Finance Committee on Sept. 28th, 2023

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

Thank you, Mr. Chair.

I have more questions for the people from CMHC.

I'd like you to provide us with data, broken down by province, that would give us a current picture of the programs you manage.

First, how many projects have been announced? Of these, how many are currently under construction? Second, how many units and how much money is involved?

We'd be grateful if you could provide the committee with this information.

[Bob Dugan]

I'll make a note of it.

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

Thank you.

I have another question for you. I referred to it a little earlier. The government is asking you to manage a wide range of housing construction programs. Historically, it seems to me that this is not what CMHC was essentially doing. This is new, from my perspective. By inference, I imagine it takes a lot of resources and requires finding new ways of doing things. I'm concerned that CMHC does not have enough resources to carry out all these new mandates.

For example, regional projects—those outside urban centres—could be at a disadvantage because it would take too much time to analyze each small project in detail and, as a solution to the lack of resources and to save time, it would have been decided to take care of the biggest projects. Can you reassure us that this is not the case or, on the contrary, tell us that there are concerns and that you don't have enough resources to meet the needs?

[Chris Woodcock]

I'm Chris Woodcock with the CMHC housing programs.

There was a lot in that question.

To start, we certainly look at our resourcing on an ongoing basis. We have had a lot of success moving internal resources between programs. For example, just as an anecdote, when we were wrapping up the delivery of the rapid housing initiative this year, we were very successful in retraining and redeploying a significant number of staff from the rapid housing initiative to support the housing accelerator fund and in developing training to support that work, and the timing worked out. That's the type of workforce planning we look at overall to make sure that we leverage the available resources we have in the best possible way and the capacity we do have as flexibly as we can to support the various programs that we're delivering.

Certainly I would agree with your statement that in recent years we've been delivering many housing programs that are different from historic programs that would have been worked on. The most recent one, the housing accelerator fund, is a very different kind of program. There's involvement in municipal processes and regulations, which is very new to us, and it's certainly a learning process. If you go back a few years, the introduction of the co-investment fund and the rental construction financing initiative were also very new to CMHC, and we were able to ramp up very quickly. Again, there were lessons learned, and there are certainly opportunities to continue refining, but that's been an ongoing process.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Ste-Marie.

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

Thank you.

[The Chair, Liberal, Peter Fonseca]

Thank you.

Now we will go to MP Blaikie for two and a half minutes, please.

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

Thank you.

I was hoping that either the department or CMHC could provide the committee with a list of projects that have a social or an affordable component that are in part federally funded in some way, shape or form, whatever the mechanism, and that began construction prior to September 13, 2023. That's to get an idea of projects that have stalled as a result of higher interest rates.

If those projects are going ahead in any event, so be it. I'm interested in the ones that, due to escalating interest rates, had to pause construction after they began. Is that a list that can be provided to the committee?

[Chris Woodcock]

Thank you for the question.

We will take that away and we will do our best to provide that information.

I can't confirm at this time that we would have the lens specifically around projects that have stalled due to interest rates. We can certainly take a look to see what we do have and what we can provide.

[Alison McDermott]

It's Alison McDermott from the Department of Finance.

I'll just add that there is a fair bit of built-in flexibility in a lot of those CMHC programs that would allow them to take small measures to improve the viability of individual projects, so I don't think there's a very large list of projects that are stalled at this point. I think what you would find is that funds have been used up faster on fewer projects than may have been originally anticipated.

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

Okay. Well, that's why the list would be very helpful, because we've certainly heard anecdotally from the sector that there are non-profit or co-op housing projects that receive federal funding that have been put on pause just because the numbers don't work for the budget. I think to have a list of what those projects are, what their value is and what the federal contribution represents would be useful to the work of the committee.

We know that among OECD members, Canada has the lowest number of social housing units as a percentage of its housing stock. We've heard a lot from the CMHC today about supply and about market supply. I wonder if CMHC could speak specifically to the need to increase social housing stock in Canada and what mechanisms they believe are the best in order to significantly increase Canada's social housing stock.

[Bob Dugan]

Thank you very much for the question.

I can confirm that we have a low level for that housing stock. Social housing makes up, I think, about 4% of the housing stock in Canada, which is well below OECD averages. I would completely agree that there's a need to build more social housing stock, as well as housing stock across a continuum, in order to improve affordability for all Canadians. That is most definitely an important part of it.

In terms of the mechanisms, that's not my area of expertise to answer, but I can confirm that we have a low stock and that it's something we should improve in order to promote affordability, especially for the most vulnerable households in Canada.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Blaikie.

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

Whose responsibility is that within government, would you say ?

[The Chair, Liberal, Peter Fonseca]

MP Blaikie, we have gotten to the time, but I do believe Mr. Chris Woodcock might have that information.

[Chris Woodcock]

I was going to respond on preservation of social housing units. We could provide an answer on that off-line.

[The Chair, Liberal, Peter Fonseca]

Okay. If you could provide that to the committee, that would be great. Thank you.

Thank you, MP Blaikie.

We now go to MP Morantz for five minutes.

[Marty Morantz, Conservative, Charleswood—St. James—Assiniboia—Headingley, MB]

Thank you, Mr. Chair.

I have a quick question for you, Mr. Chair, before I start. I'm just wondering if the finance minister has accepted our gracious invitation and when she'll be appearing at this committee.

[The Chair, Liberal, Peter Fonseca]

We're working on our schedule.

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

That's good news.

[Marty Morantz, Conservative, Charleswood—St. James—Assiniboia—Headingley, MB]

Okay. I'll wait for you to advise, then.

Mr. Dugan, on defaults again, IMF and The Economist have both published that Canada is at the highest risk for defaults of any country in the G7. It's a very serious situation.

I note that the Royal Bank published a proof point earlier this year, in which they said, “This poses a particular risk in 2025-2027 for a specific group of borrowers: those who bought a home between late-2020 and early-2022—when the market was at its peak and interest rates hit rock bottom.”

For you, as a mortgage insurer, this obviously has to be on your radar. How concerned are you about this? Also, has CMHC done any analysis as to what the loan losses might be? Are you increasing your provision for loan losses on a go-forward basis, given the concerns with what might happen over the next couple of years?

[Bob Dugan]

It's a great question. I don't work in the mortgage insurance area. I know they do stress testing of these kinds of things in order to assess our capital levels and I can try to get back with a more precise answer, but I share the concern that in an environment of rising interest rates and with mortgages resetting at higher rates, there is risk in an environment in which Canadians are heavily indebted. It's something we monitor. It's something we want to have a handle on.

[Marty Morantz, Conservative, Charleswood—St. James—Assiniboia—Headingley, MB]

Thank you. If you could find something on that to table with the committee, it would be very interesting to have it.

In my first round I was asking the Department of Finance about various tax measures that would incentivize housing construction, and having heard your comments, I think that is first and foremost on your mind. You want to see more houses built as quickly as possible.

I remember that when I was a young lawyer, one of the programs at the time was something called the MURB program, the multiple-unit residential building program, which basically allowed investors who would risk their capital on new builds to write off the soft costs and the capital cost allowance against their personal or professional income. That program in the 1970s and 1980s got hundreds of thousands of units built. That's why I'm harping on these recommendations in Mr. Richter's report. It seems to me that although it's good that the government is taking the GST off purpose-built rentals, there are so many other things you could do with the capital gains tax deferrals and various tax credits that are outlined in this report.

I know the Department of Finance doesn't want to talk about it, but I'm wondering if you could provide your thoughts on those types of measures.

[Bob Dugan]

Thank you very much for the question.

I have to start by saying that I'm not a tax expert and that it's not the kind of analysis that we do at CMHC, but just as a general statement, I think it's important to look at all avenues to increase the attractiveness to investors and builders to provide more supply in the housing market.

I'm in favour of analyzing all of those possibilities to have a handle on how best we can respond to this housing crisis and get units built. In terms of that suggestion versus others, I don't have the infrastructure at CMHC to study those tax estimates, so I don't have a very educated opinion on one versus the other, but I think—

[Marty Morantz, Conservative, Charleswood—St. James—Assiniboia—Headingley, MB]

Maybe this would be more of an apt question for an economist. Do you think that increasing taxes on those who risk capital to build housing would incentivize more builds?