Finance Committee on Sept. 21st, 2023

[The Chair, Liberal, Peter Fonseca]

I call this meeting to order.

Welcome, everybody, to our 100th meeting of the House of Commons Standing Committee on Finance.

[Some hon. members]

Hear, hear!

[The Chair, Liberal, Peter Fonseca]

Yes, in our 44th Parliament, it's a great day. It's a nice number.

I do hope that all of you have had a great summer with your families, friends and constituents.

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

On a point of order, has any other committee done 100 yet, Mr. Chair?

[The Chair, Liberal, Peter Fonseca]

That's 100 official meetings, MP Lawrence. I don't think any other committee.... I could be wrong. I'll look to the analysts or the clerk. They may know and provide that number. We've had that number of official meetings. I think we've had even many more than that.

Just on that note of summer, as I said, I hope that everybody had an opportunity to be with family and friends and recharge and talk to your constituents and to the many Canadians whom I'm sure you've heard from.

We've a lot of work to do with our pre-budget consultations. We're going to be hearing from stakeholders from labour, business, academia and civil society. I know that our excellent finance committee members are going to do a great job and be very active on this.

Also, here's another one: We have received what I believe is a record number of submissions and briefs to our committee from stakeholders for our pre-budget consultations. There are around 850....

I'll look to the analysts. Yes, there are about 850 submissions that we've received. Outside of our Ottawa meetings, we will be visiting communities across Canada in October and November.

Our committee is made up of members from right across our great country. We have a number of new members on our finance committee, and many veterans.

New to our committee is parliamentary secretary Bendayan; welcome. We also have MP Thompson and MP Weiler, who are new to the committee.

Our veterans are MP Baker, MP Dzerowicz, MP and Vice-chair Hallan, MP Morantz, MP Chambers, MP Lawrence, MP and Vice-chair Ste-Marie and MP Blaikie.

I'm not going to go through your riding names. I know that you're going to have an opportunity when you ask questions and get into discussions to highlight many of the things that are going on in your ridings and your regions.

Also, it's great to be back with an outstanding team. As I've said for the analysts, the clerks, the interpreters, the support team and all the members' staff who are with us here, we're all here to work together and to do a good job.

Let's get into it.

Pursuant to Standing Order 83.1 and the motion adopted by the committee on Thursday, June 8, 2023, the committee is meeting to discuss the pre-budget consultations in advance of the 2024 budget.

Today's meeting is taking place in a hybrid format pursuant to the Standing Orders. Members are attending in person in the room and remotely by using the Zoom application.

I'd like to make a few comments for the benefit of witnesses and members.

Please wait until I recognize you by name before speaking. For those participating by video conference, click on the microphone icon to activate your mike. Please mute yourself when you are not speaking. For interpretation, those on Zoom have the choice at the bottom of your screen of either floor, English or French. Those in the room can use the earpiece and select the desired channel.

Although this room is equipped with a powerful audio system, feedback events can occur. These can be extremely harmful to interpreters and can cause serious injuries. The most common cause of sound feedback is an earpiece worn too close to a microphone. We therefore ask all participants to exercise a high degree of caution when handling the earpieces, especially when your microphone or your neighbour's microphone is turned on. In order to prevent incidents and safeguard the hearing health of the interpreters, I invite participants to ensure that they speak into the microphone into which their headset is plugged and to avoid manipulating the earbuds and place them on the table, away from the microphone, when they are not in use.

I will remind you that all comments should be addressed through the chair.

If members in the room wish to speak, please raise your hand. For members on Zoom, please use the “raise hand” function. The clerk and I will manage the speaking order as best we can. We appreciate your patience and understanding in this regard.

In accordance with the committee's routine motion concerning connection tests for witnesses, I'm informing the committee—and this is through the clerk—that all witnesses have completed the required connection tests in advance of the meeting.

I would now like to welcome our witnesses.

Joining us as an individual is Ian Lee, associate professor from the Sprott School of Business at Carleton University. Welcome.

From the Canadian Labour Congress, we have Bea Bruske, president, and Chris Roberts, national director, social and economic policy. From Edge Reality Analytics Limited, we have Ben Rabidoux, who is a housing analyst. From the Front d'action populaire en réaménagement urbain, we have Véronique Laflamme, who is a spokesperson for the organization.

We also have, from Letko Brosseau and Associates Inc., Daniel Brosseau, president, and senior vice-president Peter Letko.

Also joining us, from Native Child and Family Services of Toronto, is director of governance and strategy Jeffrey Schiffer.

With that, we will start from the top with Ian Lee. You will have up to five minutes to make an opening statement.

[Dr. Ian Lee, Associate Professor, Sprott School of Business, Carleton University, As an Individual]

Thank you, Mr. Chair and members.

Here are my disclosures. First, I do not belong to or donate money to any political party, or allow lawn signs during federal, provincial or municipal elections.

Second, I was mortgage manager of the fourth-largest BMO branch in Canada—the Ottawa main office, now the Sir John A. Macdonald reception centre for Parliament Hill—during the late seventies and early eighties, when inflation peaked at 14% and interest rates peaked at 20%.

Third, I am a tenured professor paid by Carleton, not by business or NGOs, as I do not consult or lobby.

Fourth, immediately after the collapse of the Berlin Wall in 1989, through to 2020, I taught over 100 times in former centrally planned economies across central and eastern Europe, and later multiple times in Cuba, China and Iran, where governments frequently set prices and production quotas. I witnessed the massive systemic shortages of food and consumer goods across each of these economies in the early to mid-nineties.

Everyone in Canada today is understandably concerned with increasing interest rates and with inflationary prices, especially for food and housing. There is a tendency to blame the firms at the end of what Harvard strategy professor Michael Porter accurately calls the “value chain” system, not the profit maximization chain claimed by some MPs.

Restated, these critics focus on the symptoms of inflation rather than examining not only the totality of the value chain system of the two million corporations in Canada—per StatsCan—but what David Dodge, David Rosenberg and others call the economic fundamentals. Fundamentals include Canada's dramatic decline in productivity and our terrible decline in business capital investment.

However, before going further with this issue, I want to discuss inflation briefly, because it's central to everything we're going to be talking about, I think.

Inflation in the late sixties did indeed originate in the U.S., due to President Johnson's war in Vietnam and the war on poverty. This led to massive spending increases, but there was a simultaneous refusal in the American government to raise taxes or increase interest rates to cool down the economy.

However, when inflation crossed the border into Canada, it was exacerbated by very large Canadian government deficits and a refusal, initially, by the Bank of Canada to raise interest rates. I lived through this. Inflation went from 4% to 5% to 8% to 10%, peaking at 14%, causing the greatest harm to lowest-income people in Canada.

It was only when Governor Bouey of the Bank of Canada and Chairman Volcker of the Federal Reserve decided to attack the out-of-control inflation with enormous increases in interest rates that peaked around 20% that they finally killed inflation, while our fiscal profligacy was only finally addressed by the courageous decisions of Prime Minister Chrétien and Minister of Finance Martin in 1995 to eliminate the out-of-control fiscal deficits.

These monetary and fiscal policies produced very low inflation and very strong income growth for everyone for a third of a century. It's now very clear that we have forgotten those lessons and that it's time to go back to school.

Today, rising inflation has indeed been caused by the lockdowns and supply chain interruptions, but it has been exacerbated by massive, excessive monetary and fiscal stimulus, and rates were far too low for far too long. Please read Mohamed El-Erian's op-eds in the Financial Times. He's now the head of Cambridge University.

Some argue that interest rate increases cause inflation. These critics fail to understand the arithmetic of monetary policy. Interest rate increases subtract or take money out of the bank account of every last one of us and businesses, leaving less money to buy stuff.

Some argue that grocery store executives are greedy and profit-gouging. This is notwithstanding that for my entire adult lifetime studying this industry, any person who conducts interindustry comparative analysis knows that grocery retailing has notoriously low net profit margins, empirically validated by StatsCan and the audited financials.

I'm urging parliamentarians to return to an examination of the economic fundamentals of Canada by examining low productivity and protectionist policies in certain industries, such as airlines, telecom and agriculture, that exclude foreign competitors and drive up prices to much higher levels.

Examine competition policy that currently allows industry consolidation for a handful of oligopolistic firms when there is a clear consensus in economic research that concentrated or oligopolistic industries are less competitive and charge higher prices than fragmented industries with many firms.

I strongly urge parliamentarians to examine the role of government policies, including taxes that increase the cost of doing business. See the recent C.D. Howe study on how multiple government taxes increase average housing costs by up to a third.

You must undertake a fundamental review of the remarkable number of barriers in industry after industry that restrict entry by new firms, restrict competitiveness, or, through taxation, force prices to be increased.

In closing, it is timely to recall Pogo’s very wise words: “We have met the enemy and [it] is us”, or more precisely—no offence intended—it is you, the elected officials who have approved these extensive multiple barriers time after time, in bill after bill, year after year.

Thank you.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Lee. You're right on time.

Now we'll hear from the Canadian Labour Congress.

Witnesses and members, just before we go to the Canadian Labour Congress, I'll let you know that when there's about a minute left in your time, I'm going to put up this sheet so that everybody will know and it will keep you on track.

We will hear from the Canadian Labour Congress, please.

[Bea Bruske, President, Canadian Labour Congress]

Thank you, Mr. Chair.

Good morning, committee members.

I'm coming to you from the unceded territory of the Anishinabe Algonquin territory. It's my honour and my pleasure to be here with you today.

The Canadian Labour Congress advocates on behalf of all workers in Canada.

The 55 national and international unions that are affiliated with the CLC bring together over three million workers in virtually all sectors, industries, occupations and regions of this country.

Workers in Canada currently are suffering intense cost-of-living pressures, but with bold action, we believe that government can help alleviate these pressures. Government can make ambitious investments to provide more affordable, non-market housing for workers in need.

The CLC recommends that budget 2024 allocate $20 billion per year in capital funding to the national housing co-investment fund. Together with provincial partners and other public contributions, this will help build a minimum of 100,000 new units per year.

Budget 2024 should accelerate the rollout of the national housing strategy's federal lands initiative for affordable housing. Government should introduce a dedicated five-year, $10-billion public land acquisition fund to acquire additional land for the construction of non-market, affordable rental housing.

In order to assist the community housing sector to acquire existing affordable rental buildings, the government should create a $20-billion housing acquisition fund in order to maintain the supply of affordable housing for low-income and modest-income households.

The CLC also recommends that in order to cope with high food prices, budget 2024 impose a windfall profit tax on large food retailers and use the revenues to fund an extension of the existing grocery rebate program.

The situation with the cost of prescription drugs is also a major affordability issue for Canadians. We call on the federal government to accelerate the current plans to introduce a national public pharmacare program in Canada. That should entail passing enabling legislation by the end of 2023, implementing—without delay—an essential medicines formulary, and implementing the bulk purchasing plan by the end of 2023. The multi-payer, patchwork system that we currently have has left Canada paying among the highest prescription drug prices in the world. We know that Canadian households paid nearly $7 billion out of their own pockets for prescription medicines in 2020.

Numerous studies have linked the high cost of prescription drugs and related charges, like deductibles and co-payments, to patients' not taking their drugs as prescribed. That, overall, raises the cost of our health care system.

Canada's unions want to see a truly universal pharmacare plan, implementing a single-payer system of public insurance coverage for prescription drugs.

I'll remind you that the Hoskins report advocated a “universal, single-payer, public pharmacare” program and noted that it would reduce the cost of prescription drugs for employers and businesses by $16.6 billion and for families by $6.4 billion.

I also want to address the issue of employment insurance. Since 2019, the federal government has committed to creating an EI system for the 21st century that works for everyone. Canadians are still waiting to see the results of years of consultations on EI.

First, we had a global pandemic, and then this year we've had disastrous floods and the worst forest fire season on record. These disasters have displaced tens of thousands of Canadians from their homes, jobs and communities. Now the economy and the job market are beginning to cool, with the possibility of an economic downturn in the near term. The CLC calls on the government to introduce an annual government contribution of 20% to EI program costs, and we know that this will help pay for improvements while minimizing employment insurance premium increases.

We call on the government to commit to improving access by establishing a lower, uniform, national entrance requirement of the lesser of 360 hours or 12 weeks of insurable employment, and to provide up to 50 weeks of regular benefits to meet the needs of seasonal workers across this country. We're also calling for a raise on the ceiling of insurable earnings and for a substantial increase to the 55% benefit rate. We expect to see the end of a clawback of EI benefits due to severance and vacation pay that workers have earned prior to a downturn requiring them to apply for EI. We also expect to see the end of a 50-week restriction on combined special benefits with regular benefits, which disproportionately punishes women.

Finally, I want to touch on budget 2024 investments in sustainable jobs and the environmental transition. The CLC welcomes the sustainable jobs act. We want to see greater investments in social protections for workers in sectors at risk due to climate change. That includes transition supports for workers, including skills recognition, training and retraining, relocation assistance, mental health programming, family supports and other assistance programs. Budget 2024 investments in decarbonizing the economy have to include job-quality strings, building on the climate-focused investment tax credits that were announced in budget 2023.

Job quality requirements will ensure low-carbon jobs that are well paid and safe and that will afford workers a say through access to a union and ensure that green investments are made in consultation with workers.

Thank you. I welcome any questions from the committee members.

[The Chair, Liberal, Peter Fonseca]

Thank you, Ms. Bruske.

We go now to Edge Realty Analytics and Mr. Rabidoux.

[Ben Rabidoux, Housing Analyst, Edge Realty Analytics Ltd.]

Thank you, Mr. Chair.

Good morning, committee members.

I've covered Canadian housing and household credit trends on behalf of institutional investors for over a decade now. I previously testified before this committee in 2022 regarding housing's role in the cost-of-living crisis in Canada. If I could, I would just like to look back and quote from that testimony:

Part of the current housing crisis can be traced...to 2019. At that time, population growth in Canada hit nearly 600,000 in [one] year, due in part to [an]... increase of 200,000 non-permanent residents....

Allowing population growth at this level without consideration of the real world constraints is a policy failure that cannot be repeated.

Now let me fast-forward to today.

According to Statistics Canada, Canada's population has grown by 1.2 million in the past year, of which an unprecedented 730,000 consisted of non-permanent residents, such as international students and temporary workers. I've included charts in my submission, which I would encourage the members to review.

Importantly, the non-permanent resident cohort has no caps and no targets set in Ottawa and is separate from the federal permanent resident target of 465,000 for 2023. I want to be crystal clear that my comments to follow should not be construed as criticism of immigration policies broadly or of Canada's permanent resident target, which I fully support. We need to be careful not to position this issue as a binary all-or-nothing issue. There's plenty of area for thoughtful discussion between zero and the current levels of growth, which have clearly had unintended consequences that we cannot ignore.

Let's talk about those unintended consequences.

It's important to note that non-permanent residents are overwhelmingly made up of renters, so it should be no surprise that when we add nearly three-quarters of a million into the Canadian population in one year, we see an extremely disorderly rental market that has disproportionately hurt lower-income households.

We also need to be mindful that this growth has impacted the non-permanent resident cohort themselves, particularly international students, who often find themselves living in substandard housing if they can find housing at all. We have failed them too.

According to CMHC, rental apartment vacancies had already fallen to 20-year lows late last year, while average rents in 2022 posted the largest annual increase since at least 1998. It is certainly worse today, and your constituents who have tried to find rental accommodations recently can attest to that. This dynamic is also contributing to the cost-of-living issues as rents alone have added 0.4 percentage points to headline CPI as of last month.

I believe we have a misaligned incentive structure at play as post-secondary institutions and the for-profit partnerships they often work with have every incentive to increase international student enrolment due to the much higher tuition fees these students pay and without regard for the local rental market that doing so might impact.

Among the other unintended consequences is that this dynamic has contributed to housing speculation in recent years, as some landlords have discovered that while they cannot make a satisfactory return renting a single-family home to one family, the economics are very different if they can instead rent to a dozen or more international students. We are absolutely seeing this dynamic at play.

Finally, I believe this level of population growth risks stoking anti-immigration sentiment. Consider the results of a Nanos poll this month that found that the share of Canadians who want lower immigration targets has risen sharply from 34% in March to 55% today.

Our ability and willingness as a country to attract and welcome the best and brightest from around the world has been our superpower. It would be a shame if Canadians became disillusioned and lost that vision due to the disruptive trends we're seeing today.

I recognize that the provinces have a major role to play here, but the federal government still has some levers and some things that it can do, including establishing a provincial-level cap on international students and dissuading applications by raising student applicant visa fees or reducing the number of hours international students can work by issuing a fixed number of work permits for students each year.

Finally, there is incentivizing new construction, and on that point I would recognize that the elimination of the GST on new rentals is a welcome policy on that front.

Shifting gears for a moment, I'm going to leave that point there now, but I do also want to express my support for the submission from Mortgage Professionals Canada, which advocates for direct income verification between lenders and the Canada Revenue Agency as a means to dissuade mortgage document fraud, which has become a very real problem in recent years. This is a problem with a simple, elegant solution clearly articulated by Mortgage Professionals Canada, and there's absolutely no reason not to pursue this.

I will leave it there and I welcome your questions.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Rabidoux.

Now we go to Front d'action populaire en réaménagement urbain.

Madame Laflamme, go ahead, please.

[Véronique Laflamme, Spokesperson, Front d'action populaire en réaménagement urbain]

Good day.

Le Front d’action populaire en réaménagement urbain (FRAPRU) is a group of 145 social and community organizations active in various regions of Quebec. These include 30 housing advisory committees that are at the heart of FRAPRU’s initiatives.

For 45 years, FRAPRU has been working on housing rights and promoting social housing as fundamental to the progressive implementation of those rights.

The housing crisis is a hot topic these days. It is a multi-faceted crisis. The rental housing shortage, which is at a 20‑year high in Quebec and elsewhere in Canada, is now affecting almost all municipalities in Quebec. One aspect of the crisis is the increasing unaffordability of rental housing. To give just one example, according to the Canada Mortgage and Housing Corporation, the CMHC, the average rent in Canada increased by 7.7% between 2021 and 2022. Quebec experienced a 9% increase. Gatineau next to Parliament Hill, had a 22% increase over the same period. The few rental units available are far more expensive. Last spring, the average rent for available listings in Quebec was $1,500. When housing is unaffordable, it has an impact on the ability of renters to pay. That ability to pay is part of the right to adequate housing.

It must be said that, first and foremost, this crisis affects tenant households and low- and modest-income households. I want to emphasize this because, as a percentage, far more tenant households have core housing needs; this problems affects low-income households in particular.

I'll give an example from the latest census, in 2021: 1,624,715 Canadian tenant households already spent more than the standard 30% of their income on housing. Those households have a median income of $30,000. In Quebec, that median income is significantly lower, at $22,800. Those households are unable to afford private-sector housing, much less newly-built private-sector housing, even with government assistance. That's why, in my speech, I really want to stress the importance of non-market social housing.

The Canadian government can and must do better to help low- and modest-income renters access adequate housing for the long-term, in a manner that respects their security of tenure and ability to pay.

There aren't 10,000 ways to do that: a bigger percentage of all rental housing stock needs to be non-market social housing. The current percentage is insufficient. The monopoly held by the private market is putting renters in a bind with no options. A number of them are becoming visibly or invisibly homeless give the lack of options. They need social housing, but they have to wait years to get it. In Quebec, the percentage of rental housing stock classified as social housing has actually decreased; it is now approximately 10.2%.

History proves, however, that it's entirely possible to reverse that trend. Between 1971 and 1991, sustained federal investments in meaningful policies and programs increased the share of social housing in Quebec, from 0.5% to 9.7%. Housing built during that time has become part o our collective heritage, which now serves as a bulwark against the rise in rents, real estate speculation and gentrification.

It is clear that the National Housing Strategy, presented as an $82 billion plan over 10 years—more than five of which have now passed—, has not kept the housing and homelessness situation from worsening. Our comments echo mounting criticism, whether from the Federal Housing Advocate, the National Housing Council, the Parliamentary Budget Officer or the Auditor General. The funds available under the strategy need to be reallocated. It should be a priority in the upcoming budget and even in the fall economic update. I'll speak to this in a moment.

The federal plan falls far short of the objectives set out in the legislation passed in 2019, specifically to support the progressive realization of the right to adequate housing as recognized in the International Covenant on Economic, Social and Cultural Rights.

The strategy has failed because the funding is scattered. To date, the government has chosen to leave it up to both the for-profit private housing sector and the not-for-profit public housing sector. Furthermore, the government's strategy focused solely on the construction of housing, without considering whether it meets the needs and abilities of the families and individuals most in need, about whom I spoke earlier.

Some federally funded projects even contributed to the rising cost of rent. Only the Rapid Housing Initiative was successful and reserved for the non-profit sector. However, it was the only non-recurring program and, unfortunately, the recent federal budget does not provide further funding for it.

The National Housing Strategy progress reports demonstrate that its two most important initiatives have, to date, been used to fund unaffordable housing. Even though we are critical of the national housing co-investment fund, which is not a significant program, it has helped to round out funding for non-profit and cooperative housing in Quebec. Nonetheless, the subsidies available under this fund ran out some time ago.

Consequently, FRAPRU believes that the federal government must change course and significantly increase funding for social housing. We urge the committee to...

[The Chair, Liberal, Peter Fonseca]

Thank you very much, Ms. Laflamme.

Now we'll go to Mr. Brosseau and Mr. Letko, from Letko Brosseau and Associates Inc.

[Daniel Brosseau, President, Letko, Brosseau & Associates Inc.]

Thank you for inviting us this morning.

We want to talk to you about pension funds, which represent 36% of institutional savings in Canada, only slightly less than the banks. We're talking about a very large pool of capital.

Pension savings and how they are invested have been subject to major transformations over the last 30 years. Many changes have been unintended, and several have been quite damaging for both individual pensioners and the Canadian economy.

The negative effects include a substantial decline in the portion of private sector employees covered by pension plans; a rise in the much less efficient defined contribution plans at the expense of defined benefit plans; an increased reliance on subjective, opaque and illiquid private markets; a disinvestment from transparent and liquid public markets; an increased investment in low-return bonds; and increased herding, to the detriment of independent fundamental analysis, resulting in a decrease in vitality.

The negative effect that seems to attract the most attention has been the exit from Canada of Canadian pension funds. Canadian public equities held by Canadian pension funds fell from 80% of their total equities in 1990 to probably less than 10% now, representing under 4% of their total assets. The argument most often used to justify this behaviour is the expectation of higher returns in foreign markets. In fact, returns in Canada have historically exceeded many other world markets. By comparison, current valuation metrics are quite favourable.

Let's assume for a moment that returns in Canada will be lower. The question remains whether maximizing single portfolio returns to the exclusion of other factors is the correct global strategy for the country as a whole. If pension funds siphon away Canadian savings under the guise of higher expected returns without considering the effect this may have on the ability of their contributors to earn incomes, the return calculations are incomplete from the point of view of the Canadian economy.

Investing $100 outside the country may generate an extra dollar in returns, but the impact of the absence of the $100 invested in the local economy may be much greater. The loss in domestic investment, sales, salaries and profits because of a lack of local investment by committed domestic investors can easily overshadow any small pickup in income that may have come from a higher return elsewhere. We may already have started to see the effects of this dynamic. GDP per capita in Canada in 1980 was 92% of the U.S. GDP per capita. It has now fallen to less than 73%.

Now, consider two cases. In the first case, a Canadian investor takes $100 of savings and invests it abroad. After one year, they bring back the $100 and $10 of profit. Their return is 10%. In the second case, a Canadian investor takes $100 of savings and invests it in a machine that produces $205 of product in the year. The costs are $100 of salaries, $100 of wear on the machine, and $5 of profit. The return is less. It's 5%.

In case one, Canada’s GDP would rise by $10—the profit. In case two, Canada's GDP would rise by $205—the salaries, the machine and the profit. Even though the profit is less, the impact on GDP is much, much greater.

From the Canadian investor’s point of view, the foreign investment gives a higher return, but from a GDP perspective, from a GDP-per-capita perspective, from the perspective of Canada’s ability to save, the domestic investment is by far the better one.

In addition to these considerations, foreign investments can also present governance, political, legal, currency, supply, confiscation and other risks that can sometimes be better managed domestically.

It is unreasonable to think that Canadian pension funds will see the opportunity cost of the loss of investments to the Canadian economy and to the ability of their contributors to earn good incomes and save. They cannot consider what they can't see. As a result, moral suasion cannot correct for these negative effects. Only a national policy reflected in appropriate regulation can constructively deal with the problem.

In 2021, investment in Canada accounted for 20% of GDP, compared to 18% in the United States—so higher—but what these statistics hide is that investment in residential real estate in Canada was 9.7% versus 4.9% in the United States, which left 10.4% for non-residential investment in Canada versus 13.3% in the United States—

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Brosseau. We're going to have to wrap up right there. You'll have an opportunity, of course, during questions from members, and I'm sure there are going to be many.

We do have to move on to the Native Child and Family Services of Toronto and Jeffrey Schiffer, please.

[Dr. Jeffrey Schiffer, Director, Governance and Strategy, Native Child and Family Services of Toronto]

Thank you very much to the chair and to the committee members.

I'm joining you this morning—or this afternoon, I guess, depending on where you are in the country—from Treaty No. 13, the ancestral homelands of the Huron-Wendat, the Haudenosaunee and the Mississaugas of the Credit.

I'm here today to speak a bit about the federal transformation that's under way with respect to indigenous child and family well-being.

Native Child and Family Services of Toronto has served families in the Toronto and Peel area for the last 30 years. We started as a prevention agency and in 2004 began legislated child welfare. We currently serve about 8,000 unique community members annually from across Canada, last year serving members from 207 different first nations across Canada.

I'm here to talk a bit about federal funding with respect to the transformation currently under way through new legislation under the act respecting first nations children and families, formerly Bill C-92, and the impact that's had for service providers who are supporting indigenous children and families in urban centres.

Funding to date has largely been distinctions-based, which means that funding from the federal level is going directly to indigenous governing bodies. To be clear, that's something that Native Child certainly supports. I think what we're seeing is that federal funding trends meant to support Canada's most important relationship, as stated by the Prime Minister—the relationship with first nations—and meant to move reconciliation forward are not always getting to the children and families who require those services.

While funding at the federal level is going to first nations and other governing bodies to do the work, which is largely on reserve and is deeply needed and supported, we're seeing the majority of indigenous children and families across Canada from coast to coast to coast living and accessing services off reserve. That's creating challenges for agencies that are operating in urban spaces that are trying to support the youngest, most rapidly growing and most diverse demographic in Canada, which is indigenous children and youth.

While these children and youth are continuing to face challenges that have been made much more acute by the pandemic and are again being made more challenging by the current economic space, agencies like Native Child are struggling. Understanding that all three levels of government have a responsibility to support indigenous children and that it's a collective responsibility to do that work, I'm here today to speak to some of the things that I think the federal government can do to get ahead of some of these challenges before they become acute and before they become drastically more expensive.

There are three really well-developed mechanisms right now that agencies across Canada can access to support indigenous children and families.

The first is Jordan's principle. That's a funding program that is meant to support indigenous children regardless of where they are. This is just to state that our access to that program really is leading to phenomenal outcomes and to say that the budget coming in 2024 should continue to invest in Jordan's principle so that first nations children can get access to the medical and mental health services they need.

The second program that's well developed is the urban indigenous peoples program, UPIP. That program historically has been quite underfunded, I'll say. The amount of money that's available for agencies working in urban spaces is quite small, given the magnitude of the challenges in front of us with respect to decolonization and reconciliation. We at Native Child encourage the committee to think about how that program could be expanded or invested in, in ways that continue to allow agencies like Native Child to expand the service delivery that we provide.

Finally, I think the most complex equation in front of us as a nation is the recent Canadian Human Rights Tribunal final settlement, which really is going to talk about how indigenous governing bodies begin to create their own legislation and change the way indigenous child and family services are delivered across the country. To date, that's been very distinctions-based. It's been led by the Assembly of First Nations and other parties to the settlement, but urban voices, which are actually providing the majority of the services, have not been included.

As an example, here in the province of Ontario, where a quarter of the children in Canada live, 85% of all investigations involving a first nations child that involve child protection are happening off reserve, and the majority of the funding right now federally is going to on-reserve services. That inequity creates challenges for urban agencies that are trying to get ahead of some of these challenges and support those kids.

Given the status of first nations children and the numerous challenges they face with respect to the history of colonization and current barriers, I think we have some work to do collectively to work across jurisdictions between the federal and provincial governments to ensure funding is available for agencies providing child and family services to indigenous children and families.

I will leave it there and thank the committee for the time. I look forward to any questions later.

Meegwetch.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Schiffer, and all the witnesses for those opening statements.

We will now move into our rounds of questions. In our first round, each party will have up to six minutes to ask questions of the witnesses.

Just for everyone's information, Madame Laflamme does have a hard stop at 12:25 p.m. She will have to leave at that time.

We will begin with the Conservatives.

MP Lawrence, you have six minutes, please.

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

Thank you.

I have a quick bit of housekeeping. I'm wondering if the Governor of the Bank of Canada, Tiff Macklem, and the finance minister have accepted our quarterly invitation to appear, or if that's something we can follow up on. If you don't have an answer immediately, that's fine.

[The Chair, Liberal, Peter Fonseca]

I'll try to get an answer from the clerk.

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

That's fine, Mr. Chair.

For their service on the finance committee, I'd like to thank Sophie Chatel, Heath MacDonald and former parliamentary secretary and now cabinet minister Terry Beech. Congratulations to Terry.

I'd also like to give a big welcome to Joanne Thompson, Patrick Weiler and Rachel Bendayan. I'm looking forward to working with you all.

Thank you, merci and meegwetch to everyone for coming today. You're great panellists.

My questions will focus on Mr. Rabidoux in my five minutes, or whatever is left, but please don't take that as any sign of disrespect. I'm sure you all have valuable contributions to make.

Mr. Rabidoux, you commented with some level of detail on the Canadian housing situation, in particular on how dire the situation is in terms of the doubling of mortgage and rental costs and the inability of Canadians to obtain reasonable housing. I'm wondering if you might be able to start our questions and answers by talking, as briefly as you can, about the current landscape and what you see coming in the Canadian housing market in the next six to 12 months.

[Ben Rabidoux]

Certainly. I'll try to be brief.

The current affordability dynamics will exert downward pressure on demand. I expect that we will see prices grind lower over the next six to eight months. Inventory is still remarkably low. There's not a lot to buy out there.

The concern looking beyond this immediate year or two, when interest rates will pressure affordability, is that we're starting to see a steep drop-off in investment in new housing, which is partly a function of higher rates. The concern is that on the other side of this housing demand trough, we may be facing a severe supply crunch and very quickly reverting back to the supply crises we've had in the past. We're currently in a trough. We may very well be heading for a severely stressed market going forward.

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

One issue you've written and talked about in the past is static variable mortgages. Those are mortgages that are variable, meaning that the amount of interest being owed continues to increase as interest rates have been increased, but the actual payment stays the same. How the banks accomplish that is that they push out the amortization. However, the challenge is that when they renew, as they will in 2024 and 2025, it has to revert back, as I understand it, to the original amortization, pushing up the amount the individual will have to pay and owe.

Perhaps you could talk a little bit about that and about the issues that could cause for Canadians.

[Ben Rabidoux]

You've got the dynamic exactly right. The idea is that we hold payments constant, extend the amortization, and today we have a number of banks that have up to 20% of their mortgage book that is negatively amortizing.

The Bank of Canada has done good work on this. They found that if we roll the clock forward to 2024-25 and we look at rates where they are currently, a number of households will be facing 40% to 50% payment increases. That will just be unmanageable for some cohorts.

I'll stop there.

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

Thank you, Mr. Rabidoux. I really appreciate that.

Today, I believe, the government five-year bonds hit a 15-year high at 4.278%. Can you talk about the impact that will have on the mortgage market?

[Ben Rabidoux]

Mortgage rates broadly have been more or less stable over the last three or four weeks. They'll start to trend up based on the pricing of the bond markets. We should expect by this time next week that fixed mortgage rates will probably be 20 basis points, or 0.2%, higher.

As to what that means for affordability, we're already at near-record levels of unaffordability. I don't know the exact number, but it will probably add another $100 a month onto the monthly mortgage payment a buyer would need in order to buy into this market on the average-priced home.