Evidence of meeting #68 for Finance in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was changes.
A video is available from Parliament.
4:45 p.m.
NDP
Guy Caron NDP Rimouski-Neigette—Témiscouata—Les Basques, QC
Thank you very much, Mr. Chair.
I would like to thank the witnesses.
At the last meeting, in response to a question similar to the one Mr. Liepert just asked, I asked the witnesses if they had been consulted as a rule before the federal government made the changes to the mortgage rules. There have been ten or so changes since 2006. Have you been consulted as a rule or not?
Mr. Taylor, you may answer briefly.
4:45 p.m.
President and Chief Executive Officer, Mortgage Professionals Canada
My tenure with the association is just about 12 months but I know my predecessor was talked to regarding the increase in the down payment change from $500,000 to $1 million and the incremental increase, if you will, as that's tiered. So sometimes, yes.
4:45 p.m.
Mortgage Expert, Team Lead, DLC Canadian Mortgage Experts
I wasn't, personally, but I believe that MPC, our previous group, and CAAMP were consulted.
4:45 p.m.
Senior Economist, Association des professionnels de la construction et de l'habitation du Québec
For our part, we are not systematically consulted.
4:45 p.m.
NDP
4:45 p.m.
Senior Economist, Association des professionnels de la construction et de l'habitation du Québec
No.
February 1st, 2017 / 4:45 p.m.
Kim McKenney Secretary and Board Member, Ontario Chapter, Canadian Mortgage Brokers Association
No. CMBA has never been consulted.
4:50 p.m.
NDP
Guy Caron NDP Rimouski-Neigette—Témiscouata—Les Basques, QC
A few of you are consulted from time to time, but you are not consulted systematically. From what I understand, you may be consulted sometimes, but there is no specific rule.
I will turn now to the APCHQ representatives.
I am sympathetic to your recommendations, especially regarding the use of RRSPs and a home buyer's plan. I have a concern in this regard and I would like you to respond because it is important. It is an interesting idea and it warrants consideration, as long as we can eliminate the weaknesses I see in it.
Have you estimated what such a measure would cost the government?
4:50 p.m.
Senior Economist, Association des professionnels de la construction et de l'habitation du Québec
From a mechanical point of view and at first glance, there is no cost to the government, since the tax deduction applies when the money is saved and deposited into an RRSP. Withdrawing an amount from an RRSP and using it for a home buyer's plan would not cost the government anything. On the contrary, there would be a cost to the taxpayer if the money were not repaid on time according to the repayment schedule.
We are proposing that children be given access to funds that are already available, that their parents have saved in an RRSP, for which the parents have already received tax deductions, and that the children repay the money to their parents' RRSP in accordance with the applicable standards of the home buyer's plan.
4:50 p.m.
NDP
Guy Caron NDP Rimouski-Neigette—Témiscouata—Les Basques, QC
I understand what you are saying. That is all in theory. In practice, that kind of transfer between spouses already exists. A person can contribute funds to their spouse's RRSP.
It has been pointed out to me that, for two people living in their first home, this measure is used to enable the spouse of the person who owns the home to purchase their first home. In the wealthiest homes, so to speak, a spouse gives money to the other spouse to purchase a first home. This is done for speculative purposes and, on a regular basis, that money is not repaid.
In that case, it is ultimately a tax loophole and it opens the door for each child from the same household to do the same thing.
Were you aware of this technique or loophole?
4:50 p.m.
Senior Economist, Association des professionnels de la construction et de l'habitation du Québec
Not specifically. I can, however, make two comments based on my limited knowledge of tax matters.
First, contributions that are not repaid as they should be over 15 years, a period that begins two years after the funds are withdrawn, are added to the person's income, and that amount is taxable.
Secondly, the tax rules on capital gains exemptions have been tightened up recently. It is also very clear that taxpayers will have to declare property sales in their tax returns. This is something new. The capital gains exemption rules for assets other than a principal residence apply and are already in force.
As to a person who owns a principal residence and another residence that is deemed a secondary residence, the current rules already limit possible gains, and the government can tax that person under the current rules.
There are of course always financial arrangements. There are tax specialists and professionals who can be very creative in order to achieve certain things, while fully complying with the spirit of the law. Our suggestion, however, is intended to help children access funds that their parents have already accumulated, but that are not available in a chequing account.
4:50 p.m.
Policy Director, Association des professionnels de la construction et de l'habitation du Québec
I would like to add something. Regardless of the program or government measure that we are looking at, I am sure we will find exceptions or that people will find ways of misusing it.
Our public policies must not be developed based on possible exceptions, but rather by considering who would benefit the most from the measure. In this case, it would be young people who do not have the necessary down payment to buy a home, which is seven out of ten young people.
4:50 p.m.
NDP
Guy Caron NDP Rimouski-Neigette—Témiscouata—Les Basques, QC
Okay, but there are measures that might cost the government something, such as a more generous GST rebate or making the federal tax credit for a home purchase refundable as opposed to non-refundable.
4:50 p.m.
Senior Economist, Association des professionnels de la construction et de l'habitation du Québec
Yes, of course, but there is a stimulative effect as well as tax benefits for the government when a home is purchased, whether it is a new build or a resale home. There are economic benefits for the government.
4:50 p.m.
Policy Director, Association des professionnels de la construction et de l'habitation du Québec
The government is now spending money to stimulate the economy. This could perhaps be a way of using those investments while also encouraging home ownership.
4:55 p.m.
NDP
Guy Caron NDP Rimouski-Neigette—Témiscouata—Les Basques, QC
Thank you.
I have one last question which is rather general so I would like quick answers if possible.
Mr. Albas and most of the MPs here, I believe, agree that there is not just one housing market in Canada, but many markets. I am referring to the various overheated markets. It seems the government's approach to addressing those markets has been to address all the markets at the same time, with everyone suffering the consequences.
We know that banks and by extension mortgages are under federal jurisdiction. Aside from the tax measures such as those proposed here, which could be applied province by province, how in your opinion can the provinces address their overheated markets locally? If the federal government has done all it can do, how can the provinces now step in, given that the measures are federal on the whole?
4:55 p.m.
President and Chief Executive Officer, Mortgage Professionals Canada
Any incentives at all that could assist with adding supply to the markets where we are seeing values appreciating would be incredibly beneficial for everybody. I think that almost all of the pricing pressure in the Toronto and Vancouver areas is very specifically a supply-side issue.
To be fair, the government, since 2009, has implemented a good number of changes to tighten mortgage rules. I would actually argue that many of them were very prudent at the time. I think we have arrived at the point, though, where we're addressing the entire problem with demand-side solutions when supply is what really needs to be addressed. We're creating real problems for first-time homebuyers and making home ownership in Canada elitist. We really need to address the supply side.
4:55 p.m.
Mortgage Expert, Team Lead, DLC Canadian Mortgage Experts
I agree. The biggest issue is the supply of homes for people to move into. We can keep hurting first-time buyers, but that's not going to stop this supply situation.
4:55 p.m.
Senior Economist, Association des professionnels de la construction et de l'habitation du Québec
There are of course specific, localized problems which are largely a function of demand. For our part, though, given the current situation and the reality in Quebec, our best suggestion for resolving the situation is to help buyers amass a larger down payment. As a result, they would not need an insured loan later on. At the same time, it would reduce the risk to the mortgage lender and reduce the monthly payments once the home is purchased.
4:55 p.m.
President, National, Canadian Mortgage Brokers Association
We talk about supply, and that's important, but it appears that we do have a little bit of an issue at the municipal level of government. They control the land development. They have the by-laws in place. They have the planning departments. It is very onerous, as I have heard in my discussions with a lot of different people across the country, to get a development project started.
I'm from Vancouver. In the Lower Mainland you can see up to a seven-year delay from the time you identify a piece of land that you may want to develop to when it actually comes to market. For that seven-year period of time, developers have to carry the property. There are a lot of costs. There are soft costs. There are fronting development cost charges. This is a lot of money that has to be paid for up front. Their interest costs accrue, and then, in the end, as I mentioned earlier, it's the home purchaser who actually pays for this.
Streamline that level of government, maybe through incentives, some capital expenditures to get water treatment facilities or land dedication in place. These actually delay land development projects.
On the development side, there are costs involved in acquiring land. We do those mortgages as well, as mortgage brokers for these developers. Those costs accrue. That may be one way of improving the supply side. You have to make it easier. It's very difficult.
4:55 p.m.
Liberal
Raj Grewal Liberal Brampton East, ON
Thank you, Mr. Chair, and thank you to the witnesses for coming.
There are a lot of theories on what's going on in the Canadian housing market. I just had a few data-related questions, and I'm hoping you guys can answer them.
Can any of you tell me how many homes are purchased with less than a 20% down payment?
