Finance Committee on Oct. 23rd, 2023

[Adam Chambers, Conservative, Simcoe North, ON]

Thank you.

If there's any information you want to provide in follow-up, it would be greatly appreciated.

Mr. Pomeroy, the last question is to you.

You talked about the capacity to borrow and about interest rates remaining low. When the Bank of Canada decided to purchase all of the debt issuance of the Government of Canada in an effort to keep interest rates low, what impact did that have on capacity to borrow, and thus prices?

[Steve Pomeroy]

I think what we see in the data in 2020, 2021 and 2022 is prices across the country on average going up 20% a year, so it had a profound affect.

[Adam Chambers, Conservative, Simcoe North, ON]

The decision by the Bank of Canada to participate in quantitative easing increased housing prices.

[Steve Pomeroy]

I think it did.

That said, of course, there are many reasons that they did that. They're not just there to look after the housing market. In fact, the Governor of the Bank of Canada has said quite emphatically that it's not their job to look after the housing market, but it was there for sure.

[Adam Chambers, Conservative, Simcoe North, ON]

I have 10 seconds.

Mr. Guthrie, I like your Twitter feed. Thank you very much for saying, “No more gatekeepers.” If you have examples of federal gatekeeping at CMHC, please send them to this committee. We would welcome them.

Thank you.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Chambers.

It's over to MP Baker.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

Thanks very much.

Thank you all for being here today.

I represent a community called Etobicoke Centre, which is a suburban community on the western side of the city of Toronto. My constituents regularly tell me that they or their family members can't afford to buy a home or they or their family members can't afford to rent a home that's appropriate.

The federal government has done a number of things. A number of you have spoken to those actions that we've recently taken: the removal of the GST on the construction of new rental apartments to build more homes and the $4-billion housing accelerator fund. We've banned non-residents of Canada from purchasing housing to reduce speculation in the market. We've instituted a number of programs to help folks save for the purchase of a home or to help them to pay rent. There have been a number of things that the federal government has done to try to address this problem, both in terms of increasing supply and also in helping folks to afford a home, whether that be a purchase or a rental.

Mayor Guthrie, I'm going to start with you.

What is the role of the provincial government in housing?

[Cam Guthrie]

Thank you, and through you, Chair, they have a massive role to play.

First of all, it's coming to the table appropriately, in a respectful and collaborative way. I think that everyone at every level of government has said that we can't really attack this crisis if we don't come at it in a collaborative way.

I feel like the provincial government has created a lot of issues, to be very blunt with you, that have not gone very well. Municipalities, especially the Ontario Big City Mayors caucus.... I don't know of one mayor who isn't laser-focused on trying to help with housing, but the regulatory and legislative changes that have been pouring down on municipalities have not really helped produce a lot of new supply. I respectfully say that we need to kind of get over these issues of trying to refocus the government on trying to help, especially when it comes to infrastructure.

When municipalities cannot receive money to help with infrastructure, that same amount of money has to then be spread across the entire tax base, which is already burdened right now. We're here to talk about affordability. That's an issue every municipality is facing with our budgets coming up right now. There is a form of downloading that is occurring to municipalities, and municipalities are struggling with their budgets to try to figure out how to balance things and create infrastructure to unlock houses, because we have pledges to do. It seems like we're constantly on a merry-go-round.

I would submit that the province has a big role to play, and in the City of Guelph and other cities, we're ready to play with them in a collaborative way, just as we would with the federal government.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

I appreciate that.

Could you offer some more examples of some of the steps the provincial government could take that would help build more housing and address the housing affordability crisis in the province?

[Cam Guthrie]

I certainly can. The first thing would be to unlock infrastructure. If you want to unlock housing, help us with infrastructure. That would be, probably, the number one thing I would ask for.

A very close number two, which would really help with the most vulnerable people in our community, is supportive housing and/or transitional housing for homelessness. Municipalities, especially in urban settings, have been inundated with the increase of homelessness and the mental health addictions that are tied to that. If we do not get help to cope with that issue as well.... We have tons of people who are experiencing homelessness issues, and municipalities really need help with that.

The final thing, if I could throw in a third one, is that there are constant regulatory changes, and they're compounding over and over again. If the provincial government would just make the changes they want to make—because they have the right to do it—and then let us implement them and get out of the way, it would not only help municipalities in the regulatory framework but it would send a signal to the development community so that they know the rules they have to play by and they can just get going. However, constant changes all the time are just creating a lot of hurdles.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

What about the issue of rent control? I think we had a mention of that here today. We've heard about rental increases called “renovictions”: Landlords will ask their tenant to leave so that they can renovate, and then the rents go up. I think we've heard they increase by an average of 29% in Canada. What are your thoughts on that?

[Cam Guthrie]

I think the provincial government has a bigger role to play in that, and they could do a better job, not only legislatively but also when it comes to the landlord and tenant act and that whole administrative process. They're trying to staff up that issue, but it's not enough. I think, to send a signal to people who are on the brink of losing the homes they're renting, some action needs to be taken pretty drastically and very quickly.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

It sounds like all three levels of government need to work together. The federal government has taken a lot of steps, but it sounds like we need more from the province in these areas that you've listed. I really appreciate that.

My Conservative colleagues were worried about gatekeepers. I think we've just heard about one right there.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Baker. That's the time.

We are now going to hear from MP Ste-Marie, please.

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

Good afternoon, Mr. Chair.

Good afternoon to the witnesses, including you, Mr. Mayor.

First of all, Mr. Chair, I don't know if this is a point of order, but I have two questions for you.

One, is there any word from the Canada Mortgage and Housing Corporation about the written responses it was supposed to send the committee?

Two, do we know if the Governor of the Bank of Canada will be coming to testify next week?

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Ste‑Marie.

From the clerk, what we've heard is that CMHC is still working on those responses to get back to our committee, and that yes, the governor will be appearing on October 30.

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

Okay, thank you.

I'll proceed with my questions. I'd like to hear from Mr. Pomeroy first, then Mr. Guthrie.

One thing that worries me in connection with the housing crisis is that the proportion of residential properties bought by investors has gone up. Instead of investing their money in the stock market, in other businesses and elsewhere, people are buying residential properties with the intention of reselling them in the short term or in a few years.

Mr. Pomeroy, can you share some numbers and comment on that? To what extent has that increase in the proportion of purchases by investors resulted in reduced access to property?

[Steve Pomeroy]

Thank you for your question.

Through you, Chair, the Canadian housing statistics program has done a number of statistical reports that have identified the number of purchasers who are in fact investors. I think the last one I saw showed that 31% of purchases in 2022 were by investors in the housing market.

I think one has to be careful in terms of framing this, in that if we want a rental market, we have to have investors, because someone has to produce the assets that tenants are living in.

That said, relative to the concerns a number a years ago that it was foreign investors who were driving up home prices, it very much has been domestic investors who have been driving up prices. This relates to the point I made in my presentation, which is that many of these are small investors. They are seeing 20% increases in home prices. They are looking at what they are getting in the equities markets and saying, “Why not just take my equity and buy another house and become a landlord?” We have seen a significant growth of small investors in the marketplace.

As I say, somebody has to own those units and rent them out, but housing has become a commodity and an investment vehicle as opposed to a home. If those investors are now crowding out individual families who want to buy a home as a home, then I think the only thing we can really do there is.... They're buying those homes because of the expectation of large capital gains. Maybe you can ask them next week, but the Bank of Canada seems to be doing a pretty good job of suppressing that particular benefit.

The other is these bags of money that I talked about that are enabling them to buy. Maybe we should consider some kind of a windfall gains tax. When properties are going up at 20% a year and landlords are putting up rents 20% a year, constraining that has to be part of the policy solution.

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

Thank you.

I would like Mr. Guthrie, the Mayor of Guelph, to comment on that same question and Mr. Pomeroy's answer.

Mr. Guthrie, is this a problem in your city too? Has the proportion of residential housing bought by investors gone up? Has that reduced access to property?

[Cam Guthrie]

Thank you.

Through you, Chair, the quick answer is yes. We have seen an increase of investor purchases in the city of Guelph, especially in the condo market. That is specifically where it's been happening.

The answer is yes.

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

Thank you.

Mr. Pomeroy, in your opening remarks, you said you could do a deeper dive into your four proposed solutions during the discussion. I don't know how much time I have left, but you can use it to start getting into those details.

[Steve Pomeroy]

I identified five specific recommendations in the brief that speak to the issues I've raised there.

The first one relates to revisiting macroprudential policies that punish first-time buyers. I think the concern has been that if we give assistance to first-time buyers, we're pouring fuel on the fire and we'll just create more price inflation. I think we can moderate that effect, and I think it is critically important to enable these first-time buyers to get into home ownership for all the benefits of home ownership that we can all appreciate, but most importantly, because of this clogging up of the rental market, these 400,000 renters are sitting there. It would have been like building 40,000 rental units a year had they exited.

I think that trying to facilitate access and doing those stress tests and other mortgage-qualifying rules massively constrains their access, and we need to think about that one.

The second one, as I've already mentioned, is some kind of a windfall gains tax or a federal land transfer tax. Everyone is very concerned about not taxing the capital gains on a principal residence, but when that policy was brought in in 1972, it recognized that the house is a home and we didn't want to tax people's homes. Now that houses have become investments, we need to rethink the original basis of exempting the principal residence from the capital gains tax.

When we're getting these massive gains, sharing some of those gains.... If the prices are going up 20%, paying 2% or 3% in a federal transfer tax wouldn't really punish the vendor and it would create revenues for the federal government to fund its other initiatives.

The third one, as I mentioned, is a very vexing issue. It's the issue of rent regulation. As I mentioned, in the past the federal government has encouraged the provinces to do this. If we're seeing 20% increases in rent, that's just untenable. We have to basically try to end that.

I've long been a proponent of vacancy decontrol being balanced with regulation of sitting tenants, but I think that in this context, temporarily bringing back a mechanism and asking the provinces to suppress vacancy decontrol for a few years while rentals catch up is something they can do.

I'm getting the nod from the chair, so I'll come back to that in the next time.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Ste-Marie.

Thank you for that, Mr. Pomeroy. You'll have further opportunity later.

We have MP Blaikie, please, for six minutes.

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

I do have a few questions for you, but I wonder if you want to share the last two planks of your recommendations with us.

[Steve Pomeroy]

I appreciate your giving up the time.

Through you, Mr. Chair, the fifth one is establishing explicit guidelines and targets for temporary foreign worker visas and international students that better align with the existing rental supply in the respective local markets where those individuals are heading under their permits.

This is not to be derogatory or discriminatory. We have a very well-managed system for new permanent residents, but we don't have a managed system for this group, is what I'm saying there.

The following one is again relating to these students. In analysis that I've done looking at performance, it's extremely viable to build purpose-built student housing on a viable for-profit basis with no subsidy from government. If we're having significant numbers of newcomers coming as students, using some of the financing mechanism in the RCFI program, which is currently under review anyway, to incent private developers, potentially but not necessarily in partnership with universities, to build purpose-built student housing, would help address the student demand.