Finance Committee on Sept. 28th, 2023

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

Thank you.

Since 2018, has the problem stayed the same? Has it improved or has it gotten worse? Has the housing crisis worsened since 2018?

[Bob Dugan]

I think it's fair to say that we're moving in the wrong direction in terms of affordability. Affordability has gotten worse.

We think supply is the solution. Unfortunately, supply takes time. For example, in the Toronto area, if you want to build a multi-residential rental building, it can take eight years from the time you have the idea that you want to do that until people are moving in.

Those kinds of supply lags are some of the reasons for things like the housing accelerator fund to look for efficiencies. We always say that we need to find innovative ways of building and innovative solutions so that we can get supply on the ground more quickly, because it is a problem.

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

Thank you for that, sir.

I agree that we definitely need more supply.

With respect to barriers for that supply, have you published or do you have available or could you make available to the committee the impact from additional costs or barriers that arise from changes to municipal building codes, whether they're slow in releasing them or just not releasing them, or other municipal barriers?

Finally, what would the impact of the carbon tax be on the cost of building homes?

[Bob Dugan]

I am not aware of any studies that we have that quantify those measures right now. I don't think I have anything I can provide. I can check when I get back to see if anything has been done.

The only thing I can maybe point to is a recent survey done by Statistics Canada that outlined some of the key local-level impediments to supply. It doesn't quantify in terms of additional cost, but it identifies, at the local level, some of the impediments that have the biggest impact on the supply response.

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

Thank you for that.

It's your position, then, that in 2018, CMHC at least started to lay out the issue to the government. I know you can't jump into partisan politics and I wouldn't ask you to, but it has been your evidence that despite that report in 2018, the housing crisis worsened. Is that correct?

[Bob Dugan]

Yes.

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

Second, my colleague Mr. Chambers referred to hitting the target of 3.5 million additional homes as “fantasyland”. Given the GST rebate and the current actions, if we looked on trajectories, has anything changed that would, in your mind, give Canadians any confidence that we would bridge that 3.5-million home gap?

[Bob Dugan]

The 3.5 million is an enormous undertaking. It's not something that CMHC or the federal government can do alone. Basically, an all-hands-on-deck effort has to happen with the private sector and different levels of government.

I think it's a very ambitious goal. It's going to be difficult to attain. I don't see how we'll attain it with the current environment. We have high interest rates and high material costs. The unemployment rate has come up a bit, but it's still 5.5%, which is very low. There's not a lot of labour.

We need to come up with very innovative ways to build by using existing capital and labour in order to get this job done. Because innovation hasn't happened yet, it's hard to point to a solution. It's going to be difficult, but hopefully we can do it . It's an important objective, because affordability is so important.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Lawrence.

Now we go to MP Dzerowicz, please, for five minutes.

[Julie Dzerowicz, Liberal, Davenport, ON]

Thank you so much, Mr. Chair.

I'm just going to finish off with that, because I think there seems to be an implication that in 2018, a report came out and all of a sudden now we're in a worse crisis situation because the Government of Canada didn't listen to that 2018 report. I do not believe that is true.

Can you confirm that the housing crisis we have today is one of inaction for probably about 20 to 30 years from all levels of government, which is how we've reached the situation today? Would you agree with that, Mr. Dugan and Mr. ab Iorwerth?

[Bob Dugan]

I think you're quite right to point that out. Affordability has been deteriorating for much longer than just since 2018. I would say that as a result of a lot of our work, a lot of the discussion around policy to solve housing has shifted from demand-based initiatives before then to more of a focus on supply.

I think there's been responsiveness, but as I said earlier, unfortunately, supply takes time. You can't just create it out of thin air.

[Julie Dzerowicz, Liberal, Davenport, ON]

Can I also have you confirm that since 2018 we had a massive global pandemic? We've had major global shifts. We've had huge inflation. We've had a number of factors that have impacted the ability for any level of government to move as aggressively as possible on a lot of the housing initiatives that were originally planned.

Can you confirm that this is true?

[Bob Dugan]

Absolutely, it's been a challenging environment in recent years, for all the reasons you mentioned.

[Julie Dzerowicz, Liberal, Davenport, ON]

Thank you.

We're talking about the financialization of housing. It's one of the things we're talking about right now. If I asked a Davenport resident what they think financialization of housing means, I'm not quite sure they would know.

Can you confirm that it means basically buying housing as an investment versus as a place to live?

[Bob Dugan]

That's a very broad definition of it. I think it's is very important to recognize that financialization of housing has been around for a long time. Earlier in my opening remarks—

[Julie Dzerowicz, Liberal, Davenport, ON]

Could you define it for the average Canadian?

[Bob Dugan]

I was agreeing with your definition. If you buy housing as an investment as opposed to using it for shelter, that could be an example of financialization of housing.

There are many definitions, and different people use different definitions. That's one I like to work with. There's probably some merit in coming up with some standardized definition that we all agree with.

I think it's important to note that with regard to financialization, 95% or so of the rental market is owned by investors. It's not government-provided; it's investor-provided units, and that is the most affordable part of the housing market.

We need more financialization. We need more investment dollars in order to increase the rental supply, because I think that's where the affordability crisis is the most acute.

[Bob Dugan]

I think what we're looking for from the private sector is more investment dollars making their way into the construction of more units.

It's very important to also point out that people will blame financialization for the lack of affordability, but really, I think the lack of supply is the main issue that's creating the affordability crisis. We have to encourage more investment in order to get beyond this and have more supply, so that the market is supplied well enough to get shelter costs back in line with income and people can afford the units they live in.

I fear that solutions that don't encourage that investment can lead to short-term improvements in affordability, possibly, but in the long term, if they discourage investment, we never get the supply we need to restore affordability on a sustainable basis.

[Julie Dzerowicz, Liberal, Davenport, ON]

Okay. I think a lot of people feel that when people are buying housing as a way to invest, it tends not to benefit Canadians in general. There's a general thinking around that. That is versus the need to have private investment to help to create additional spaces. Do you see that there's a little bit of disconnect for the average Canadian? Can you maybe find a way to explain what we're actually looking for from the private sector?

[Julie Dzerowicz, Liberal, Davenport, ON]

For my last question, I was very shocked to hear that when people are changing units, rent increases are 29% versus 2.3% when they are staying in their units.

It's at the provincial level that they can actually have some sort of rent control for the changing of units. Is that correct? Would it be at the provincial level that they could actually manage that?

[Bob Dugan]

It's a provincial-level jurisdiction to set rent controls in Canada.

[Julie Dzerowicz, Liberal, Davenport, ON]

They don't have that in place right now for the change in units.

[Bob Dugan]

In Ontario, I gave the example for Toronto, where the rent increase was 29% for units that change hands. That would be rent control that is set by the Province of Ontario. The current approach in Ontario is to set a guideline for units that people remain in, but rent can change and move up to what the market can bear when a unit changes hands during the year.

[Julie Dzerowicz, Liberal, Davenport, ON]

The province can control that if they like.

[Bob Dugan]

I believe so, yes. It's their jurisdiction.