Finance Committee on May 4th, 2021

[The Chair, Liberal, Wayne Easter]

I call this meeting to order.

Welcome to meeting number 39 of the House of Commons Standing Committee on Finance. Pursuant to the committee's motion adopted on Friday, February 5, 2021, the committee is meeting to study all aspects of COVID-19 spending programs and related monetary policy.

Today's meeting is taking place in a hybrid format, pursuant to the House order of January 25, and therefore members are attending in person in the room and remotely by using the Zoom application. Proceedings will be made available via the House of Commons website, and the webcast will only show those who are speaking.

With that, we will go to witnesses. Mr. Tremblay and Dr. Kershaw, I'm not sure whether you have five-minute remarks again or not. You were here recently; you don't need to go through long remarks if you don't want to. We can go to questions.

[Dr. Paul Kershaw, Founder, Generation Squeeze]

I prepared five minutes, for what it's worth.

[Michel Tremblay, Senior Vice-President, Policy and Innovation, Canada Mortgage and Housing Corporation]

As did I, Mr. Chair.

[The Chair, Liberal, Wayne Easter]

All right.

I understand that some of the witnesses didn't get their headsets and that there may be a little difficulty with translation. We'll cross that bridge when we come to it.

We'll start with Mr. Tremblay from the Canada Mortgage and Housing Corporation. The floor is yours.

[Michel Tremblay]

Thank you, Mr. Chair.

I welcome the opportunity to continue our discussion of the solutions labs program, which is a key element of Canada's 10-year, $70 billion-plus national housing strategy.

I'd like to acknowledge that I'm joining you again today from Ottawa on the traditional unceded territory of the Algonquin Anishinabe peoples.

I explained how solution labs work in my previous appearance, so I won't go over that ground already covered, but I do want to reiterate our commitment and confidence in this innovative approach to solving complex housing problems.

As I mentioned last time, Canada Mortgage and Housing Corporation, or CMHC, has funded 47 solution labs as of December 31, 2020. I provided brief details on two of them. The examples I have given demonstrate how various stakeholders are focusing on vulnerable groups, who often fall through the cracks of the Canadian housing system. These groups require special, targeted solutions to meet their unique needs. This is the heart of the solutions labs.

There are many more examples I could share with you, but instead I want to take this opportunity to emphasize something we are not doing, which is funding research on a home equity tax. This was a significant topic of discussion at our last meeting. Regrettably, erroneous media reports—misinterpretation of the research parameters of one lab in particular—have led to this misunderstanding. I would like to put any concerns about this to rest today.

As is the case for most national housing strategy initiatives, the ultimate goal of the solutions labs program is to increase housing supply. There is a direct relationship between housing supply and affordability. Whether we are talking home ownership or rental housing, cost increases when there's not enough supply to meet demand. The impacts trickle down through the entire housing continuum. Increasing supplies of all types of housing is therefore the primary solution to the housing crisis that many communities and households face today.

It's no secret that house prices have been increasing at record levels in many of Canada's largest cities. Bidding wars are common, and many buyers are paying tens of thousands of dollars over the asking price to acquire a home. That means Canadians are taking on more and more debt. The combination of high house prices, low interest rates, high levels of household indebtedness and the economic uncertainty caused by the COVID pandemic represents a real threat to the financial well-being of young Canadian families and to Canada's overall economic stability. This is why OSFI has proposed to strengthen the stress test for uninsured mortgages. This proposal is fully supported by CMHC.

Making housing more affordable is why we exist. As I mentioned last time, we have set a bold aspiration that by 2030 everyone in Canada will have a home that they can afford and that meets their needs. There's no doubt that some of the ideas we have been hearing about from solutions labs will help us towards achieving this goal.

I would like to thank the committee for inviting me back to appear before them.

I’d be happy to take questions from the committee at this time.

[The Chair, Liberal, Wayne Easter]

Thank you again, Mr. Tremblay.

We'll turn to Generation Squeeze and Dr. Kershaw.

You've been through this process before, not long ago. The floor is yours.

[Dr. Paul Kershaw]

Thank you very much.

As a reminder, I'm a policy professor at the UBC School of Population Health and founder of Gen Squeeze.

Gen Squeeze is a force for intergenerational fairness to improve Canadian well-being. It is powered by the voices of Canadians in our 20s, 30s and 40s, the kids we represent and the family members who love us, all backed by cutting-edge research.

When you requested my participation a couple of weeks ago, I focused in particular on the need for policy-makers to reduce an intergenerational tension in our housing system.

Our current policies incentivize many everyday households to want two incompatible things from housing. On the one hand, we often want housing to provide an affordable place to call home. On the other hand, we want housing to provide a good return on investment. The problem is that those two things are incompatible, because when something provides a good return on investment, by definition its value grows faster than local incomes. When something grows faster than local incomes, it becomes less affordable.

For the last several decades, a cohort of Canadians who tend to be older and reside more in urban areas have reaped substantial gains in wealth as a result of rising home prices, all while sleeping, watching TV, cooking, raising kids and making our homes. I share with you my own story about how my own wealth windfalls are implicated in that.

Unfortunately, one of the outcomes from housing wealth windfalls for people like me and others is that those who follow in our footsteps, our kids and grandchildren, have a much more challenging time to find a place to call home that is affordable, even in places where they grew up.

I pointed out last time that our national housing strategy so far fails to address this intergenerational tension, because it never once mentions the word “wealth”. That omission reflects a hesitancy on the part of our world of politics to address intergenerational tensions. By being silent, our world of politics is collectively standing by as many Canadians are over-consuming wealth windfalls that erode the sustainability of the housing system to deliver affordability for generations to come.

It's quite similar to our climate change problem. While the last couple of years clearly signal some important federal progress, Canadian policy remains quite slow to address the reality that Canadians today are over-consuming the atmosphere's scarce capacity to absorb carbon. We don't yet price pollution at a high enough value for the harm that it's causing, so what do we do? We leave younger Canadians and future generations to pick up the tab for our present over-consumption of this scarce capacity, and that over-consumption undermines the sustainability of the very climate on which younger Canadians are depending for their health and economic well-being, and we know that's a big price to impose.

It's not just environmental debt; there's also government debt, which we know is ballooning as a result of the emergency response to COVID. That response is appropriate in this emergency moment, but the sustainability of government finances was already being disturbed prior to the pandemic, in no small part because the federal government was not prioritizing balancing budgets even when we were not in a recession.

One of the concerns I want to draw attention to today with the moments that I have remaining in my opening remarks is that the world of politics has shied away from helping Canadians to recognize another intergenerational tension, in this case in regard to our old-age security system, which is a very important system to protect, but it's at the heart of an intergenerational tension in our budgets. Our budget messaging coming out of Ottawa each year is risking burying those details in its fine print, which is not a partisan problem; it's a long-term problem.

The most recent budget is really instructive. Everyone in this room could be forgiven for thinking that child care was the biggest social spending increase in federal budget 2021. You should know that Gen Squeeze is proud of what happened in that budget. We worked hard to popularize the concept of $10-a-day child care when we first gave this label to a pan-Canadian child care recommendation in our lab over a decade ago, and along with tremendous mobilization by the Coalition of Child Care Advocates and early educators in B.C. , a 10aday.ca movement was born, and it's clearly had an important influence on national thinking.

I want to congratulate the federal government for really investing now in a meaningful way in child care, but it should be known that child care is nowhere near the largest social spending investment in the 2021 budget. Increases to OAS absorbed far more taxpayer dollars, and I beg of everyone in this room to go pay a lot of attention to table A1.6 of the budget, which shows that the Government of Canada plans to increase spending on OAS by $22 billion as of 2025, compared to a year ago.

That $22-billion increase is three times more than the roughly $8 billion that Ottawa plans to add to child care in 2025. It's more than the nearly $18 billion that budget 2021 plans to spend over several years for its green recovery to create jobs, build a clean economy and protect us against climate change. Also, it's about 10 times greater than the $2.5 billion that budget 2021 adds for affordable housing over the next several years. When Canadians and our politicians reflect on why our national government still plans a $31-billion deficit in 2025, well after we hope the pandemic-induced recession is over, it's going to be important to acknowledge that growth in OAS spending is a primary factor.

To be clear, OAS spending itself is not a problem on its own. Old age security is important because it helps seniors enjoy financially secure and healthy retirements. Almost every younger Canadian will have a parent or a grandparent who uses OAS. My mom and dad do, and so do my in-laws. However, it is a problem that governments resist being honest with Canadians about the need to consider new ways to raise revenue to cover its growing cost.

This means that today's retirees can rightly claim that they paid taxes towards OAS throughout their working lives, but the problem is that our governments weren't sufficiently honest with them about how much they needed to contribute in the past in order to ensure that their generation didn't take from the current system more than they put in. That outcome is unpaid bills that they leave for their kids and grandchildren.

Let me close. Intergenerational tensions are at the heart of a lack of political commitment to sustainability in our housing system, sustainability in our climate system and sustainability in our government budget system. Now is the time for us to come together to build for our world of politics the political cover to be courageous, to act on the evidence, to reduce these tensions, so that Canada truly works for all generations.

Thank you.

[The Chair, Liberal, Wayne Easter]

Thank you, Mr. Kershaw.

We will turn now to The Shift.

Ms. Farha, the floor is yours. Welcome.

[Leilani Farha, Global Director, The Shift]

Thank you so much.

Good afternoon, everyone.

I'm Leilani Farha. I'm the global director of The Shift, an international human rights organization focused on housing. I'm also the former United Nations special rapporteur on the right to housing, a post I held for six years, until April 2020, and I was the executive director of Canada Without Poverty.

It will come as no surprise to you that Canada is in a long-standing housing crisis that has been exacerbated by the pandemic. I'm sure you've heard these stats before: 1.7 million households are in core housing need, and 235,000 people are living in homelessness. New homeless encampments are springing up in every city, big and small. More than 250,000 rental households are in arrears and are now at risk of eviction from their homes.

According to the OECD, Canada has seen a 168% increase in real house prices over the last 20 years. That puts us as the leader in the OECD, with the U.K. next, 70 percentage points below us.

In keeping with the federal government's commitment to the National Housing Strategy Act and to progressively realize the right to housing, budget 2021 includes a number of measures to address aspects of this housing crisis. However, in my opinion, a fundamental blind spot in the budget is its failure to address the monetary and fiscal policies that are heavily implicated in the housing crisis. With a few exceptions, it seems that structural changes to fiscal policy, beyond spending, are somewhat off limits for use in addressing the housing crisis. This blind spot suggests to me that the budget, despite its huge expenditures, might not be as effective as the government would hope.

Let me use affordability as the example, given that affordability is the cornerstone of the right to housing, or a cornerstone, and a key driver of homelessness and housing precarity.

The budget commits to a number of measures to address affordability: more money for the rapid housing initiative, rent supplements for women and children leaving violent relationships, and resources for community-based housing.

While those measures may produce some new affordable housing, Canada's monetary and fiscal policies actually incentivize housing unaffordability. As you know, the Bank of Canada has lowered interest rates and engaged in quantitative easing, which makes money cheap. It allows institutional investors easy access to the loans they need to purchase existing properties, and institutional landlords have a vested interest in raising rents.

It's not surprising, then, that in the last five years, and particularly in recent months, real estate investment trusts have been buying up affordable rental housing stock. For example, in January, I think it was, Ontario-based InterRent and Crestpoint REITs purchased 15 rental apartments, or over 600 units, in Vancouver. Starlight and Timbercreek bought seven buildings in Toronto in August 2020, and CAPREIT purchased 88 units in Halifax in the same month.

Increasing the turnover of tenants and raising rents is part of their business model. It's necessary to securitize loans and to project a solid return for prospective investors. A study out of Toronto from 2012 to 2019 found that financialized and corporate landlords filed 64% of all above-guideline rent increase requests, potentially impacting over 175,000 households.

The rise in REITs in Canada is in part due to fiscal policies that grant them preferential tax treatment. They are the only trusts, as I understand it, that do not pay corporate income tax. ACORN Canada reports that if seven—just seven—of Canada's residential REITs had been taxed at the same rate as non-REIT corporations, the government would have had an extra $1.2 billion in a 10-year period.

I should add that REITs and other corporate landlords also benefit from CMHC lending and mortgage insurance. Michel and I have talked about this on other occasions.

In conclusion, if the government had really examined the drivers of unaffordability and looked at its own fiscal policy, it would have been impossible to completely leave out measures in budget 2021 to protect tenants in arrears.

Really, for me it's the result of this omission that doesn't make sense. There are 250,000 rental households facing eviction, and as some of the most vulnerable low-income households, they are at real risk of homelessness. To me, that creates a zero-sum game for the government—addressing homelessness with one hand, and then creating it, potentially, with the other.

[The Chair, Liberal, Wayne Easter]

Thank you, Leilani.

Before I turn to the last witnesses, the lineup to start, with six-minute rounds, will be Mr. Fast, Mr. McLeod, Mr. Ste-Marie and Ms. Kwan.

We'll turn to the last witnesses. Joining us as representatives of self-governing indigenous governments are Mr. Matthew Mahaffey, legal counsel and senior advisor for the Carcross/Tagish First Nation, and Ms. Bertha Rabesca Zoe.

I'm not sure who is leading off.

Ms. Zoe, are you leading there?

The floor is yours. Go ahead, and welcome.

[Bertha Rabesca Zoe, Legal Counsel, Tlicho Government, Self-Governing Indigenous Governments]

Thank you, Mr. Chairman.

Thank you to the committee for giving me the opportunity to speak today on this important issue.

My name is Bertha Rabesca Zoe, and I've been asked to speak on behalf of the Tlicho and other self-governing indigenous governments about the significant challenges our communities face when it comes to housing.

Close to half of Tlicho citizens do not have their core housing needs met. For those of you who may not be familiar with the Northwest Territories, Tlicho live just north of Yellowknife in four communities. There are over 20 communities in the Northwest Territories.

More than 128 Tlicho families are currently on a wait-list for housing. These families are waiting eight or nine years to get a roof over their heads. Over a quarter of the homeless population in Yellowknife is from the Tlicho community of Behchoko. I'm in Behchoko right now, and we're about an hour's drive from Yellowknife. Many of these people are young children, women and families. We simply do not have the houses needed to give them a place to live.

Tlicho citizens also face disproportionately higher rates of overcrowding. Twenty per cent of Tlicho families live in overcrowded conditions. There are very serious health implications to these housing gaps. Even before COVID-19, researchers were sounding the alarm on the impact of overcrowding in Tlicho homes. While tuberculosis was all but eradicated in most of Canada, as of 2018 the Tlicho community of Behchoko had more cases of tuberculosis than all the other communities of the entire NWT combined. This should come as no surprise.

Behchoko has been widely referred to as ground zero for the Tlicho housing crisis. The housing conditions in this community are objectively the worst in the entire territories. Measures such as social distancing and self-isolation are impossible to implement in Behchoko and for our citizens experiencing homelessness. This is the same for most first nations in the Northwest Territories, as well as across Canada.

Just this past weekend, schools in Yellowknife and the surrounding areas closed in response to a rising number of COVID cases caused by the U.K. variant of concern. Yesterday, the schools in Behchoko followed suit.

The Tlicho citizens who live in shelter systems in Yellowknife and the many Behchoko residents who travel to Yellowknife daily for groceries, work and other essential needs are all in danger. If just one citizen catches this virus, it will spread through our homes like wildfire.

When we say that our communities need housing, this is what we are talking about. When we say we are vulnerable to COVID-19, this is how dire it is.

I understand the committee is considering how the federal government is spending COVID-19 money on housing programs. My message to you is that more needs to be done to help self-governments like the Tlicho to address the fundamental housing shortages our people face.

The rapid housing initiative was a step in the right direction, but it did not go far enough to target the disparities in indigenous communities. Over half the available funding under the initiative went to municipalities. The second stream was open to indigenous governments, but we are competing with provinces, territories, municipalities and non-profit organizations for a limited pool of resources.

The evidence is clear that the housing crisis in indigenous communities far outstrips the needs elsewhere. We are, therefore, recommending that the committee consider these disparities and prioritize more funding to where the need is highest.

We also think that future initiatives need to be more responsive to the realities of remote communities. The rapid housing initiative prioritized housing projects that could be up and running in 12 months or less. Getting construction jobs organized in remote places takes time. You might have to wait for a winter road or a supply arrangement that takes longer than you would see in more southerly areas.

The Tlicho and other self-governments should not be disadvantaged because of the complexities of building infrastructure in remote locations. If future program spending does not incorporate more flexibility, we will continue to be disadvantaged in the ways that we have been for far too long already.

Lastly, funding for housing should flow directly to self-governments. Our treaties establish our governments as partners in Canada’s system of fiscal federalism. Providing direct allocations is in line with the government-to-government relationships we share with Canada.

As you consider federal spending on COVID-19 programs and initiatives, I hope that you will keep in mind both the evidence of need in indigenous communities as well as the impact that an investment in indigenous housing would have, not just on reducing the spread of COVID-19 but on improving outcomes for generations of indigenous citizens across the country. I am hopeful that the challenges posed by COVID-19 will give us an opportunity to right some of the historic wrongs that continue to impact our people and an opportunity to build a brighter future for our citizens.

Marsi for allowing us to present to you today. I have with me my colleague, Matt Mehaffey; he was introduced earlier. He will be available to answer technical questions if you have them.

Marsi cho.

[The Chair, Liberal, Wayne Easter]

Thank you very much for your presentation, Ms. Rabesca Zoe.

Thank you all for your presentations.

We'll turn to questions. The first round will be six minutes for each. We'll start with Mr. Fast.

[Ed Fast, Conservative, Abbotsford, BC]

Thank you, Mr. Chair.

My first question is for Mr. Tremblay.

Mr. Tremblay, you're familiar with the project charter that established the solutions labs study on intergenerational wealth and equity, correct?

[Michel Tremblay]

I am. Yes, sir.

[Ed Fast, Conservative, Abbotsford, BC]

Who actually drafted the project charter itself? Was it the CMHC? Was it Generation Squeeze? Who did that?

[Michel Tremblay]

I believe we did that in collaboration with Dr. Kershaw. I wasn't intimately involved, as Dr. Kershaw was, but I think it was a joint effort.

[Ed Fast, Conservative, Abbotsford, BC]

When that study report is finished, what would it be used for? What's the purpose?

[Michel Tremblay]

The purpose of the report, as Dr. Kershaw mentioned in his opening remarks both today and yesterday, is to look at wealth inequality and its impact on affordability. It will then be published, and people can look at it and determine what they want to do and what next steps could be.

[Ed Fast, Conservative, Abbotsford, BC]

Would this be something that government would look at and use to be informed on future housing policies?

[Michel Tremblay]

The information would be available on our website, so it would be publicly available to whoever would want to look at it. It would be just one data point among all sorts of other data points in terms of making policies.

[Ed Fast, Conservative, Abbotsford, BC]

Okay.

I refer you to the executive summary. The executive summary, of course, is supposed to summarize what the study is about. It refers to being about one key source of this intergenerational inequality, a tax policy that privileges home ownership and shelters housing wealth.

Because it refers to one key source but doesn't go beyond that, what are the other key sources of intergenerational inequality that might have been studied?

[Michel Tremblay]

I think that it's probably best for Dr. Kershaw to elaborate on that.

[Ed Fast, Conservative, Abbotsford, BC]

I'd be glad to ask him that question, but I thought that maybe the CMHC would be familiar with the executive summary itself and why the executive summary only refers to one key source of that intergenerational inequality: tax policy that privileges home ownership.

[Michel Tremblay]

I think it's a known fact that there have been studies on home ownership being preferred over rental housing to the tune of 8:1 and to as much as 15:1 in terms of Canada. That includes provincial governments, municipal governments and so forth. I don't think that we can dispute that it is one of the key sources.

[Ed Fast, Conservative, Abbotsford, BC]

All right. I'm glad to hear that.

Mr. Kershaw, given the fact that one of the areas to be examined was going to be tax policy as it relates to housing wealth, has your organization, Generation Squeeze, actually taken a position on a home equity tax?