Finance Committee on May 4th, 2021

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

Indeed, there is much in your opening statement that I agree with. Really, there's nothing partisan in this.

I'm fascinated by your take on this issue. If I have time, I actually would like to go back to your opening statement—

[Dr. Paul Kershaw]

Let's do it.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

—of last Tuesday. You characterized all foreign investors, money launderers, speculators, NIMBYists, developers, landlords and realtors as “the low-hanging fruit” that Canadians blame for rising real estate prices while ignoring.... It was right there that the bells went and you were interrupted—

[Dr. Paul Kershaw]

Yes, it was. Housing rendition—

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

—so I'm quite interested to know more.

I spent over 20 years in the mortgage business, so I'm familiar with a lot of these arguments. I would suggest that none of that fruit is particularly low-hanging, and very little has actually been addressed by any level of government, although yes, there's been a little bit around the edges of some of them.

Is it your contention that none of those factors are the primary ones to blame, that it's tax incentives for home ownership that are...?

[Dr. Paul Kershaw]

No, I think that would be a mis-characterization, and let me be clear. While some fruit may be lower-hanging than others, we need to be picking all that fruit. We desperately need to be using every tool in our tool box to address this crisis of housing unaffordability—

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

Before the chair cuts me off, one last one—

[The Chair, Liberal, Wayne Easter]

You are well over, Pat, but we'll give you one more.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

I wanted to get to—

[The Chair, Liberal, Wayne Easter]

You're lucky we've got ample time tonight. This is the last question.

[Pat Kelly, Conservative, Calgary Rocky Ridge, AB]

In your statement, I don't think you mentioned this, but maybe you did. Part of what we've studied at this committee is monetary policy, and other witnesses have talked about the incentives there, not just to institutional borrowers but to regular borrowers—to any borrower, really.

Could you comment on monetary policy, or if the chair won't let you, later in a different round?

[Dr. Paul Kershaw]

Yes, and this is really critical, so let me keep this succinct.

Monetary policy has captured more and more of our attention in the past year during the pandemic in terms of its collateral damage to housing unaffordability. A key thing to start with would be to invite Statistics Canada to review how it measures the inflation of “owned accommodation”. Right now it is doing a relatively poor job of capturing the total amount of inflation in home prices, and then its measure of CPI gives governments like ours today, and even to some degree as a risk for the Bank of Canada, not the most accurate information.

I'd love to go into that in more detail. That's a theme that is definitely emerging in the solutions labs.

[The Chair, Liberal, Wayne Easter]

Thank you both. That was a wide-ranging discussion, if I do say so.

We'll go Ms. Dzerowicz, who'll be followed by Mr. Ste-Marie and Ms. Kwan.

Julie, you'll have about six minutes.

[Julie Dzerowicz, Liberal, Davenport, ON]

Thanks so much, Mr. Chair.

I think, Mr. Chair, we should let the record show that Mr. Kelly asked for a briefing note on a tax on capital gains. I'm just nudging you, Mr. Kelly.

Anyway, Mr. Kershaw, I'm going to start off very quickly with a statement you made at the start of your last session with us. You started, I think without being asked, by indicating nobody from our current government, whether it is a cabinet minister or anybody, has asked Generation Squeeze or you for any tax policy advice.

Can you confirm if that is true?

[Dr. Paul Kershaw]

That is true, and let me just add that the reason this has become a little more of a media issue and an issue before this committee is that when we were extending our invitations to people to participate in our solutions lab, we issued some generic material to about 70 different people representing a range of groups. We went after people who were experts on monetary policy, so I had to tell them why an expert on monetary policy would come to this housing issue. We invited some people who are interested in co-ops, so we told them. We also went to the Canadian Taxpayers Federation, people we knew would probably be very skeptical about some of the ideas that Mr. Kelly is skeptical about, and invited them to come and participate as well. In the process of doing so, we wanted to make clear why we'd invite a tax group to a solutions lab on housing, and they then have taken that material and mis-characterized it with the idea that we'd be focusing exclusively on taxation because that's what we emphasized in their invitation.

That is the origin of this little media brouhaha.

[Julie Dzerowicz, Liberal, Davenport, ON]

Thank you, Mr. Kershaw.

Mr. Tremblay, just to make sure that this is crystal clear as well, CMHC does not by law offer advice on tax policy to the federal government. Can you confirm that?

[Michel Tremblay]

I can confirm that, yes.

[Julie Dzerowicz, Liberal, Davenport, ON]

Thank you, and then I want to continue with you.

One of the biggest issues in my riding of Davenport—downtown west Toronto—is not only affordable housing. It's a huge issue, and they're very big supporters of co-ops in my riding as well. Housing affordability is a huge issue.

Of the people in my riding, 43% were born outside Canada. They're immigrants, so they want their kids to own homes. It's very much what they push for.

The federal government introduced the first-time homebuyer incentive. Has it helped young people buy their first homes? Could you speak about that for 30 seconds or so?

[Michel Tremblay]

As of March 31, 2021, it has helped nearly 11,000 Canadian households access houses with a lower monthly payment, including approximately $60 million in Alberta and $60 million in Quebec. It has been less successful, obviously, in the large urban areas like Toronto and Vancouver. I believe today or yesterday the federal government did announce some enhancements to the first- time homebuyer program in Toronto, Vancouver and Victoria census metropolitan areas, which will allow the maximum house prices to go—from memory—from $505,000 to $722,000, so obviously there are some possibilities of more take-up now in those cities.

[Julie Dzerowicz, Liberal, Davenport, ON]

Okay. Thank you so much, Mr. Tremblay.

Ms. Farha, thanks so much for your presentation. You had lots of information there. I wish we had more time to get into the monetary aspects that Mr. Kershaw sort of ended with. To be honest, the reality is that in an unprecedented pandemic, there were a series of measures taken to try to continue to provide a solid foundation for our economy, and they had unintended consequences. I think that is the broader story. I wish we had more time to get into it.

I also want to say thanks for pointing out that there are some fiscal policy aspects that you think the federal government could be moving on to address some of the issues around housing in Canada. I really appreciated your pointing out the issue around REITs. I know you're a lawyer, but if you have any other ideas that you might want to put forward to us, I'd be grateful if you could submit them to the committee. We don't have time to go through them right now, but it would be very important for us to hear about them.

The question I want to ask you is about something I think about all the time. In downtown Toronto a huge issue bearing on why house prices are so high, in my opinion, is that we have such limited supply. Supply can actually be freed up at our provincial level. They hold a lot of the powers around housing as well.

I'd like you to address a couple of things. Do you agree that there is a role also for the provinces in terms of maybe increasing the supply, such as around zoning, and also in protecting tenant rights? Could you address that?

[Leilani Farha]

That too is a huge issue. A lot of people have taken as an assumption that a lack of supply is the problem. I query that, to be honest. I'm not saying we don't need more deeply affordable housing supply, because we do, but do we need just more supply? I'm not so certain. Can we access deeply affordable supply based on stuff that actually already exists? Maybe. Should we be protecting existing affordable supply? Most definitely.

So the supply question is—

[Julie Dzerowicz, Liberal, Davenport, ON]

It's actually a provincial question. Do they also play a role in helping to resolve this issue?

[Leilani Farha]

Obviously, housing is technically and constitutionally a provincial and territorial jurisdiction, but as Mr. Kershaw, Mr. Tremblay and I have already indicated, monetary and fiscal policy, which is squarely within national-level government, plays a huge role.

There's one thing I want to say about all of this.

First of all, I understand why the Bank of Canada set interest rates low and engaged in quantitative easing. Every government did that at the start of the pandemic to kick-start their economy or to keep the economy going. That's super-important, but then you need fiscal policies to protect the most vulnerable. You have your monetary policy. I'm not quibbling with that; I'm not going to take on the central Bank of Canada right now, but I would say we should look at the fiscal policies that could be supporting tenants and at what the national-level government can do in that regard, recognizing that landlord-tenant relations are provincial matters but also recognizing that the federal government has the spending power and can rightly use that spending power.

I mean, the federal government could in fact do something around rent relief for the 250,000 households that are in arrears. It's diddly-squat money in the big picture. It's like $300 million of rental arrears, or something like that. The national-level government gave banks $750 billion to protect mortgages, which I'm not quibbling with either. I want people's mortgages to be protected. I think that's super-important.

I don't think during a pandemic it makes sense to be drawing bright lines, and it seems there's some inconsistency around that. The federal government didn't draw a bright line around health care and what was federal jurisdiction and what was provincial jurisdiction, nor should it have. I wanted my federal government to get in there and get ventilators. Who didn't, right? Similarly, I don't see why they have to draw a bright line with renter households. They didn't with commercial rentals. There's a program, a good program, an important program, for those who can't pay their commercial rent leases, so why is the bright line where renter households—

[Julie Dzerowicz, Liberal, Davenport, ON]

Ms. Farha, my time has ended.

[The Chair, Liberal, Wayne Easter]

Your time has more than ended.