Finance Committee on Sept. 21st, 2023

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Thank you.

You've also talked in the past about some of the potential consequences, which could be mortgage defaults, going forward. We saw from the time that the finance minister pronounced that they had won the battle with inflation that it actually increased by 43%. Of course, if inflation continues to go up, the Bank of Canada may be forced to increase interest rates, which will drive up mortgage costs.

With the static mortgages, the potential increase in interest rates, the overall increasing of inflation and the cost and the lack of supply coming onto the market, with the increased demand that you've talked about, could you see perhaps a scenario in which mortgage defaults increased dramatically in the next, say, 12 to 24 months?

[Ben Rabidoux]

Yes, I think it's very likely that they'll probably more than double.

For context, we're starting from an extremely low base. We have 15 basis points of delinquencies, which is pretty much an all-time low. They will go up. Partly it's been masked by pandemic savings and by some of the dynamics within the mortgage market, such as the static payment variable that has shielded Canadians from some of the impact of higher rates, but I think they'll likely double. Now, that sounds dramatic, but that still leaves us roughly in line with long-term norms. I'll stop there.

It could be much worse if we get an economic downturn. What I said assumes that the economy holds relatively constant.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Yes. Unemployment is a big key to that as well.

Briefly, because I have only 20 or so seconds left, our leader Pierre Poilievre has announced a series of potential initiatives that would increase the amount of supply. To my mind, increasing the amount of supply is the key issue in the long term to solving this issue. Would you agree or not?

[Ben Rabidoux]

I agree. I think anything that incentivizes the municipalities to get on board and say no to Nimbyism is welcome. There are certainly demands that I imagine we need to explore, but I'll leave that for another time.

[The Chair, Liberal, Peter Fonseca]

Thank you.

Thank you, MP Lawrence.

Now we go to MP Dzerowicz for six minutes.

[Julie Dzerowicz, Liberal, Davenport, ON]

Thank you so much, Mr. Chair.

I just want to say that it's great to see all my colleagues—all the returning ones and some of our new ones. I very much look forward to a productive session in which we're working on the issues that are important to Canadians.

I want to say a huge thanks to all the presenters. They were outstanding presentations. Thank you so much for beginning our pre-budget consultations today.

My first question, very quickly, is for Mr. Schiffer.

Mr. Schiffer, I'm really glad you presented to us today. Thank you so much for the work you do. I have felt, being on finance for a number of years, that the voices of urban indigenous leaders have been missing from the finance committee, so I'm glad you have joined us.

I just want to be clear on your recommendation. It seems what you've indicated is that there's a lot of great federal funding that is going to children but that it's on reserve, that we are missing a little bit in terms of the voice of urban aboriginal children's supporters at the table and that there's a need for us to maybe redistribute the dollars a little bit better.

Could you maybe clarify for the committee what percentage of on-reserve versus off-reserve children there are? Is it 50-50? Then, could you give us your specific recommendation?

I'll have to cut you off after a minute, because I have a few more questions for Mr. Brosseau and Mr. Letko.

[Dr. Jeffrey Schiffer]

Thank you.

We do see variation across Canada, but we can say that within every province and territory the majority of indigenous people are living off reserve. It's above 50%. In Ontario it's a little bit higher.

The other thing that I think is really important to note is that while many indigenous people are living on reserve, reserve communities don't often have all of the programs and the services they may require. We see a lot of indigenous people who live on reserve leaving the reserve to access those programs and services. Many of the people we're providing services to in the city of Toronto live here, and many don't. Many who are coming to access programs and services don't, so the on-reserve/off-reserve dichotomy is really not an effective one. It doesn't take into account the demographic shifts of where people live or how people are moving across those jurisdictions to access the programs and services they need.

A big gap is understanding how much of the service provision is actually occurring off reserve and the role of the federal government in funding those services.

[Julie Dzerowicz, Liberal, Davenport, ON]

I think your recommendation, if I understood clearly, is that we already have three very well-developed programs and we should just better distribute the funds both on reserve and off reserve, depending on where the children are.

[Dr. Jeffrey Schiffer]

Yes, 100%, it can be a lot more work to create new mechanisms. Why reinvent the wheel when we already have it? I think we should pour more funding into those mechanisms, ensure that urban agencies have access and really look at some of the eligibility requirements around who counts as indigenous in terms of accessing that funding. I can leave an explanation around that for another time.

[Julie Dzerowicz, Liberal, Davenport, ON]

Thank you so much for that.

Mr. Brosseau and Mr. Letko, that was very disturbing information, but it's needed. It was necessary for us to hear that in 1990, 80% of pension investments were in Canada and now we're down to about 4%.

As someone who deals with a lot of innovators, we have a lot of great money to invest in new companies and new entrepreneurs. However, a lot more investment is needed in the second, third and fourth stages. There's a great need for funding of Canadian innovation and the Canadian economy.

My first question to you is how does the 4% compare to the situation in other G7 and OECD comparable countries? That's just so we get an idea about what typically happens with pension funds in other countries. Then, could you be a little more specific about your recommendation on how we can change that? I know you indicated that there is a mixture of policy and regulations, but can you be a little bit more specific on what your recommendation might be for our committee?

[Daniel Brosseau]

Canada distinguishes itself on being the developed country that invests the least in its own economy. Canada would be.... Let's say I take this 10% number. In Australia, for example, which would be a comparable country, it would be close to 50%. In the United States, which is one of the most developed successful economies, it's around 75%. We are very well below.

With regard to innovation and things like that, yes, we are a very innovative country, and it's well documented in things like this, but for every dollar we spend in R and D in Canada, Israel spends two dollars. Israel is a smaller economy. For every dollar we spend in Canada, the U.S. spends $40.

We are innovating in things like this, but we could do a lot more. With regard to potential solutions and things like this, I think we.... The last time I appeared in front of this committee was 40 years ago. Yes, it was 40 years ago. I was presenting in the name of the Canadian National Railways pension fund, where I worked at that time. The argument we were putting forth was that the10% limit on foreign investments by pension funds should be removed. Now I'm here arguing a bit the reverse of that.

[Voices]

Oh, oh!

[Daniel Brosseau]

That's how life goes. It's not my fault.

The solutions at that time were very stipulative. You had to do this. You had to do that. They were things like this. Now we're in a much more fluid world. I don't think we should go back to the strict stipulations.

One way of doing that—and I think it can all be done by regulations—is to introduce a concept of reserves. If you invest in an Indonesian bank, it's more risky—

[The Chair, Liberal, Peter Fonseca]

You'll have to wrap up, Mr. Brosseau.

[Daniel Brosseau]

Okay.

Basically, it's a system of reserves. I can go into more detail in our documents and things like that.

[The Chair, Liberal, Peter Fonseca]

I'm sure there will be more time for questions later.

Thank you, Ms. Dzerowicz.

Now we're going to MP Ste-Marie, please.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Thank you, Mr. Chair.

Greetings to all my colleagues. I'm happy to see them again. I'll echo Mr. Lawrence and Ms. Dzerowicz in greeting those colleagues who are present, thanking those who've left us and welcoming newcomers. I especially want to salute the new parliamentary secretary, Ms. Bendayan.

Ms. Bendayan, congratulations on your new duties.

My questions are for Ms. Véronique Laflamme, from FRAPRU. In passing, Mr. Chair, I congratulate you for saying FRAPRU's full name in French.

Ms. Laflamme, first, did you have time to complete your remarks? If not, would you like to do so?

[Véronique Laflamme]

Good day, Mr. Ste-Marie.

I think it was a little obvious, but I didn't have time to read our recommendations to the Standing Committee on Finance for the next budget.

First, we ask the committee to urge the government to reallocate, as requested by many of the organizations I mentioned earlier, all the funds for affordability under the National Housing Strategy in order to significantly increase non-profit social housing in Quebec and Canada.

This can only happen through comprehensive and recurring programs dedicated to the various types of social housing, whether housing co-ops, public housing managed in Quebec through municipal housing boards, or non-profit housing associations. Those three types of social housing respond to a variety of needs, including urban Indigenous, seniors, youth, families, female victims of domestic violence and individuals experiencing homelessness, to name just a few. Furthermore, funds need to be transferred to the provinces that already have such programs.

Next, new, predictable and recurring funding for the Rapid Housing Initiative must be made available immediately. Over the last few months, this program has allowed for the construction of social housing projects to meet urgent needs. Obviously, this initiative should also be expanded if it remains the only program to fund not-for-profit social housing, since, at present, it is reserved for households in extreme poverty. It is good, but we also need programs for low- or modest-income renters who don't necessarily have specific needs and aren't living on the streets, but who might wind up there if they don't get help quickly.

Additionally, a rental building acquisition and renovation program for social housing is needed, but with sufficient subsidies to guarantee the tenants’ return to and occupancy of the premises. We are not asking for a federal fund, because we don't know how it would be managed across the country. So we're asking for a specific program with long-term commitments, with the funds to be transferred to the provinces that choose to create their own such program.

In conclusion, we need policies that support the implementation of the right to housing, which Canada committed to and recognized in legislation in 2019. It will take significant measures to achieve that goal; one-time cheques do not serve that objective, any more than financial measures targeting private sector investments do.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Thank you very much.

As was the case during your last visit, I would like you to explain to us once again the difference between “affordable housing”, the term in the budget, and “social housing”, which you talked about and which some programs cover.

Why is social housing the most important to support?

[Véronique Laflamme]

Thank you for the question. It's important.

“Affordable housing” is an elastic concept. When you look at the Canada Mortgage and Housing Corporation's definition of affordability, it's when you don't spend more than 30% of your income on housing. Different federal programs define affordability in different ways. A federal initiative even bases affordability on the income of all households, not just tenants. With this initiative, we funded housing units in the Montreal region that cost more than $2,250 a month. Affordability is unfortunately far too elastic and does not allow for a clear expression of what we are talking about. What we're talking about is social housing outside of the private market.

In Canada, in the past, what has been funded as social housing is public housing, low-income housing intended for low-income households, meaning people whose income falls below the cap on core needs, which is published annually. These are public services where there are, in general, unionized public servants and where households on the waiting list are answered without discrimination. Unfortunately, the waiting lists are very long.

What's more, there are housing cooperatives, which meet the needs of a mix of populations, both those with modest incomes and those with low incomes, and ultimately enable tenants to also own collectively, which gives them greater control over their living environment. There are also non-profit housing organizations; that formula is a little more flexible and the composition of boards of directors is different, but they are non-profit.

So that's what social housing means. This is non-private market housing where there is no profit motive, where there is a social mission and where affordability is sustainable. In fact, it is perpetual, if we properly protect these groups, as the act does in Quebec. In the past, co-ops and non-profit housing organizations have been protected from resale. Because they have long-term agreements, generally speaking, that protects affordability over time.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Thank you very much.

I will try to ask you more questions in the next round.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Ste-Marie.

Madame Laflamme, I do understand now that you are able to be here for the whole meeting. That's great.

Now we will go to MP Blaikie for six minutes.

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

Thank you very much, Mr. Chair.

I'll take my turn at welcoming the new members of the committee and saying hello to the returning members. I'll also thank previous members of the committee who are no longer at the table for their work.

This week we've seen a couple of announcements from various parties on the question of housing, but I would put to our witnesses that what those proposals share—whether it's the Liberal proposal on GST or whether it's Mr. Poilievre's bill on housing—is that they're both market-based measures.

I'll start with Ms. Bruske from the CLC.

In your opinion, do you think that market-based initiatives alone are going to solve the housing crisis, or do you think it's important that the federal government also implicate itself very seriously in a number of ways in developing non-market housing, whether it be through the co-operative movement, the non-profit movement or government-built housing?

[Bea Bruske]

We certainly believe that market-based housing has created some of the challenges and issues that we're facing currently. We believe that there is a very important role that the federal government needs to play in terms of becoming involved in the housing market, in terms of funding new opportunities and in terms of funding social housing.

The funds that we're looking for are really to make sure that there's an establishment of that opportunity for the federal government to play a more significant role. The expansion of the government role and the public ownership is absolutely critical if we want to solve the housing problems right across this country. We hear it every single day from workers right across this country, who are priced out of the housing market, whether it's due to renovictions or rental prices going up. We hear it constantly. We hear from workers working full-time jobs, having more than one working person in the household, who still not able to find affordable housing that meets their needs.

Our federal government absolutely has a critical role to play.

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

Thank you very much for that.

Ms. Laflamme, you talked a bit about this already, but I would like to ask you once again whether, in a strategy to end the housing crisis, it's appropriate to adopt only market measures, or whether it's necessary to focus on the non-profit sector, cooperatives, and even the government, to succeed in building social and affordable housing.