Evidence of meeting #214 for Finance in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was program.
A recording is available from Parliament.
12:30 p.m.
President and Chief Executive Officer, Mortgage Professionals Canada
It's a very surgical program. It allows the government to make statements that it's supportive of construction, even though I'm not really sure there's going to be an awful lot of take-up with the program that would create that.
12:30 p.m.
Conservative
12:35 p.m.
President and Chief Executive Officer, Mortgage Professionals Canada
I think it's supposed to create jobs within the construction industry more than it's supposed to be inflating values, because the restrictions on income multiples would actually keep that activity level down, I would say.
I don't know if you want to add to that, Michael.
12:35 p.m.
Conservative
Blake Richards Conservative Banff—Airdrie, AB
You're convinced that it won't have much take-up, so therefore, it maybe won't have that intended effect. Is that what I'm hearing?
12:35 p.m.
President and Chief Executive Officer, Mortgage Professionals Canada
Yes, I don't think it's going to be as successful as projected.
12:35 p.m.
Liberal
The Chair Liberal Wayne Easter
We'll give you another chance after he answers. We have lots of time today.
12:35 p.m.
Chair, Board of Directors, Mortgage Professionals Canada
I think the potential exists that it would dissuade homeowners from investing in their properties. If the government is sharing in the gains of that property but is not sharing in the cost of renovations or landscaping or such, it might have a knock-on effect there as well.
12:35 p.m.
Conservative
Blake Richards Conservative Banff—Airdrie, AB
That's interesting.
The other angle that concerns me, and I want to hear your thoughts on this, is with regard to the government's equity portion of this. I know it's hard to imagine in most markets in Canada right now, but there are times when housing prices can decline. We don't know the details, but if this were to end up being such that we would be exposing the taxpayer to some risk if home prices were to decline, would the government's share of equity also decline? One would assume that would likely be the case.
Given that you've already indicated that you don't see there being a lot of take-up here, is there maybe more potential risk to taxpayers than there is potential benefit for anyone?
12:35 p.m.
President and Chief Executive Officer, Mortgage Professionals Canada
I could probably get a much more technical answer from one of the insurers that belongs to our association, but at first blush, I would say that I don't think there's any real additional risk. Because the insurance already existed on the mortgage, in the event that there was a downturn and somebody had to default, there would be taxpayer liability already.
On the potential for regional depreciation, I think the current regulatory environment in the mortgage marketplace is such that it has actually created pretty significant equity erosion in quite a lot of markets. It's not difficult to imagine. I just came back from Regina, and there's quite a lot of activity reduced there.
If we don't try to address the restrictive marketplace measures that are there, we create a bit of a self-fulfilling prophecy that drives prices down, and that potentially creates a problem. We really need to look at an equilibrium through the current stress test to make sure that we're not continuously choking down. I know that critics say that we're trying to add fuel to a fire. We're really not. We just want to stop pouring so much water on it.
12:35 p.m.
Liberal
The Chair Liberal Wayne Easter
We'll have to leave it there. We usually run out of time because we usually have an hour and a half per panel. Today we have two. We're doing fine.
Mr. Ainley and Mr. Côté, you haven't been in any of these rounds yet. If you want to come in and there's a point you want to make, raise your hand.
Ms. Bendayan.
May 16th, 2019 / 12:35 p.m.
Liberal
Rachel Bendayan Liberal Outremont, QC
Thank you very much, Mr. Chair.
Thank you to all the witnesses.
I just have a few questions for Mr. Ainley, and I'll ask them in English.
I was very interested in the specific recommendations that you put forward. I want to give you an opportunity to expand a bit on the third recommendation.
Public-private partnerships work very well in Quebec and in Montreal. I would be interested to hear a bit more about the recommendations for amendments that you're proposing with respect to P3s.
12:35 p.m.
Chair, General Contractors Alliance of Canada
P3s are a slightly different form of contract. There's actually a project agreement that exists between the public-private partnership entity, which has no assets, and the particular owner. In this case it could be Defence Construction, by way of example. That entity then contracts with the general contractor.
The prompt payment legislation as written doesn't recognize that relationship. It has the lenders concerned, because they don't have direct visibility into the payment scheme as they would under a traditional, non-prompt payment piece of legislation.
The simple answer is they think their security is at risk. Ontario shifted the definition inside a P3 contract, the project agreement, to have the general contractor take the upfront piece when it comes to prompt payment.
It's not a lot of language. It's about five or six clauses, but it would work very neatly inside this particular bill. It's proven, and there was a lot of heated debate in Ontario when Bill 142 was passed. In fact, the lenders were not going to play. There was a big sit-down with the Attorney General and the drafters to dissect the agreement inside a P3 arrangement. When everybody understood the problems, the answers came out fairly quickly and were then incorporated into the final piece of legislation, which is now law.
12:40 p.m.
Liberal
Rachel Bendayan Liberal Outremont, QC
Thank you.
You also mentioned in respect to your second recommendation that approximately 50% or more of the disputes are related to a failure to pay a change order.
In your opinion, would that be alleviated, somewhat at least, by your first recommendation with respect to invoice changes?
12:40 p.m.
Chair, General Contractors Alliance of Canada
No.
They are two different pieces, actually. The one you just referred to, your second piece, is that it's normal for invoices to be negotiated every month. A general contractor receives 20 to 30 invoices monthly from its subtrades. They negotiate a bit. Then it's incorporated into the bill that goes to the owner. That is the bill I'm referring to.
That's the invoice that goes in every month. It's normal for the general contractor and the owner, usually through the architect or engineer, to negotiate that bill. In Ontario and the other provinces that have adopted this type of legislation, they've allowed that negotiation to take place. That's your last point first, if you will.
12:40 p.m.
Chair, General Contractors Alliance of Canada
It is successful, because it prevents unnecessary adjudications. It's an operational thing. The aim of legislation is to try to take away problems. It's trying to drive cultural and behavioural change. It's getting people to actually work out the problems as they occur and not save them up.
To your first point on changes, every project goes through changes. It's normal. Owners change their minds or unforeseen conditions come up, and that sort of thing. Contractors have issues. There are changes. Typically what's been happening—and this is sort of an aged problem—is that the changes are usually slow to adapt. Every contract you sign as a general contractor or as a subtrade says you're not supposed to make any change without a signed change order. Nobody does that. It's bad, but that's just the cultural norm, because you want to make the change to keep the project moving. You're looking for timely processing of submissions of the costing for that change, its review and the eventual change order, which amends the contract. Then you pay on that.
If you look at the backlog and why prompt payment is actually here in front of us today, over half of the cases—and 50% is actually a conservative number on that; our statistics say it's more like 60% to 65% of the prompt payment issues—are a direct result of slow processing of changes on a project. Often the owner is actually saving them up until the end of the job, which effectively has the general contractor and its subtrades bankrolling the job on changes for the owner. That's something the industry is fighting against.
12:40 p.m.
Liberal
Rachel Bendayan Liberal Outremont, QC
Thank you.
I do have further questions, but I also have another round.
12:40 p.m.
Liberal
12:40 p.m.
Liberal
Rachel Bendayan Liberal Outremont, QC
No problem.
My question would be for Ms. O'Leary.
I noted that in your response to questions and in your earlier testimony, as well as in the brief you submitted with your recommendations, that by and large, although you do have several recommendations, you are not looking to amend or change anything with respect to the substantive policy in the national poverty reduction strategy. Is that correct?
12:40 p.m.
Analyst, Socio-Economic Policy, Citizens for Public Justice
Yes, it is. We've called for all the pieces that are included in the legislation and the strategy so far—targets and timelines—not so much an official poverty line but certainly the need for clarification around poverty rates and also for the advisory council. Those are all things we wanted to see as well as legislation for the strategy.