Thank you.
I am the president of the national association and a builder developer from Toronto. I am joined by Jason Burggraaf from our association's staff here in Ottawa.
Thank you to the committee for undertaking this study.
Simply put, housing matters. It matters to the economy. It matters to our huge industry of small businesses, which supports over a million workers. It matters to Canadians, who recognize home ownership as the cornerstone of attaining the middle class, and it matters that all Canadians have the security of a decent roof over their heads.
We know that there are ways to address stability concerns without causing damage to our industry or the economy. We are concerned that measures to cool markets can easily precipitate economic decline, triggering the very conditions they were intended to safeguard against.
We are also concerned that these measures move CMHC away from its purpose under the National Housing Act—to ensure equal access to mortgage markets for all Canadians.
If such measures lock out otherwise qualified homebuyers, they can cause a downward spiral in local economies. We need to be careful, because residential construction has been a major source of stability for Canada's economy in recent years. Today, residential construction supports over a million jobs, pays $58 billion in wages, and generates over $128 billion in economic activity, including over $41 billion in government revenue.
Home building and renovation are a vital part of every community, large and small, across this country, so effective housing policy is key to supporting Canadians, businesses, and communities in achieving inclusive economic growth. If we are going to support the middle class and those aspiring to join it, we need to ensure that first-time homebuyers and new Canadians have a fair chance to attain the cornerstone of the middle class, and that's home ownership. What's more, the current situation, if not curbed, will lead to a wider and wider gap between those who already have equity stakes and those who do not.
We are facing the potential of the home ownership situation creating social inequity within communities, among regions, and between rural and urban centres. To effectively address the housing challenges, we need to understand what's driving the markets. Why are so many Canadians now having a harder time becoming homeowners?
Housing affordability is determined by three factors: income, mortgage rules, and house prices.
In terms of income, we note that millennials were hardest hit by the economic downturn and the ensuing jobless recovery. Their income growth has been muted, yet house prices have escalated dramatically. We need to spur economic activity and income growth in all sectors so that young people can prosper.
At the same time, to guard against financial system instability, mortgage rules have been tightening, making it much harder to finance a house. While many of these measures have been intended to cool markets like Toronto and Vancouver, their application has been national, and that impacts markets, like Atlantic Canada, that were already in a bad state.
Our recommendation on mortgage rules at this time is simply this: do no more. Please stop for now. There have been many recent changes, the full effects of which have yet to play out, and it is critical to let these impacts become fully evident before any other actions are taken. There are also mortgage-related tools at the government's disposal that can be better utilized, without increasing market instability or leveraging. Increasing the limits to the first-time homebuyers' plan and allowing intergenerational RRSP transfers within the plan could facilitate increased down payments and decrease homeowner debt.
Perhaps the most interesting options are shared-appreciation mortgages, which should be more aptly named “shared equity down payment plans”. These tools, which have been successfully piloted for low-income families in some Canadian cities, should be considered for helping first-time homebuyers get into entry-level housing across the country.
The final factor thwarting affordability is, of course, house prices. Mortgage rules that limit access may reduce the buying power of homebuyers. What is needed are actions to reduce the upward pressure of house prices so that more first-time buyers can qualify. To address this, we need to understand what is driving those prices up. We have what we call “new fundamentals”. At the top of that list is the lack of supply of family-oriented housing.
Simply put, municipal and provincial zoning and regulatory restrictions in our major urban centres have dramatically reduced the amount of service land available. In the GTA, over the last decade, the number of newly built single detached homes available for purchase has fallen dramatically. GTA price trends reflect this disconnect between what the home-buying public wants and what is available.
With high levels of immigration and a significant increase in the birth rate over the last decade, our largest cities have a serious shortage of family-oriented housing. CHBA estimates that, at the current development rates, Canada will be short over 300,000 such homes in the next decade. Governments at all three levels need to work together to address this problem. So long as demand is outstripping supply, our more successful economic centres will continue to see price pressure and falling affordability, and this is the simple law of supply and demand.
These are issues that need to be addressed in the national housing strategy. From what we heard reported from CMHC, the current focus is almost exclusively on social housing. While social housing is very important, it's only part of the story. The final national housing strategy needs to address market-rate housing where 94% of us live. If we don't fix affordability, we have no chance of meeting the social housing challenge.
We are at a crossroads where home ownership is concerned, and affordability is at the crux of it. But there's a lot we can do to address this challenge. We look forward to working with the government to make it happen for the benefit of all Canadians. We have submitted a more detailed report that I hope you get to have a look at.
We're here for questions. Thank you.
