monthly mortgage payments but who are having trouble saving for a down payment.

Certain members might not be aware there are Canadians who cannot afford a down payment of 25 per cent of the price of a home, even the most modest home. Are there members in the House who would refuse these Canadians a chance to become homeowners? I must assume my colleagues are not so out of touch with the economic realities facing many Canadians that they are not aware of the difficulties some people have in raising enough money for a convenient 25 per cent down payment. This is a reality for many people. That does not mean we should exclude them from access to decent housing. The government supports families and individuals who aspire to be homeowners.

We know many Canadians have a strong desire to become homeowners and we understand the tremendous importance of helping them to do just that. We know how important a home is to people not only in terms of an investment but for the impact on their quality of life.

When people are well housed, they are better able to participate in their communities. They enjoy a greater sense of control over their lives. It is no surprise that Canadians are willing to make great sacrifices to achieve home ownership. Saving for a down payment

is a major undertaking, yet Canadians do it willingly because they want to fulfil their dream of owning a home, a place of their own.

Perhaps it has been a long time since some members of the House had to worry about such mundane matters as saving money to buy a home. Let me tell them that a down payment even on a starter home represents a substantial amount of money for many Canadians. It is not easy to save for a down payment these days.

Does that mean we should just close the door on those people, tell them and their children that they cannot own a home? What kind of a country would we have if we did that? Certainly not a country I would want to live in I can assure you.

Home ownership is part of the Canadian dream, a dream which this government believes should be shared with all Canadians, not just a privileged few. We believe that all Canadians deserve the chance to become homeowners. We believe that the federal government should continue to play a role in helping them to do so. And we believe that NHA mortgage loan insurance is the best way for us to fulfil that important role at no cost to the government.

Millions of Canadians depend on NHA mortgage loan insurance. In fact, members of the House will be pleased to learn that more than 3.5 million Canadian households have been helped to purchase a home since the government initiated NHA mortgage loan insurance in 1946. That figure represents nearly one-third of Canada's housing stock. In 1994 alone, CMHC provided mortgage insurance for 40 per cent of all residential mortgages in Canada. That represents over 300,000 housing units.

In the riding of Calgary Southwest for example, from 1992 to October of this year, 5,600 households accessed home ownership through NHA insurance. Two thousand, two hundred and fifty of these households were first time buyers taking advantage of the lower down payment to become homeowners.

This year alone, more than 1,000 homeowner units were insured in Calgary Southwest under the NHA with over half, 538, being first time homebuyers. Obviously CMHC mortgage loan insurance is a huge success, a very popular vehicle for Canadians to gain access to home ownership.

Today we are presenting a bill to ensure that Canadians can continue to have access to home ownership, a bill that will ensure the continued operation of NHA mortgage loan insurance, a bill which is good news for all Canadians, a bill which this government would like to see passed.

Those members who oppose this bill should keep in mind the disservice they are doing to Canadians. Are Reform members aware that 63 per cent of the adult population living in rental accommodations plan on buying a home? Are they aware that 40 per cent of all residential mortgages finalized in 1994 were NHA insured?

Does that party know that 230,000 first time homebuyers would not have been able to purchase a home if not for the first home loan insurance initiative made possible by NHA mortgage loan insurance? Do they know that new construction to the end of October 1994 totals more than 24,000 units, including single detached homes, apartments, row houses and manufactured homes? Do they not realize the tremendous economic opportunities, especially the significant employment generation, resulting from all this activity, opportunities that would have been lost if not for NHA insurance?

As I have stated, the mortgage loan insurance has enjoyed overwhelming popularity over the years precisely because it is so crucial to helping Canadians enjoy the benefits of home ownership.

Opposing this bill means opposing the expectations of Canadians to become homeowners. Some might argue that the government should get out of the business of mortgage loan insurance and leave it to private industry. A little bit of thought on that subject would turn up some reasons why it is not a good idea to leave this important area to the private sector alone.

First, without CMHC providing mortgage insurance, Canadians would be at the mercy of a private sector monopoly. Higher prices and fewer choices would be the result. Housing would then be less affordable, especially for the first time homebuyers.

Second, we know from past practices of private insurers that homeowners in all parts of the country would not have access to mortgage insurance. What would happen to the many Canadians living in communities which the private sector would refuse to serve?

Historically we know that private insurers have underserved rural areas. If NHA mortgage loan insurance were not available in rural communities, many rural Canadians would have to leave those areas in order to access home ownership because there would be areas which the private insurer would not want to serve, make no mistake about it. What would happen to the people living there? Quite simply, they would have very limited access to home ownership.

As long as CMHC is around to provide equal access to mortgage loan insurance, we do not have to travel that ugly road. With CMHC in the industry, Canadians have continued access to low cost financing. Canadians living in areas of the country that the

private insurers will not or cannot serve are able to obtain housing financing at relatively equal terms and conditions.

It should be obvious to members that competition is the best way to keep prices at the lowest possible level to encourage innovation in the mortgage industry to meet the changing needs of Canadian housing finance consumers.

Millions of Canadians have benefited from NHA mortgage loan insurance in the past. Thousands continue to benefit each year. Members of the opposition should clearly understand and support this bill. I have to wonder why they are having such difficulty with this very simple issue.

The federal government has a constitutional responsibility for banking and finance. CMHC mortgage insurance and guarantee are a demonstration that the federal government is fulfilling this responsibility. Without CMHC there would be a federal policy vacuum in the system of housing finance. The result would be unequal access to home loans across the country. Furthermore, marginal borrowers could pay more for low down payment mortgages or have no access to financing altogether.

What is the motivation of those who question the crucial importance of NHA mortgage insurance? Surely it cannot be to save the federal government money. CMHC operates its mortgage insurance fund at no cost to the government. CMHC insurance is provided at no cost to the Canadian taxpayer. I repeat this. CMHC is required to achieve self-sufficiency strictly from the premiums and fees that it charges. CMHC is not part of the problem. In fact, it is part of the solution.

Members might be interested to learn that CMHC has returned to the Government of Canada over $1 billion since its incorporation in 1946. In addition, in 1992, $55 million was contributed to the government from the mortgage insurance fund.

We in Canada are fortunate to be one of the best housed nations in the world. There can be no doubt that NHA mortgage loan insurance has had a significant role to play in bringing us to that enviable state. If we are to maintain that high standard, CMHC must be able to continue providing NHA mortgage loan insurance so that Canadians will have relatively equal access to low cost mortgage financing today and in the future.

Yes, we are fortunate to have such a high standard of housing in the country. Over the years, with the leadership of CMHC in the housing sector, Canada has developed a broad range of housing expertise in the public and private sectors as well as in the academic community. We are willing to share that expertise with countries all over the world. Representatives from a variety of countries come to Canada to learn about our operations because they believe that we have not one of the best, but the best system of public mortgage loan insurance in the world and they want to learn about it.

I want to conclude by saying that CMHC involvement in the international arena is not limited to helping other countries develop mortgage insurance, it also shares and explores possibilities in many other areas. I ask all members to support Bill C-108, which will make it possible for all Canadians to have their greatest dream fulfilled: owning a home.

[Ronald J. Duhamel, Liberal, Parliamentary Secretary to President of the Treasury Board]

Mr. Speaker, I want to confirm what I think I understood, so I would like to ask the following question. I believe this loan insurance is self-financing and self-sustaining and does not cost the government anything. I want to make sure that I have understood that correctly.

The other point which I would like the parliamentary secretary to mention once again is this. How will this help Canadians in terms of housing? I believe that needs to be repeated because I do not think it is sufficiently clear in the minds of people.

I would ask my colleague to clarify those two points.

[Jean Augustine, Liberal, Etobicoke—Lakeshore, ON]

Mr. Speaker, those two questions cover the crux of Bill C-108.

It is important for everyone to understand that there is no cost to the government. Actually, a benefit is derived from that involvement.

It is also important to note that the United Nations has acclaimed Canada as the best country in the world in which to live. We must ensure that quality of life. What goes into that quality of life? Accessible, affordable, decent housing and home ownership. Therefore it is important for us to continue to have the necessary mortgages, loans and availability of funds. With the minimum down payment, individuals will have the opportunity to access housing and all of the things that come with having a roof over one's head and providing for one's family.

It is important that we as a government continue the financing and support the National Housing Act and the CMHC to ensure that we provide loans to families to access housing.

[John Williams, Reform, St. Albert, AB]

Mr. Speaker, my question concerns the insurance program. I understand that there are two programs: one is offered by CMHC and one is offered by a private organization.

The hon. member is adamant in telling us that there is no cost to the government. I am trying to understand why the government is involved.

I was talking the other day about the Small Business Loans Act, which again is money being channelled through bureaucrats at no cost to the government. I am trying to understand what benefits are being offered through this program if they are also being offered through the private sector.

If there is no cost to the government, why is the government involved in cycling the money through bureaucrats by charging people who buy houses to compensate the lenders who have mortgages that go into default? Why is the government even in the business? The private sector can do it just as well, just as efficiently, and under the rules there is no cost to the government. Why is the government even involved if there is no cost to the government and the private sector can do it better?

[Jean Augustine, Liberal, Etobicoke—Lakeshore, ON]

Mr. Speaker, I thought I addressed in my statement as part of this debate why I think the private sector cannot do it better and also the constitutional responsibility for banking and finance, which responsibility rests with the federal government.

CMHC mortgage insurance and guarantee are a demonstration that we are fulfilling that responsibility. To leave it up to the private sector, we would have a patchwork. As I said earlier in my statement, there would be regions and areas of this country where the private sector would find it not viable to do business.

When we are looking at our country from coast to coast to coast, it is important for us to recognize that if we are looking for equality and access for all Canadians, no matter where they live, rural, urban, et cetera, we should provide the avenues and the support so that we do not leave this solely to the private sector, whose bottom line is always dollars.

[Maria Minna, Liberal, Beaches—Woodbine, ON]

Mr. Speaker, I have no doubt of the importance of the federal role in housing. It is not that long ago that modest income Canadians were able to buy a modest first home, but that is no longer the case. Finding a large chunk of money to put down is no longer possible.

I know there are still members on the opposite benches who have problems with this. I would like to know if the hon. member could give us the national benefits for the federal government investing in this area. It is important to look at not just regions or certain areas where there is accessibility to housing, but at the national interest as well, in terms of ensuring that modest income Canadians are able to buy modest homes for the first time in their lives, which gives them a sense of some form of stability. Would the hon. member do that for us?

[Jean Augustine, Liberal, Etobicoke—Lakeshore, ON]

Mr. Speaker, I will focus on one aspect, and that is the provision for assistance given to social housing.

The federal government continues to provide $2 billion annually in social housing assistance to support the more than 661,000 existing units across this country. Over a million low income Canadians whose housing needs cannot be met through the private sector market benefit from this assistance. This housing assists some of the most disadvantaged members of our society, including seniors on fixed incomes, aboriginal people, persons with disabilities, families led by single parents, social assistance recipients, and the working poor. It is important to note that this support, which is also part of the debate here today, cannot solely be left to the private sector. CMHC activities contribute to that stable supply of affordable housing, which increases the economic benefits for all Canadians and provides our quality of life.

CMHC's research demonstration and information transfer activities improve housing and living conditions and make the housing market more efficient and competitive. New technology, housing technology, building science, and promoting good living environments all provide us with safe, healthy, and sustainable development. These are all part of the work of CMHC and the research that is being done in that area.

When we talk about support that is given to the whole issue of the CMHC mortgage insurance fund and the support it needs, it is important to note not only the quality of life but also the science and technology aspect, which provides employment for Canadians.

[Bill Gilmour, Reform, Comox—Alberni, BC]

Mr. Speaker, it gives me a great deal of pleasure to speak to Bill C-108, an act to amend the National Housing Act. This is a very brief bill, just four lines long, but the impact is significant.

I listened to my colleague's debate, and her argument is basically that CMHC is going to turn off the tap. That is not true. This bill is about raising CMHC's loan limit from its present $100 billion to $150 billion. We are not talking about limiting what is already there. The pot is huge, $100 billion. That is $100,000 million that CMHC has to deal with presently. This bill would raise it by another $50 billion.

We object to that because of the state of the country. This country is now $564 billion in debt. We cannot continue to carry on programs that are going to cost the government money. I object to my colleague's statement that this does not cost the country. It does indeed cost the country.

If we are going to address our debt, the first thing we must do when we are in a hole is stop digging. Right now this bill continues to dig the hole. We cannot increase our debt any more. The country is broke. Let me repeat that: we are broke. This bill is going to add more liability to the country. It does not stop anything. It does not stop the $100 billion that is already in the pot. It is an increase.

I would like to comment on the experiences of New Zealand. We were briefed on this bill by CMHC and I asked what is CMHC's ongoing liability, because it is into mortgages 5, 10, 15 and 20 years ahead. It does not know. Current accounting practices say that you only have to be five years ahead. That is the window. I find

it incredible that a corporation dealing with this amount of money does not know its total liability.

New Zealand put in legislation which states that every year the government has to publish all liabilities of the government and all crown corporations. It was a real eye opener, because a number of areas like CMHC had to disclose exactly what their liability was. Right now CMHC is not doing that.

Another concern we have is that the government is sending mixed messages. It wants to decentralize. The Prime Minister has said that. We had a referendum in Quebec the other day that was about decentralization. Yet the bill goes in exactly the opposite direction. It enshrines more power into the federal government at a time when the federal government should be passing its powers down to the provinces.

Canadians want a smaller federal government. We are overgoverned, overregulated. Business is telling us to get out of their faces and let business do what business does best, run their business. The best thing the government can do is get its house in order. This bill goes in exactly the opposite direction.

I offer to my colleagues across the way a 20-point plan to decentralize the federal government. In fact Preston Manning spoke at the Canadian Club last week and got a standing ovation from the business people who recognized that a number of points of duplication between the federal and provincial governments have to end. Environment, natural resources, culture, and housing should all be done at the provincial level.

Private enterprise is already into the mortgage business. CMHC is already into it to the tune of $100 billion. There is no need to increase it by another $50 billion. One hundred billion dollars is just fine, thank you very much. Let private enterprise do what it does best and deal with this issue.

My colleague was saying that this does not cost the government any money. Let me remind you about the downturn in the early eighties. We can all recall that people in the housing market in Toronto, Vancouver, and Winnipeg were walking into their banks, dropping the keys on the desk and saying: "Take it". Because of the downturn in the market, their mortgage was worth more than their house. If that happens, ladies and gentlemen, guess who is going to carry the can? The Canadian government.

[The Acting Speaker (Mr. Kilger)]

With the greatest respect to ladies and gentlemen, I would remind members to address the Chair. Clearly I am of one gender and not the other. I think it is far safer for our debates to go through the Chair.

[Bill Gilmour, Reform, Comox—Alberni, BC]

Mr. Speaker, my apologies. I shall certainly go through the Chair.

People will remember the number of people who walked away from their mortgages back in the eighties. The government, CMHC, had to pick up the tab. That is what will happen in this case if there is a market downturn.

To say that there is no cost to the government is completely wrong. There may not be today, but with the volatile interest rates and with the Quebec situation the money markets are very unstable. There is an excellent potential that this could end up hurting Canada, hurting the government, and costing us money.

Another point in the bill that concerns me is paragraph (b), which refers to "any additional amounts authorized by Parliament for the purposes of this section under an appropriation act or any other act of Parliament". This concerns me, because I am not sure whether additional funds would come back to this House or whether in fact we are talking order in council. That concerns me greatly. If it comes back to this House, that is fine. If it goes to cabinet, that is not fine. Then we are not sure what is going on behind closed doors.

I would like to conclude by saying that I do not believe this government is listening. We are broke. CMHC is already in to the tune of $100 billion. We object to putting Canadians further in debt. That is the reason Reform will oppose this bill.

[Réginald Bélair, Liberal, Parliamentary Secretary to Minister of Public Works and Government Services]

Mr. Speaker, I have been listening with great interest to members of the Reform Party digressing on this bill. To date all of them have led Canadians who are listening to us to believe that this extra $50 billion in liability insurance would be added to the deficit and the national debt that exists already. This is absolutely false.

My question for the hon. member for Comox-Alberni is: In terms of numbers, how much is it going to cost the Government of Canada with this new mortgage insurance fund?

[Bill Gilmour, Reform, Comox—Alberni, BC]

Mr. Speaker, the amount will depend on exactly how bad the downturn in the market is. When people walked away from their mortgages in the early eighties, the difference between the value of the house and the mortgage is what CMHC had to pick up.

I cannot give a number. It is going to depend entirely on how much interest rates go up and how many people walk away from their mortgages. It could be a very large number, in the billions of dollars.

[Myron Thompson, Reform, Wild Rose, AB]

Mr. Speaker, a previous statement was made by a member of the House. When we questioned the idea of turning this kind of enterprise over to the private sector, the reply was that it was not viable in some areas for

the private sector to do it. That means if it is not viable then it must cost. Why would the private sector not do it if it does not cost?

Does the hon. member agree that if the private sector is saying in some areas it is not viable there is a cost that is recognized by that sector?

[Bill Gilmour, Reform, Comox—Alberni, BC]

Mr. Speaker, of course there is a cost. CMHC has nearly 3,000 employees. They are not counting the cost of running the operation. A private insurance company does not have that cost. The cost to the Canadian people is clearly there.

I have difficulty with a member's comments earlier when she said there really was not any cost to the government. She said they were going into areas that were not viable. They cannot have both. It is either viable and we are making a profit, or if CMHC is going in there and it is not viable somebody is losing money. Guess who? It is the Canadian people.

[Maria Minna, Liberal, Beaches—Woodbine, ON]

Mr. Speaker, the hon. member across has made a great to-do about what it costs the government but he has not told us what that is. Perhaps we should put some facts on the table.

Concerning the CMHC's mortgage insurance fund, the premiums charged by the corporation in addition to the value of the property assist in covering the liability. That is why the fund has been more than self-sustaining. It has thus far returned $55 million to the government. The fact of the matter is that it is self-sustaining. It has not cost us.

We should have figures on the table when accusatory statements are made.

[Bill Gilmour, Reform, Comox—Alberni, BC]

Mr. Speaker, I guess any accountant can make figures talk and I can certainly talk to members opposite.

CMHC has been self-sustaining in the past few years. It was losing buckets of money until it got its house in order. If there is a downturn in interest rates it will cost us more buckets of money. Clearly they are talking out of both sides of their faces.

[Geoff Regan, Liberal, Halifax West, NS]

Mr. Speaker, is the hon. member aware that approximately one-third of the housing stock in the country has been built with the assistance of National Housing Act insured financing? In other words, without this kind of financing, one-third of the houses with all the benefits and all the spinoff effects they had for the economy would not have been built.

Is the member for Comox-Alberni aware that 3,944 of his constituents have purchased homes using funds insured by CMHC since 1992? Is he aware that 917 of his constituents have purchased homes taking advantage of CMHC's first home loan insurance program since 1992?