Finance Committee on May 4th, 2021

[Dr. Paul Kershaw]

I love this question.

[Ted Falk, Conservative, Provencher, MB]

I have to remind them that you have to work for some things in life. You shouldn't be able to afford a house of the kind I can afford or drive a car of the kind I can afford to drive. I'm almost getting the sense from the executive summary that you're suggesting there's too big a gap.

[Dr. Paul Kershaw]

Mr. Falk, this is a great question. I don't think you're reading the executive summary clearly enough, but here are the facts of the matter.

If you're a young person today, you're going to go to school years longer and incur far more student debt than somebody your age did in the past to land jobs that, after you adjust for inflation, pay thousands of dollars less for full-time work, and then you'll face a housing situation in which your rent will be on the rise and your chance to get into the housing market as an owner is even more out of reach.

A typical young Canadian, back when my mom started in the housing system, had to work five years of full-time work to save a 20% down payment on an average-priced home. Now, across Canada, you'd need to work 14 years on average. Of course, it's worse in Ontario and B.C., and worse in Victoria, Toronto and Vancouver.

In other words, Mr. Falk, hard work from your kids does not pay off like it used to, and that is the quintessential issue that we need our public policy-makers to respond to, because we want hard work to pay off like it used to, and we need to adapt policies to help ensure that hard work comes to at least approximate the return it did back in the day.

Your kids definitely have reason to be angry at you when you say those sorts of things, because that dismisses the very harmful economic situation they have inherited by comparison with you.

[The Chair, Liberal, Wayne Easter]

Ted, I tell mine, “You don't need a new washing machine and dryer. Buy a used one like we did.”

[Ted Falk, Conservative, Provencher, MB]

Exactly. There are lots of options.

[Dr. Paul Kershaw]

It is not because young people are spending too much on their cellphones, their avocado toast or their coffee that they can't save a down payment for an average home in this country; it's because we've tolerated home prices literally doubling or tripling over the last several decades, and we did that—

[Ted Falk, Conservative, Provencher, MB]

I'm just about out of time, but I want to get another question in.

The Bank of Canada has targeted 2% as the inflation rate. We know that we're edging towards 3%. We know that these low interest rates are a big cause for an escalation in home prices, which actually compound or quadruple the problem for young folks. What's your comment on the Bank of Canada's monetary policy?

[Dr. Paul Kershaw]

The Bank of Canada has a primary responsibility to keep inflation in range. We understand that, and to Ms. Farha's observations earlier, we need to create space for them to do it, but we need our governments to then think about how we deflect the collateral damage of that low interest rate policy into the housing system. That's where we need more and more of your attention, and it's going to start, I think, with a review of how StatsCan is actually measuring our CPI and our rate of inflation, and particularly the inflation of owned accommodation.

I really push all of you to go and look at this. It's something the Business Council of British Columbia has been urging for some time. We are downplaying the degree to which home prices are inflating, so we're not capturing that in the 2% or 3% benchmark that you're referring to, Mr. Falk.

[The Chair, Liberal, Wayne Easter]

We have time for one more, Ted, if you want one.

[Ted Falk, Conservative, Provencher, MB]

Sure.

Ms. Farha, you mentioned that the banks received $750 billion to subsidize their mortgage guarantees. Do you have a breakdown of which banks received how much?

[Leilani Farha]

No, I don't, actually, and my point about that goes to Paul's point about the different support we provide to homeowners versus renters.

At the time when I heard that banks were going to be provided with this cushion, I had a mixed reaction as a human rights lawyer.

On the one hand I agreed, because I don't want homeowners to be suffering and not be able to pay their mortgage and then have foreclosure happen. I especially don't want foreclosures of single-family homes, because that makes those homes prey to those institutional investors that I was talking about. We do not want to see in this country what we saw in the U.S. after the 2008 financial crisis, so I thought it was okay. I do think that banks have their own profits and I'm not exactly sure why they couldn't harness their own profits, but whatever, I was pleased to see that the government was moving to ultimately protect homeowners.

The reason I raise that point is that, as I understand it, right now the rental arrears—and my data is a couple of months out of date—amount to somewhere around $300 million, so it's $300 million versus $750 billion, right? That's for renters.

I'm telling you, I work very closely with city officials across this country from about 16 different municipalities—mayors, city councillors and housing departments—and they are very fearful, because they're on the front lines of this situation. They don't want to see an increase in homelessness. They're already having these problems with encampments. They don't know what to do about them. That was my point.

[The Chair, Liberal, Wayne Easter]

Okay. Thank you all for the interesting discussion.

We'll go to Mr. Fragiskatos, followed by Ms. Jansen, and Ms. Koutrakis will wrap up.

[Peter Fragiskatos, Liberal, London North Centre, ON]

Thank you, Chair, and thank you to the witnesses for their time this afternoon.

Mr. Tremblay, in July of last year, the former CEO of CMHC, Evan Siddall—and he'll be known to our colleagues, as he came to our committee many times—said the following on social media: “The suggestion that @CMHC_ca is funding a study on any tax measure is inaccurate and misleading reporting. We are co-funding a Solution Lab on housing wealth and inequality. We do not control the agenda nor the research base, which is a minor component of the protocol.”

Is that still the position of CMHC?

[Michel Tremblay]

Mr. Chair, yes, that is still our position. Again, a solutions lab, by its very nature, doesn't start with a solution but with a housing challenge, and Dr. Kershaw has done a great job over the last two meetings of defining the problem they were looking at.

[Peter Fragiskatos, Liberal, London North Centre, ON]

The ideas generated in the solutions labs are varied, Mr. Chair. A number of these are all available online. There are a number of different focuses. I would point my colleagues to them, and in particular my Conservative colleagues, who seem so fascinated with this particular subject, to use Mr. Kelly's words. Again, they're all online.

The one that stood out to me is called the solutions lab on affordable housing. It was supported by the Greater Ottawa Home Builders' Association, the Ottawa Social Housing Network and SHS Consulting. Among other things, they advise that in order to promote affordable housing, there is a need to allow the private sector to more easily meet the needs of the community. The solutions lab further suggests that there is a need to remove barriers and create new opportunities for innovation in land use planning. If I was looking at those quotes in isolation, I would think they were put forward in the National Post or the Financial Post by Conservative politicians.

I caution my colleagues not to make an issue here and draw in an advocacy group, paint an imaginary line to the federal government and try to turn this committee into some sort of partisan enterprise when we could be focusing on serious things, unless it is indeed the ambition of my colleagues in the Conservative Party to cultivate ties with Mr. Kershaw so he can advise the Conservative Party on housing policy.

Again, they do have a real fascination with it. Mr. Kelly has also said that he agrees with a number of the points that Mr. Kershaw has said. Those discussions can continue, but not at the committee level. This is a non-partisan committee. If the Conservatives want the advice of Mr. Kershaw, that can be explored outside of the committee.

My final question will go to Ms. Farha.

The rapid housing initiative, as you know, Ms. Farha, is something the government invested in last year. It has been renewed now in budget 2021. I have a question on modular housing. This is something that's really been promoted as part of the policy. What do you think about modular housing? Is it something that needs to continue to be pushed forward by the government?

In London, Ontario, where I am, there have been a number of new modular units built. They go up very fast. They help to address affordability challenges. There is a lot of potential here. I'd love to have your thoughts on the record.

[Leilani Farha]

To be honest, it's whatever works. If the residents are finding that modular housing is meeting their affordability and security of tenure needs, that's cool. That's what the right to housing is about. It's not really for me to dictate that people have to do this or go down this road or that road. If modular is being built quickly, is affordable and offers good security of tenure, then you're in the door with the right to housing, so of course I would support that.

I think there are a whole lot of things that could be done, though. Modular housing is one. I think there are other things that can be done to ensure that people who really need it are well housed and adequately housed.

I want to give a shout-out to the City of London, which is doing very interesting things to deal with homelessness in particular. It's taking what it calls a compassionate approach, which most cities don't do in this country or around the world. London is doing some really interesting things.

[Peter Fragiskatos, Liberal, London North Centre, ON]

Thank you very much.

[The Chair, Liberal, Wayne Easter]

Thank you both.

Ms. Farha, you're doing well. Peter usually mentions London three times in a meeting. You mentioned it twice.

We'll go to Ms. Jansen, followed by Ms. Koutrakis, and then we might have a minute or two left.

[Tamara Jansen, Conservative, Cloverdale—Langley City, BC]

Thank you very much.

Mr. Tremblay, I know the charter between CMHC and Generation Squeeze has been mentioned numerous times. I noticed that in there it states, “There's an inequitable and uneven playing field for younger and older generations in the housing market—one that is hindering current Government of Canada goals to create affordable housing opportunities for...Canadians”.

It goes on to state that a “key source...is tax policy that privileges home ownership, and shelters housing wealth, especially in principal residences”.

Can you understand how, based on these core statements, this project looks tailor-made to find one solution and one solution only, which is a tax on your home value?

[Michel Tremblay]

Mr. Chair, I'll reiterate that solutions labs doesn't start with a solution but with a problem that we're trying to solve, or that groups are trying to solve. It brings numerous people together to have discussions, to investigate, to analyze this. Again, it has no predetermined conclusion. I don't know how much clearer I could be.

[Tamara Jansen, Conservative, Cloverdale—Langley City, BC]

I wonder if you could continue explaining to me. It mentions “a key source”, but it mentions no other key sources.

I live in the Fraser Valley, and we know that government here adds hundreds of thousands of dollars to the costs of new homes by way of zoning regulations, development charges and housing limits. We know here in the Fraser Valley.... I think the C.D. Howe Institute did a study, and they said it adds $644,000 to the cost of a home. I was thinking about Mr. Kershaw's comment that we should be taxing million-dollar homes because those are crazy-valuable homes hiding wealth. Actually, if you take that $644,000 worth of government regulations off, it's a $350,000 home.

When you mentioned “key sources”, would you agree that government red tape is a massive problem that's causing a rise in housing prices, besides, as you say, monetary policy?

[Michel Tremblay]

Mr. Chair, there are obviously a lot of costs involved in housing. In B.C., in the greater Vancouver area, for example, land is a critical cost as well. It makes up to 80% of the cost of a housing unit. As we encourage supply and reduce red tape, it will certainly, first of all, increase supply and eventually reduce prices.

I would say there's a dichotomy there, where certain cities in the B.C. area have a lot of development charges and so forth because they do not want to raise property taxes of existing homeowners. They needed to find a different source of revenue. Unfortunately, they've decided to tax new supply more than other areas of the country.

[Tamara Jansen, Conservative, Cloverdale—Langley City, BC]

I was looking at Canada's situation in regard to permits, and I noticed that it takes 250 days to get a permit in Canada. That's three times longer than our competitors in the U.S., where it takes 168 days. We're also, I think, 35th of OECD countries in being able to get project approvals in a timely fashion.

Again, on the idea that we're sheltering wealth and doing a study on that and the idea of taxing a million-dollar home, rather than tackling the fact that red tape is truly getting in the way of our being able to ensure that we work on housing affordability, Mr. Tremblay, would you comment?

[Michel Tremblay]

Mr. Chair, again, this is only one solutions lab. As was mentioned, we have other solutions labs. We do have other research projects as well as other conversations with other parties. The federal government, the provincial governments, municipal governments, the private sector and non-profits all need to push together towards affordability. The federal government can't do it alone. Municipalities can't do it alone. Non-profits can't do it alone. I think we all have to work together.

I'm not disputing any of what's been said here.

[The Chair, Liberal, Wayne Easter]

Mr. Kershaw wanted in on this one, and then we'll come back to you.