Evidence of meeting #169 for Finance in the 42nd Parliament, 1st session. (The original version is on Parliament’s site, as are the minutes.) The winning word was municipalities.
A video is available from Parliament.
NDP
Peter Julian NDP New Westminster—Burnaby, BC
I'm trying to dig into the figure. A few years ago, our infrastructure deficit was $120 billion in Canada. What is it now?
Director, Policy and Research, Federation of Canadian Municipalities
We haven't undertaken a repeat exercise like that to give an updated figure. We felt that the more helpful way was to look at the condition of our existing assets as we move forward. We published that infrastructure report card in 2016. Statistics Canada, with federal funding, is now doing a similar exercise on a rolling basis. That has just started. That's the core public infrastructure survey.
When it comes to new assets, new areas of need, we do undertake research to do that. We don't have a number to share today on the adaptation piece, but it's something that's a priority for us.
NDP
Peter Julian NDP New Westminster—Burnaby, BC
Would it be fair to say that the infrastructure deficit has increased?
Director, Policy and Research, Federation of Canadian Municipalities
We have a combination of existing assets, and programs like the gas tax fund and the investing in Canada plan are helping to address those. I think it's fair to say, especially when you're talking about disaster mitigation adaptation, that the needs are only growing in terms of how we need to tackle that.
You talked about the DFAA program. It has a cap of 15% on “building back better” with money that the federal government disburses. That's the kind of thing we need to change, going forward, to tackle that particular deficit.
NDP
Peter Julian NDP New Westminster—Burnaby, BC
Okay. I'll stop questioning on that, but I think it would be helpful to see any internal figures from the FCM that indicate how we have progressed over the last five years. I assume, from what you're saying, that the needs are much greater than they were even five years ago. It would be helpful, I think, for the committee to have that information. When you get back to the office, if you have some figures to dig out for us, that would be helpful.
My final question is about housing.
In my riding, in my community of Burnaby, we have people who will be homeless within three days, people who are desperately searching for housing. How important is it for the federal government to be investing now, to be building affordable housing units now, whether that's co-op housing or social housing?
First Vice-President, Federation of Canadian Municipalities
We talked briefly about how with the national housing strategy that was in fact released by the federal government, approved last November, there's just a real transformational change in this country as well to be able to have that. I was very pleased with the May announcement this year on the funding, which is rolling, but more money is needed, certainly for repairs. We stressed that in our proposal.
The money needs to flow for all aspects of the national housing strategy. It's something that certainly we've had great conversations about, going back. Mike Layton has talked about it. I've talked on many occasions here to other members of Parliament. It's just great to be at a point where we have the strategy. Now we need the funds to continue to flow.
Liberal
Francesco Sorbara Liberal Vaughan—Woodbridge, ON
Thank you, Mr. Chair.
Welcome, everybody. Good morning. I'll try to get to a few of you here.
To the FCM, thank you for your presentation. I would like to read one of the sentences from it:
The government has delivered historic levels of investment and engaged in unprecedented dialogue with local governments. The past three budgets have forged new tools like the Investing in Canada Plan and the National Housing Strategy, and municipalities are delivering transformative outcomes for Canadians with these new investments.
I take that to mean that PTIF 1, the public transit infrastructure fund, and now PTIF 2 are working well for municipalities, and the relationship between the federal government that I'm part of and the municipalities is constructive and working well for Canadians. Is that correct?
First Vice-President, Federation of Canadian Municipalities
I'm a municipal councillor, so I found it very hard to answer with one sentence, but that is correct.
Liberal
Francesco Sorbara Liberal Vaughan—Woodbridge, ON
No, no, you can elaborate for another 15 seconds, if you wish.
First Vice-President, Federation of Canadian Municipalities
It's very accurate. We are at a time when.... This is successive governments, I have to say. It's an evolution to where the FCM is very pleased and proud of the relationship we've had with governments. The recommendations we make are based on sound financial policy-making at our staff level. Certainly the amount of money, the $81 billion over 11 years, is huge, but we are here today, as we noted in the remarks, to talk about a conversation that needs to be had, a mature conversation about how that fiscal framework can work for us better in the future.
Liberal
Francesco Sorbara Liberal Vaughan—Woodbridge, ON
Yes, absolutely. Part of the city of Vaughan is in the riding that I have the privilege to represent. The gas tax funding delivered approximately $8 million to the entire city. That's one mechanism whereby dollars go directly to the city, which is great, and we need to look at other mechanisms as well.
Going over to CREA, our government has put in place, along with some of the arm's-length agencies, macro prudential measures, as we'll call them, to ensure that the quality of debt that Canadians are taking on is good debt and that we're not seeing over-leveraging. If you read some of the Bank of Canada reports, which I like to do on occasion, you'll see that the quality of that debt—the FICO score, as they call it, the credit score—is improving. We don't want to get in a situation of moral hazard, if I can call it that.
I think we've done the right things in terms of housing markets on the federal level. We all know—Mr. McColeman knows this quite well—that there are four levels of government in some places, because you have the regional level of government, municipal and provincial, and the housing market is complex. There are things that we can do at the federal level and could look at.
If you wanted to rank at the federal level.... I'm not talking about development charges or the availability of land, because those are decided at different levels of government, but at the federal level, are there one or two key things that you think would be most constructive for housing affordability?
Chief Executive Officer, Canadian Real Estate Association
Yes, and you're right that regulations are right across the board, but if I can focus on federal government and in particular on the stress test, I agree with you 100% that the measure was required. If you speak to members of our industry, particularly in Toronto and Vancouver, they will agree with you, because they felt first-hand the impact of a really superheated market, and they're happy with the result that has occurred.
Unfortunately, because of the urgency with which that was brought in, and perhaps the level of coordination with which that was brought in between the various agencies—OSFI, Bank of Canada, Finance Canada—they weren't really too sure exactly how it would work, and they're probably pleased with how it's worked.
What we're pointing out now is that there are unintended consequences in markets that were not out of balance. That's where it can help—
Liberal
Francesco Sorbara Liberal Vaughan—Woodbridge, ON
I'm going to stop you there, because I have one more question, if I may, Chair.
A house is a family's largest investment, and we have a home ownership rate right around 69% or 68%, I believe it is. We have a very strong housing market, and we need to keep it there.
To CMC Microsystems, in our past budget reports, we've commented about the Naylor report and how transformative that report and its recommendations are. Our government has put in, in prior budgets, investments in fundamental research and basic research.
You commented this morning about how the Naylor report is a good road map for the government to follow. Can you elaborate on your comments? I think your presentation is insightful this morning.
President and Chief Executive Officer, CMC Microsystems
Yes, clearly much of the Naylor report really talks about funding a lot of basic science, but it's the applied science that we work with most often, taking laboratory results and turning them into products, turning them into commercially viable inventions and innovations. That's where we think it really hit the nail on the head. We're very keen.
It also had a lot of recommendations about major science initiatives in Canada and about the funding levels and the methodologies that I think were very positive for us.
Liberal
Blake Richards Banff—Airdrie, CPC
Thanks.
I'll start with the Real Estate Association and go back to the stress test. I guess, really, when you look at the effect it has had, in combination with some of the other changes that were made, it made it more difficult, particularly for first-time or young buyers, to be able to even save a down payment and get into the market. The stress test has added to that.
I saw recently an article, I think last week, in The Huffington Post that talked about some of the other unintended consequences, besides the ones you've mentioned, which are the effects on other markets outside of Toronto and Vancouver. I've seen very significantly in my area, the Calgary area, the impact that has had on people in this difficult time that we're facing there, when maybe they're trying to downsize into a smaller home so they can find a way out, but they can't do it because the value of their home has dropped and it just isn't something that makes any sense to do. It's really having an impact on a lot of families.
However, the other impact we've seen, according to that article, is that the number of mortgages being issued to those between the ages of 73 and 93 in the first quarter of this year jumped by 63%. That doesn't even include reverse mortgages. That doesn't even include HELOCs, so those numbers are probably even higher. At the same time, we saw the number of mortgages issued to millennials fall by 19% and the number to Generation Z by 22%. You can obviously see what's happening there. What we're seeing is that people are going to parents or grandparents and saying, “Help me out here, because I can't do this anymore.”
We also had the Home Builders' Association here a couple of weeks ago, and they were telling us that what they think they've seen is people aren't getting mortgages. The goal here was supposed to be to make sure people weren't getting into debt they couldn't afford, but what they're doing instead is just going and buying a fancy new vehicle because they're going to rent instead.
Have you seen those types of consequences as well, and is this policy really going to have any impact on those types of issues when what we're seeing instead is this type of increase in mortgages amongst people in the older generations who are trying to help out the younger generations, or people taking on other types of consumer debt that certainly doesn't have the enduring value that investment in a home would?
Chief Executive Officer, Canadian Real Estate Association
It's interesting. In a study that we just completed, when we asked millennials about, for example, the extension of the home buyers' plan so they could borrow from their parents' RSP, it was much less popular than the idea we presented today, which was to increase the tax credit.
The reason is that they don't want to take their parents' money if they don't have to, but certainly intergenerational support for home purchasing has been around for a long time. There's nothing wrong with it. However, to your point, in places such as Calgary where the economy is already pretty difficult, the stress test has had a very significant impact in that market.
We believe there are ways that the government agencies that are involved in this could calibrate the stress test so that it is still highly functional in those markets that are out of balance, such as Vancouver and Toronto, but would not be so punishing to places such as Calgary and Regina.
Banff—Airdrie, CPC
Thank you.
Hopefully I'll have time to get to a couple more witnesses here.
I guess it will only be one. I'll go to the FCM. I had some questions for Food and Beverage Canada, but we'll have to save that for after the meeting.
I've had a lot of concerns from a lot of municipalities in my area about the marijuana legalization and the impacts that are being downloaded on them. They're confused about what they're supposed to do, and more importantly, they're not sure how the heck they're going to pay for the consequences. Is this something that you're hearing right across the country, and what are your thoughts on that?
First Vice-President, Federation of Canadian Municipalities
Thank you very much for that question. It's a question I ask myself every day in terms of how to better address the needs of municipalities across the country.
From day one, FCM did mention that we're willing partners with the federal government that is going to pass this legislation into law in October to deliver to our residents the cannabis regime, as long as it's done safely, effectively and with no cost to the municipalities. The federal government, I do believe, did its part by stepping up in December of last year and changing the initial formula on the excise gas tax from a 50:50 ratio between the province and the feds to 75:25.
The Prime Minister has been very adamant in budget 2018, and in subsequent occasions when I've had the honour of meeting with him in Halifax at the FCM conference, that the 25% and more, if necessary, was meant to run through to municipalities to cover our costs. The costs are real, and the arrangement is such that now only two provinces in Canada signed or even verbalized agreements with municipalities as to how those costs are going to be covered. In Halifax we have the concern on a weekly basis. We're passing new bylaws, we're spending staff time, and there is frustration in trying to procure that money, and on many occasions—I say respectfully—it's falling on deaf ears at the provincial level.
This is again a great example of why, collectively, we need to be together and talk about a mature and modern mechanism and framework for fiscal policy, because the current model as far as our getting the 25% is concerned is that we have to knock on the doors harder to get in.
