Mr. Chairman, honourable members, ladies and gentlemen, we are very honoured to be here again. We appreciate the opportunity to present our members' perspectives and recommendations to the Standing Committee on Finance as you prepare for your pre-budget consultation process.
The Appraisal Institute of Canada has over 5,500 members. They complete over one million real property appraisals each year, valuing over one trillion dollars' worth of real estate and real property. Our members provide unbiased opinions of value on residential, commercial and all other types of property. In addition to a university degree, our members complete a rigorous program of professional study, leading to one of two internationally recognized designations. The scope and conduct of our members' services are defined by our Canadian uniform standards of professional appraisal practice. As a self-regulatory body, we have a strong focus on consumer protection. We maintain a robust disciplinary process and provide a mandatory professional liability insurance program to help protect consumers and our members' clients.
Our submission today is focused on three areas. The first is that the Office of the Superintendent of Financial Institutions exempt residential mortgage renewals from the application of the B-20 stress test. The second is that the Government of Canada work with provinces and territories to create a publicly accessible registry of beneficial ownership to help combat money laundering in real estate. The third is that the Government of Canada make an immediate investment to improve the quality, availability and currency of flood mapping across the country.
We understand that each of these recommendations has been noted in mandate letters to the Minister of Finance, the Minister of Innovation, Science and Industry, and the Minister of Natural Resources. We would like to convey the importance of proceeding with these initiatives and would note that we are fully prepared to support government in carrying out that work.
To our first recommendation, we all know that as of January 1, 2018, the stress test has been applied to uninsured residential mortgage loans gained through federally regulated lending institutions. The stress test applies to all mortgage loans, whether they are new originations, renewals or refinances. While we know and appreciate that many in organized real estate have called for broad-based changes in the stress test, our focus has been on the application of the stress test to renewals. Applying the stress test on borrowers who may want to switch lenders at renewal could prevent consumers from obtaining the most competitive interest rate and terms that might otherwise be available in the marketplace.
Whether it is at the end of the mortgage's first term or several terms down the road, mortgage holders seeking to renew their mortgages are responsible borrowers who have a proven track record, and are not seeking to increase the amount of their mortgage debt. We would also note that transferring one mortgage from one federally regulated financial institution to another does not add any additional financial stress to the system as a whole. Therefore, we recommend that mortgage renewals be exempt from the application of the stress test so that Canadians can obtain the most competitive rates and terms possible.
Our second recommendation focuses on allegations of criminal behaviour and money laundering through real estate purchases in Canada. One measure that has been discussed, and in fact has been recently announced in British Columbia, is the need for and the creation of a publicly accessible registry of beneficial ownership. In May of 2019, the C.D. Howe Institute released a report regarding Canada's ability to combat money laundering. The report called for this publicly accessible registry, stating, “Canada’s anti-money-laundering protections (particularly as they pertain to real estate) are among the weakest of those of the western liberal democracies”. Based on 2018, it's estimated that the amount of money that is laundered annually in Canada could be as high as $130 billion.
The C.D. Howe report further outlines that money launderers are able to do what they do because of their ability to be “invisible” and “anonymous”. A publicly accessible registry of beneficial ownership would help address that concern. We believe these registries would help support the balance in market forces of supply and demand, and help ensure that legitimate homeowners are allowed to compete in a fairer and more balanced market. Regardless of how the registry is structured, it is important that all stakeholders within the real estate industry have full and equitable access to these and other public records.
Our third and final recommendation relates to the increased number of floods that have occurred over the last several years in communities across the country, most notably in the spring due to abnormally high water levels during the thaw. Many thousands of residences and buildings across the country have struggled in preparing for and managing these extreme flooding events. There are reports and indications that climate change is one of the factors contributing to recurring flooding. In fact, the Insurance Bureau of Canada estimates that over one million homes across Canada are at a high risk of flooding. A portion of those are at a very high risk.
Homes and buildings that are situated in flood plains are often less valuable than those that are outside of those zones. As climate change escalates, floods will occur more frequently and in areas that may not have been affected in the past.
Prospective homeowners, developers and the mortgage-lending industry rely, in part, on information gathered by appraisers to make their buying, lending and development decisions. Updated flood maps that would be made available to the real estate industry, and in fact to the public, would assist appraisers in providing more accurate information to those relying on their reports.
Mr. Chairman, honourable members, we feel privileged to have been invited here today to share the perspectives of our members. We also appreciate the chance to share our recommendations and would be very pleased to respond to any questions or comments that you and your colleagues may have.
Thank you.