Finance Committee on Sept. 18th, 2018

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Thank you.

[The Chair, Liberal, Wayne Easter]

Okay, we'll move on to Blake Richards.

[Blake Richards, Conservative, Banff—Airdrie, AB]

Thanks, Mr. Chair.

Thank you all for your presentations and for being here. I'm going to focus, at least mainly, on you, Mr. Lee. I have some questions in regard to housing and some of the issues around it.

I'm obviously really concerned right now about first-time homeowners and homebuyers, whether buying new construction or whether it be resale, based on a few things. One of the issues is, of course, some of the mortgage rule changes that this government has made, and one of them is issues with the building code changes being proposed, in terms of the affordability issues that will be created.

I believe you've given some statements in the past that it creates costs somewhere between $30,000 and $50,000, I think, whether it be a new build or renovations required in order to sell a home. Those are significant issues. For the mortgage rules themselves, I've seen estimates that about 20% of people may not be able any longer to get into a home.

That's a big thing, right? That's a huge thing for Canadians. It's a source of pride to be able to say you're a homeowner. It's also often one of the best investments that many people make. This government is going to limit that opportunity for maybe as many as 20% of people who might have otherwise had that opportunity.

You mentioned some of these things in your opening remarks, but maybe I'll give you an opportunity to elaborate a bit on some of those thoughts. I guess I'll start with the mortgage rules, the stress test.

Do you see that significantly decreasing new home construction and therefore potentially employment in Canada as a result? Obviously, as we know, new home construction is a significant source of employment. What are your thoughts on that, and in addition on the ability of people to get into a home for the first time?

[Kevin Lee]

There's no question that it's knocking people out of the housing market to a pretty significant degree. That affects jobs. It affects construction. Unfortunately, it affects jobs and construction in the most extreme manner in the areas that can least afford to have it happen, in places like Alberta, which has been facing challenges with oil, forest fires, and so on; and Atlantic Canada, which is still trying to recover from 2009. In those areas where there is still an opportunity to have construction at a decent rate, we're seeing major slowdowns in what should be part of the local economy.

I think the other thing we have to look at when we're knocking people out of the housing market is that we're not just talking about the current economy; we're talking about the future. Where are these people going to be at the time of retirement if they are never able to get into the market? We heard stories, when some of the mortgage rules came in, of people being rejected and then going and buying a car, saying, “Well, we're not going to be able to afford a house; we're going to take the money we've saved and buy a car.” I don't think that that's the way we want to have our financial planning occur in Canada. We would like to see people investing in their future as an investment.

I also think that there's a strange leaning by some right now in suggesting that housing is a bad investment or that it isn't the investment it used to be. We know housing goes through cycles. Prices go up; prices go down; but over the course of time, just like the stock market, it's pretty darn steady, and it's putting shelter over your head. I think that we need to remember why Canadians are where they are in terms of success as a society. Home ownership has been a huge part, and it's time to re-engage in solutions for that.

[Blake Richards, Conservative, Banff—Airdrie, AB]

On that same line, with these building code changes that could potentially cost homeowners $30,000 to $50,000, what kind of an impact do you think that will have, both on new home construction and the ability for people to own a home?

Again, we want to try to encourage this, I believe, rather than, as you said, what we're seeing, which is sort of defeating the whole purpose. If people are just, as you said, creating debt in other areas because they can't own a home, I'm not sure that really serves any kind of purpose, or at least not the purpose that we've heard it's supposed to serve.

[Kevin Lee]

That's exactly right, and when we look at energy efficiency and housing, particularly new housing, we're doing incredibly well and have been for a long time. We're 50% better now than we were 25 years ago in new housing, and we continue to improve. The next changes are going to be very expensive changes. We've hit all the low-hanging fruit. As a simple example, we can't fit any more insulation in a wall, so we're getting fatter walls. That's not only more expensive to build; it's taking away from floor space.

Land prices, as everybody knows, are what's really driving a lot of the cost right now. You're talking about $30,000 or $40,000 when some of the stretch targets we're talking about are over the next 11 years. Eleven years is not a long time to change technology, and that's really what we're looking at.

Our main point on things like energy efficiency is that the code changes need to occur as they become affordable and not before, when they'll knock people out. We need to invest in research. We need to have affordability as part of the code process so that we don't say, “We're getting there no matter what the cost,” which, while not stated, is exactly where we are right now.

By 2030 we need to be at net zero ready levels. That's a 40% to 50% improvement in energy efficiency. It's $30,000 to $40,000 more on the average house, and that's in the Lower Mainland of B.C. In fact, in northern B.C., the latest studies show it might not even be possible with current technology to get to those types of levels in any way that makes sense.

We really need to look at it in such a way that we say, “If we want to get there, that's fine, but let's do it together. Let's find the affordable ways to do it, let's invest in research, and let's not put code provisions in place until we can show we have an affordable solution that's not knocking more people out of the market.”

The retrofit side is a whole other story. That's where the opportunity is. There is talk of regulation on the renovation side of the market. You have seen nothing in terms of push-back until you try to implement code effects on the retrofit side. Right now, when you change a code requirement, there's not really a voter there. That's why you see less push-back. You see organizations like the Canadian Home Builders' Association saying, “Hey, new homebuyers can't afford that”, but new homebuyers aren't really voters; they don't get that. However, try to say, “When you replace your siding, you're not just going to replace your siding; you're going to put $10,000 or $20,000 of insulation behind it,” and then you will hear about it. That's not going to go over very well. It's going to become very political. A tax credit, though, which incentivizes people to do it, is something we've seen work before, and we could see it happening again.

[The Chair, Liberal, Wayne Easter]

Thank you.

Mr. Julian is next.

[Peter Julian, NDP, New Westminster—Burnaby, BC]

Thank you very much, Mr. Chair.

Thank you for your contributions. They were very interesting presentations, with a lot of great ideas.

Mr. Kelly, when you talk about a pathway to permanent residency for temporary foreign workers, that's certainly music to my ears and hopefully to the rest of the committee.

Also, Mr. Lee, when you talk about the energy retrofit program, it's also music to my ears. Those are very important suggestions.

I'd like to start off by asking my questions to Mr. Morrison.

Mr. Morrison, Jagmeet Singh, our national NDP leader, and I met with housing advocates in Burnaby last Friday. What we found from the advocates, the organizations, and the individuals was that the Lower Mainland is in crisis. There are people who have just become homeless. There are people who are on the verge of becoming homeless.

One that struck me was a man named Edward, a tradesman who worked all his life and has a small pension. He said that in 14 days—and that's 12 days as of today—he would be homeless. He has been searching desperately for an apartment that will actually be within his price range.

Coming back to the issue of housing, do you feel we are in a crisis in certain regions of the country like the Lower Mainland, and what should the federal government do immediately to address that crisis?

Secondly, you raised the issue of 125,000 Canadian families being on waiting lists already. The housing plan the government has put forward will only build 60,000 units over 10 years. Where will we be in 10 years if we only build 60,000 units, when there are already 125,000 families waiting for housing? What does that mean over a 10-year period? How many more Canadian families will have to wait?

[Jeff Morrison]

Thank you. It's interesting and it's great to hear that you met with those advocates in Burnaby.

There was just the discussion about the private market and home affordability. Yes, of course that's important, and for many Canadians, yes, home ownership is a dream. However, we also have to remember that for millions more Canadians home ownership is not the dream: it's just simply having access to any home that is the dream. For those roughly 250,000 Canadians who are homeless every year, it's any home that is the dream.

Are we in crisis? For many years the federal government had not been investing what it needed to into the non-profit and affordable housing sector. We saw growth in social and non-profit housing in the sixties, seventies and eighties. It was the ending, the completion, of operating agreements in 1993 that really precipitated the decline in both the quality of affordable housing and the supply of it.

Would I say we are in crisis? Yes.

Just to clarify, the wait-lists are more than 125,000 people. I was referring simply to two cities in Canada. When you add in everything else, it's significantly higher.

[Peter Julian, NDP, New Westminster—Burnaby, BC]

How high would it be?

[Jeff Morrison]

The fact is that we don't actually know the national wait-list, simply because jurisdictions both locally and provincially count wait-lists for affordable housing in different ways. At this point, because we have also not had the investment in research we need in affordable housing, we don't have a solid national number. We just have really anecdotal evidence from individual cities and, in some cases, provinces.

[Peter Julian, NDP, New Westminster—Burnaby, BC]

Would it be fair to say that we're talking about hundreds of thousands of Canadian families?

[Jeff Morrison]

It is that at a minimum, absolutely, on wait-lists. These are Canadians who have registered to be in an affordable housing unit. This does not generally often include, for example, homeless people who may not register. It is, I would argue, a crisis.

Also, in terms of the solution, again, I think the national housing strategy started us down that road to increasing access and particularly supply. As I said in my remarks, though, there need to be additional significant tools and policies designed to do that.

One quick example I can give that the federal government could do tomorrow is with the new Canada Infrastructure Bank. Affordable housing developments are not an eligible project under that bank. We have asked the Minister of Infrastructure to do just that. That's one example, but there are others we could use.

[Peter Julian, NDP, New Westminster—Burnaby, BC]

Coming back to the issue, then, of housing, if we build 60,000 units over 10 years, is that anywhere near adequate to address wait-lists of hundreds of thousands of Canadian families who are desperately seeking affordable housing?

[Jeff Morrison]

It's a first step. It is certainly not at all what is required. We definitely need more.

[Peter Julian, NDP, New Westminster—Burnaby, BC]

Thank you very much for that.

Do I have another minute or so?

[The Chair, Liberal, Wayne Easter]

You can have a short question.

[Peter Julian, NDP, New Westminster—Burnaby, BC]

It's a short question for Mr. Stratton. You mention in recommendation 17 that the federal government should not look to duplicate work already being done by insurers for a national pharmacare plan. Of course, the Parliamentary Budget Officer actually says that businesses would save about $6 billion and that overall, as Canadians, we'd save $4 billion with a national pharmacare plan. I'm a bit concerned, then, about the idea of not duplicating, because it actually adds to costs.

Is the Canadian Chamber of Commerce opposed to a national pharmacare plan that is universal?

[Dr. Trevin Stratton]

We're for a filling-in-the-gaps approach to a national pharmacare plan. It depends which study you look at, but most Canadians are covered under a private plan or a provincial plan when it comes to pharmacare. We don't want to duplicate that work that's already being done. Most Canadians also seem to be relatively satisfied with the pharmacare that they have. It's very important that people who don't have access to it do get access to it, so that's why we're for a filling-in-the-gaps approach to national pharmacare.

What we hear from a number of our members—to represent the views of employers on the issue—is that they use their current private plans in terms of attracting and retaining employees, both in Canada and from abroad, and that this is an important aspect of the current system. They don't want to throw out the baby with the bathwater.

[The Chair, Liberal, Wayne Easter]

Thank you all.

Mr. Fergus, you have five minutes.

[Greg Fergus, Liberal, Hull—Aylmer, QC]

Thank you very much, Mr. Chair.

I would like to thank all the witnesses for being here today to discuss their prebudget consultation submissions. I also commend them for everything they said about competitiveness, which is truly an important issue. It is the general topic our committee has chosen.

I have a lot of questions for you, but I have to select a few.

I will begin with a question for Mr. Morrison about affordable housing.

Mr. Morrison, I have been involved in this area for a long time. I am familiar with your association's work over the years. Thank you for your work in partnership with the government on the National Housing Strategy.

Canadians and everyone here know that this is the first time in a generation that Canada has had a housing strategy; it is a 10-year plan. According to your first recommendation, this program should be extended over a longer period of time.

Can you provide the historical background and tell us more about why this program should be extended over a longer period?

[Jeff Morrison]

Thank you for your question. If you don't mind, I will answer in English.

This is the first national housing strategy that we have seen in generations. There is some debate among academics on whether this is the first in history or not; I'll leave that to the academics.

Clearly, as I mentioned previously, the federal government had been involved in affordable housing, and supported it through the implementation of operating agreements throughout the postwar generation—the sixties, seventies, eighties. We saw CMHC and the federal government back out of implementing any new operating agreements in roughly the early nineties, and since that time we've seen very little federal engagement in the social housing sphere. Clearly the national housing strategy marks the return of the federal government to a leadership position with respect to affordable housing.

It is a 10-year plan. I know there has been a lot of welcoming feedback on that long-term element of the plan. However, there are some components of it, as I mentioned in my remarks, that are of concern.

For example, the federal community investment will essentially see operating agreements for federal operating agreement holders being extended up to 10 years, but the federal government has signalled that it wants to then essentially wean itself off the subsidy model. That's raised several concerns, particularly for housing providers who serve the most low-income populations or very vulnerable populations. I think we are looking for some signals from the federal government that, yes, this is 10 years, but that the federal government will remain in the business of social housing beyond that. I know it's difficult for this current federal government to be able to commit to something beyond a 10-year time frame.

One thing we do hope for, which will essentially bind the federal government to maintaining its presence in social housing, will be the introduction—we hope this fall—of the right-to-housing legislation that Minister Duclos has promised. We're hopeful that we'll be seeing that in the House this fall.

[Greg Fergus, Liberal, Hull—Aylmer, QC]

Thank you, Mr. Morrison.

My next question is for Mr. Kelly and Mr. Mains and pertains to the capital cost allowance.

Mr. Mains, you said the amount should be increased from 30% to 40%. For your part, Mr. Kelly, you suggested 100%.

I do not have much time left, but I would like to hear briefly from you both on this so it is reflected in the record of proceedings.

[Howard Mains]

There are certain groups that we've seen ask for the 100% in their submissions, and we're certainly supportive of that. There are times, though, when pure practicality of matters comes into play. Having watched the Department of Finance over the years, I would be cautiously optimistic if they would move from 30% to 40%. I'm sure that would be a welcome change.

[Daniel Kelly]

From our perspective, there are certainly many ways to achieve that goal, and I think the business community would be pleased if the government were to take one of those paths toward that end. The method that we prefer, that we've suggested, is to borrow from the U.S. approach, which is to allow 100% deductibility in the first year for certain types of assets.

The way that the government could work to control the costs is by setting a threshold under which there would be a 100% deductibility. For example, in the U.S., it started at $500,000 under Obama; it's now a million dollars in the first year.

We have suggested that the Canadian government could announce a multi-year plan whereby there would be 100% deductibility under $100,000 or $200,000 in year one, and then the bar would go up after that. That's the way that Parliament may find its way to afford it. While the small and medium-sized firms would get the benefit right away, it would be a pathway for the future.