Finance Committee on Nov. 6th, 2023

[The Chair, Liberal, Peter Fonseca]

I call this meeting to order.

Welcome to meeting number 114 of the House of Commons Standing Committee on Finance.

Pursuant to Standing Order 108(2) and the motion adopted by the committee on Thursday, September 21, 2023, the committee is resuming its study of policy decisions and market forces that have led to increases in the cost of buying or renting a home in Canada.

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 using the Zoom application.

I'd like to make a few comments for the benefit of the 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, and please mute yourself when you are not speaking.

For interpretation for those on Zoom, you have the choice at the bottom of your screen of floor audio, English or French. For those in the room, you 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 cause serious injuries. The most common cause of sound feedback is an earpiece worn too close to the 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 they speak into the microphone into which their headset is plugged and avoid manipulating the earbuds, placing them on the table away from the microphone when they are not in use.

I will remind you that that all comments should be addressed through the chair. For members in the room, if you 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, and we appreciate your patience and understanding in this regard.

In accordance with the committee's routine motion concerning connection tests for witnesses, I am informed by the committee that all witnesses have completed the required connection tests in advance of the meeting.

Members, before we begin and before we get to our witnesses, let me thank the witnesses for their patience. We had a vote and things ran a little late. We're about 20 minutes over. I have checked, and we do have resources and will get the full two hours in today.

Members, before we begin, let's try to make this quick. This is about budgets. You would have received an email with some budget options from the clerk. We need to get a budget approved today. Please note that one option covers for a base budget increase because of interpretation devices, just like our October travel. The other is for an additional $4,000 over the previous budget to cover the base budget increase plus audio recording that will be uploaded to ParlVU once the committee returns to Ottawa, for the audio only to be available following the meeting.

I'm just going to look around. We have these two options. We have option one and option two. Are there any questions? No?

[Adam Chambers, Conservative, Simcoe North, ON]

What's the recommended option?

[The Chair, Liberal, Peter Fonseca]

I believe it's option two, right?

Is that what you've heard, Clerk, that people are looking for? I believe it's option two. I think there has been some discussion and it was option two. Okay?

[Some hon. members]

Agreed.

[The Chair, Liberal, Peter Fonseca]

That's great. I see that everybody is in agreement. That's fabulous.

Now we'll go on to our witnesses.

With us today, we have, as witnesses, from Butler Mortgage Inc., mortgage broker and probably the owner or principal of Butler Mortgage, Mr. Ron Butler; from Markee Developments, a partner there, Ms. Jennifer Keesmaat; from Mortgage Professionals Canada, the director of public affairs, Ms. Jasmine Toor; from The Shift, Leilani Farha, global director, via video conference; from the Union des municipalités du Québec, Ms. Valérie Fortin, policy adviser, and Ms. Catherine Fournier, chair of the housing committee; and from West Neighbourhood House, the executive director, Ms. Maureen Fair.

Welcome.

With that, we're going to have the witnesses give us their opening statements.

We'll start with Butler Mortgage and Mr. Butler, please, for five minutes.

[Ron Butler, Mortgage Broker, Butler Mortgage Inc.]

Thank you.

It really is an honour to be here. As a teenager, I was fascinated by politics and government. I know that people say it's an honour to be here, but it actually is an honour for me. It's striking. Thank you for having me.

This housing crisis that is obvious to anybody who lives in Canada is a very real thing. It's difficult and it's complex, but in essence, the simple part is that the prices of houses are too high in Canada and rents are becoming unmanageable. As we move in that direction, we must find solutions. The solutions have to be found for the next generations, for the people of the future who want to own homes and are finding it effectively impossible.

For young people, the size of the down payment that they must accumulate and the level of income that they must attain in at least 50% of Canada right now is stratospheric. We have prices that are in excess of $1 million in British Columbia and Ontario. I talk to young people every day on their hope of achieving what's necessary to get to the point of being able to buy a home. It's effectively impossible for the majority of them. They tell me that. They tell me that, in many cases, they've given up hope.

We also have, through these very high house prices, combined with much higher mortgage rates than we've experienced for almost a decade, incredible pressure on rents. In many areas of Canada, this is becoming almost unmanageable. People are confronted with increases in rent, or, if they have to change accommodation, the new rent is just so high that really, in some cases, they can't do it. They have to find other ways, such as moving in with others or getting support from family. There are so many cases that we know about.

Finally, there is the pernicious effect of outside money coming into Canada from other countries. The foreign buyers ban is a great first step, but money comes into Canada in ways that people don't completely understand. If you're using a house as a safety deposit box for money that you brought over from another country, it has a major impact on the marginal price of houses. The person who's using it for storage of his or her money doesn't particularly care what the price is. They just want to move the money. This is one of the reasons I believe we saw the foreign buyers tax come into place in the first place.

Now, as for fixes, there are a few. Let's start with something that's going on in British Columbia right now, which is the banning of short-term rentals. Short-term rentals are pernicious. They are all wrong for our country. It literally doesn't make any sense. Think about what a hotel is. It has a location in great tourist areas and urban centres. It has great advertising capacity. It has a terrific reservation system. Well, that is Airbnb. That's what Airbnb is. It is effectively a hotel. It is effectively an illegal hotel. We have a lot of hotel space in Canada. We don't particularly need any more hotel space.

So why do it? It's profitable. It allows landlords to make money in ways that they couldn't with a long-term tenant. We are depriving long-term tenants of these locations. We are also depriving people who could purchase those properties, because it's a business. It's not a place to live. This is a key area. As I've stated, we should really want to support that ban on short-term rentals throughout Canada.

Now, the other consideration is this approach of increasing the development of purpose-built rentals. The GST waiver was a tremendously positive move. Many provinces will match the PST waiver. This will change the face of purpose-built rentals, but there's a long way to go. I think Ms. Keesmaat will talk about the fact that there are just so many development costs associated with creating these new projects. There are so many loads of taxes and development fees and things that the municipal governments layer on.

These projects could be much, much more feasible if there was some pullback from the development fees, local taxes, red tape and Nimbyism that all prevent multiple dwellings in areas that should be upzoned.

There really is no reason why the provincial mandates to increase zoning in municipal areas to allow for multiple dwellings shouldn't be forcibly endorsed by the federal government.

Thank you.

[The Chair, Liberal, Peter Fonseca]

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

Now we'll go over to Ms. Keesmaat, please.

[Jennifer Keesmaat, Partner, Markee Developments]

Good afternoon, honourable members. It's wonderful to be here today.

You will hear some of the themes my colleague just outlined reiterated in my presentation.

I'm trained as a professional planner, but I've now switched teams and I'm a developer, developing housing in the GTA.

In 2019, I created a development company with my colleague, Jason Marks, who had been building rental housing in the city of Toronto for nearly a decade. Our objective in creating this company is to build affordable, transit-oriented rental housing in close proximity to transit. The objective is to build a much more sustainable urban form than the urban form we've been building in the GTA and across the country.

Surprisingly, one thing that has been a key driver behind this housing crisis, which has really been in the making for nearly a generation—my entire life—is how we have primarily been building housing in Canada. Seventy-five per cent of all new housing over the course of the past 10 years has been built as urban sprawl. It's been built on the periphery of our cities and greenfield sites.

This has proven to be unsustainable for municipalities from the perspective of providing infrastructure. It is unsustainable from the perspective of being able to integrate transit into these communities, largely because there simply isn't a high enough density to enable the frequencies that make transit viable. This, of course, drives up household costs. The second-highest cost for Canadians after paying the rent or the mortgage is the cost of transportation.

Part of delivering a much more sustainable approach to how we live in Canada is building housing in the right places and also building the right types of housing. This is as much a land-use planning problem as it is a construction problem and a financing problem.

In order to solve the housing crisis, we need to look at the problem from all three of those lenses: where we build housing; the materials we use and the design of that housing; and then, lastly, how we finance housing. All three of these areas need a fundamental reboot.

I would like to spend a couple of minutes talking about some of the key issues that we see in building housing today.

When we started our company in 2019, of course, it was a low interest rate environment. Our very first project is 1,530 homes in the north of Toronto, where we are building mostly a missing-middle typology. They are six- to eight-storey buildings and a couple of taller buildings as well. That development was initially 100% rental, and 50% of those units were attainable or affordable and designed for middle-income earners.

Essentially, as a company, we self-imposed rent control. Rent control is a way of taking housing out of the market. The minute you put rent control on a building, it is no longer going to be subjected to the typical fluctuations you see in the market. We essentially did that as a company.

However, as interest rates began to increase, we discovered that we had a fundamental problem, which was the cost of borrowing for our construction period. Not only did our construction costs go up significantly, but the cost of borrowing went up significantly. From when we began our project to the completion of our approvals with the City of Toronto, we saw a $75-million increase in our borrowing costs. That's just the cost of borrowing—$75 million on that one project of 1,500 homes.

In order for the project to proceed, we have reduced the amount of affordable housing. We initially—approximately two years ago—changed the project to be a combination of a rental and condo, as a result of the cost of borrowing. Of course, when you're building a condo, you can finance the construction through the down payments on the condo.

I do have some very good news. From a policy perspective, once the waiver or the forgiveness of the GST was announced, we immediately re-evaluated our entire portfolio. I would like to give you two examples of the impact of that. On the project I just mentioned, we are now going to, again, build 100% rental housing as a result of the forgiveness of the GST. It's a very powerful policy change. The changes at the provincial level on the PST are a welcome addition to that in the province of Ontario.

We have a second project. It's a 350-unit condo adjacent to the subway in the city of Toronto, where it was only viable to build a condo. As a result of the forgiveness of the GST, we've now changed that project. It is going to be a rental project, with 30% affordable housing.

What's really critical here is that when we add affordable housing that has an affordable period for the life of the housing, so in perpetuity, and there's rent control, the impact of that is that we are building housing that is really non-market housing, and it stays affordable over time.

I'd like to close by saying that I wanted to highlight for you the incredible impact of the cost of borrowing on housing delivery, in particular rental housing. Recalibrating the rental construction financing program, which really brought an entire generation of rental housing to the market over the course of the past 10 years, is really critical to ensure we can provide low-cost and long-term mortgages through CMHC for the delivery of more affordable rental housing in Canada.

Thank you.

[The Chair, Liberal, Peter Fonseca]

Thank you, Ms. Keesmaat.

We'll now go to Ms. Toor, please.

[Jasmine Toor, Director, Public Affairs, Mortgage Professionals Canada]

Thank you, Mr. Chair and members of the finance committee, for having me here today.

There is a growing consensus that a lack of supply, taxes across all levels of government, red tape, Nimbyism and a lack of labour have increased the cost of buying or renting a home in Canada.

I’d like to get a little more mortgage-specific to address the ability of first-time homebuyers to enter the market. In our latest state of the housing market report, we found that 48% of non-homeowners feel they will never be able to purchase a home in their lifetime. Young Canadians are giving up on the dream of home ownership. This is a problem that we cannot afford to ignore and that must be addressed urgently.

There are economic consequences to not addressing this problem. In the OECD’s latest country report on Canada, the OECD notes, “High costs of housing can make it hard for people to pursue jobs in high-wage, high-productivity cities.”

Some believe that any policy that increases the purchasing power of first-time homebuyers will stoke demand and drive up housing prices. However, in reality there are many targeted measures the government could adopt that would have a minimal impact on prices while making housing more accessible.

Increasing the insured mortgage cut-off to $1.25 million and indexing it to inflation will help to better reflect today’s housing prices, enabling first-time homebuyers and young families, particularly those in urban settings, achieve their dreams of home ownership.

Many first-time homebuyers who do not have a 20% down payment are currently being priced out of the market. The increased pressure is also reflected in the year-over-year increase in the number of people who required help from family members to make their down payment. This was 56% in 2021, increasing to 62% by the end of 2022.

Based on data received from Canada Guaranty, we can estimate that the increase would have a very small impact on stimulating housing market demand, potentially representing just about 1% of the overall mortgage market. In 2021 we saw about three million originations, and in 2022 we saw about two million originations. This would mean 20,000 to 30,000 potential new mortgages, which is a relatively small increase, but it is very meaningful to first-home buyers, particularly in the greater Toronto and greater Vancouver areas, where the average price of a townhouse has surpassed $1 million.

Additionally, expanding the maximum amortization period for insured mortgages to 30 years will allow greater opportunities for home ownership.

Housing costs are the highest and fastest-growing expense for Canadian households. In December 2022, a report by RBC noted that 62.7% of household income is needed to cover home ownership costs. That's the worst level on record. Allowing homeowners a choice between a 25-year and 30-year amortization for insured mortgages will help level the playing field for first-time homebuyers and improve their ability to afford a home by lowering their overall mortgage payment.

Criticisms have focused on anecdotal examples from other countries, such as a program in the United Kingdom that offered homebuyers down payment grants. That is a far more wide-reaching policy than what we are suggesting here. We should be wary of comparisons with markets far different from Canada's and policies that do not compare with what we're suggesting.

Some other criticisms of 30-year amortization are that homeowners would pay more interest over the life cycle of their mortgage. A major flaw in this argument is that many Canadians are not holding on to their homes for 30 years. In fact, our recent consumer survey saw 43% of Canadians move their primary residence every 10 years.

In addition, the extra monthly savings would enable families to better afford their mortgage payments and help with long-term financial planning, such as contributing to an employer RSP plan.

With the right policies in place, the federal government can help ensure that the dream of home ownership remains available to Canadians.

Thank you.

[The Chair, Liberal, Peter Fonseca]

Thank you, Ms. Toor.

Now we'll go to Ms. Farha by video conference, please.

[Leilani Farha, Global Director, The Shift]

Thank you, and good afternoon.

I'm Leilani Farha. I'm the director of The Shift, a human rights organization focused on housing and finance. I'm also the former United Nations special rapporteur on the right to adequate housing.

Before my substantive comments, I would like to say that I come here with a very heavy heart. As an Arab Canadian and an expert in international law, I am disturbed by the human rights violations occurring in the occupied Palestinian territories and in Israel. To prevent any more innocent lives from being lost and to retain Canada's historic reputation of upholding human rights, I ask you to consider signing the ceasefire letter that your colleagues have put forward, if you haven't already.

This committee has heard from witnesses who've diagnosed that the housing crisis in Canada is attributable to a lack of supply, suggesting that we need to build around 2 million units in the upcoming years to solve the housing crisis. I want to challenge this econ-101 approach, because without significant fine tuning it risks producing more of the same: a lot of too-expensive housing and a whole lot of profits for a few, without meaningfully contributing to solving the actual crisis. We have to address the fact that the wrong demands have been driving housing supply, and supply models are currently designed to satisfy the wrong demands.

Don't get me wrong. I do think Canada needs more truly affordable rental housing in particular that meets actual need, and, yes, some of this will have to be newly built. However, it's wrong to think that Canada can build its way out of this crisis without stronger tenant protections, the harnessing of existing resources, addressing short-term rentals, and a radical change in the relationship between governments and housing providers.

Evidence shows that the rental housing market has been distorted by institutional and other investors using their outsized resources to leverage profits from housing. Because of that, households are being squeezed and priced out. StatsCan recently reported that more than 50% of the total value of purpose-built rentals was held by institutional investors and for-profit businesses like REITs. We know that purpose-built rentals that are owned by institutional investors are based in a business model that seeks the highest possible valuation of a property. To support that valuation is a mathematical equation that requires that rents and fees be raised, whether existing tenants can afford it or not. Profit-seeking of this nature means weak tenant protections like vacancy decontrol and above-guideline rent increases are exploited. It means rental housing is being demolished at alarming rates and replaced with more expensive buildings.

In 2022 more rental units were built than in the previous three decades, yet rents continue to increase in pretty much every jurisdiction across Canada. This suggests that while what's being built may satisfy investor and business interests, it is not meeting the needs of tenants.

In these supply-side debates, I find myself wondering whether there is a magic number of newbuilds that will result in rent decreases to levels that households on low income can afford. How long will this take, and what should low-income tenants do while they're waiting for this very uncertain future?

I propose that a supply-side response needs to be situated within legislative and policy conditions that will produce the right kind of outcome, an outcome that ensures that those in housing need can access any of the new units, that rents are set at levels people can actually afford, that newbuilds don't displace existing tenants through demovictions, and that housing be used for its primary purpose: as a home.

This can be achieved only through new economic thinking that recognizes that governments have a lot to do with how markets operate. There's a real need for governments to step in and shape economies. Rather than being led, governments need to lead the private sector and develop coresponsibility for solving the crisis. They need to ensure that, where public money is spent, it produces real public value. For example, when you give a GST rebate to builders, conditions are attached to require that they build housing that is affordable to those most in need.

I'll close with this question: What if I am correct that just building more rentals doesn't result in the trickle-down you're expecting? Wouldn't it be better to put in place the legislative and policy conditions to make sure that it does?

Thank you.

[The Chair, Liberal, Peter Fonseca]

Thank you, Ms. Farha.

Now we will go to the Union des municipalités du Québec. I believe it is the chair, Ms. Catherine Fournier, who will be delivering remarks.

[Catherine Fournier, Chair of the Housing Committee, Union des municipalités du Québec]

Thank you, Mr. Chair.

Ladies and gentlemen, thank you for this opportunity to comment on the current housing crisis, an issue that is critically important to our society. I am here today with Valérie Fortin, Policy Adviser to the Union des municipalités du Québec, the UMQ.

First, I would like to say that the UMQ brings the local governments of all regions of Quebec together to leverage municipal expertise, support its members in exercising their jurisdictions and promote municipal democracy. Our members represent more than 85% of the population of Quebec.

The housing crisis is a complex problem. The imbalance between housing supply and demand increases every year. Consequently, many tools must be brought to bear to address it. A major catch‑up effort must first be made to build the 130,000 units needed per year just to preserve housing affordability in Quebec, where housing starts currently lag more than anywhere else in the country. What is more, according to the Société d’habitation du Québec, 37,000 households are waiting for social housing in Quebec.

On the ground, UMQ members estimate that at least 4,500 social housing units and 12,400 affordable units must be built per year to meet Quebeckers' needs. I would note, however, that those estimates are based on clearly conservative demographic projections in a context of strong temporary immigration growth, which rose 46% in Quebec between July 2022 and July 2023. That represents an additional 150,000 persons who must also be housed.

In short, this is a major challenge. It is also the reason why additional efforts and investment will be required by all orders of government, including the federal government, to establish the conditions for increased housing supply and affordability in the next few years. The quality and safety of existing housing will also have to be maintained. Cities must take responsibility, of course, and that is what we are currently doing in Quebec, with strong commitment from the municipal sector to achieve these objectives. However, the Government of Canada must also take action in various areas to lower the cost of housing in Quebec and stimulate housing starts.

We therefore wish to comment on the various federal housing programs that have been established for the municipal sector and offer some constructive proposals to address the current housing challenges.

First of all, we welcome the agreement that was reached with the Quebec government on October 13, under which $900 million will be transferred to Quebec from the housing accelerator fund. In addition, the rapid housing initiative, or RHI, has proven to be effective in quickly providing housing for vulnerable households since it was introduced in 2020, and it must be maintained. However, the 2023‑2024 federal budget does not include any new money for this program.

It is also essential that the maximum contribution levels under the RHI be adjusted to current conditions in Quebec and that program requirements allow projects to close their financing by means of mortgages. The national housing co‑investment fund is very important for Quebec and is so popular that funding for the program is no longer available. New funding must be made available soon so that hundreds of pending units can be built.

With regard to homelessness, the Canada-Quebec agreement on implementation of the reaching home program, which will terminate in 2024, will have to be substantially improved to address the situation in Quebec, where the homeless population now numbers 10,000.

I would note that, according to the last progress report on the national housing strategy, Quebec has received only 13% of funding, whereas we obviously represent more than 20% of the population. I repeat that the largest decline in housing starts has occurred in Quebec.

However, to stimulate new housing starts, more solutions will have to be provided to enable private and social promoters to access enough capital financing and better loan conditions. The numbers simply don't add up for promoters any more. CMHC's programs providing access to lower-interest loans should be more flexible and afford promoters greater predictability through rapid response mechanisms. We also call on the federal government to urge the banks to play a greater social role in stimulating residential construction.

However, to maintain housing affordability, efforts must also be made to facilitate the acquisition and removal of existing units from the market. According to a study by Steve Pomeroy, at Carleton University, for every social or community housing unit built in greater Montreal, we lose from the private market more than 17 affordable units that rent out for roughly $750 a month, a figure that represents 30% of the income of a single person earning the minimum wage.

In short, the federal government must invest more in the acquisition and removal of existing units from the housing market. The best affordable housing unit is one that already exists.

I will conclude by saying a few words about infrastructure funding and programs. The federal government must play a key role in funding future municipal water infrastructure. Capacity issues are currently holding up many projects in our municipalities. It is also important that the federal government quickly come to an agreement with the Quebec government over the disbursement of funding provided under the Canada community-building fund.

Lastly, I would add that the flexibility and agility of federal programs, their fit with Quebec's problems and the speed with which the government reaches agreement with Quebec on funding transfers are critical factors in enabling Quebec municipalities to make a full contribution to resolving the housing crisis.

[The Chair, Liberal, Peter Fonseca]

Thank you, Ms. Fournier.

Now, again via video conference, we're going to West Neighbourhood House and Ms. Fair.

Go ahead, please.

[Maureen Fair, Executive Director, West Neighbourhood House]

Thank you, Mr. Chair.

Good afternoon.

Thank you for inviting West Neighbourhood House here today.

I have a brief that I sent in on Friday with nine recommendations. It's being translated for you. I don't know if you have it yet.

West Neighbourhood House is a multiservice, not-for-profit organization serving about 15,000 to 20,000 individuals each year in downtown west Toronto, including the Davenport riding ably represented by MP Dzerowicz here. We work with people experiencing homelessness, with low-income people and families, and with seniors. Many of those seniors are cash-poor but housing-rich.

Despite our name, West Neighbourhood House, we currently don't provide shelter or housing, but I will describe our effort to do so in a few minutes.

First, I want to speak about building new housing supply for lower-income people, including new entrants into the labour market such as young adults and newcomers.

Canada is not a pure democracy; we are a parliamentary democracy with a Charter of Rights and Freedoms that protects minority rights. Canada also doesn't have a fully free market; we have regulations that protect consumers and citizens.

While not perfect, Canadians have found ways to thread the needle between freedom and the protection of people when they are vulnerable. One of the ways Canada does this is through its large and vigorous not-for-profit, for-public-benefit sector.

Having low-income people housed appropriately is a public benefit. We all benefit from having young adults and newcomers able to get and keep work because they are housed and stable. We all benefit from having workers live near their workplaces and not have to lose hours of their daily lives in transit. We all benefit when children from low-income families have a stable and appropriate home.

We recommend that the federal and provincial governments invest more in not-for-profit provision of housing, separate from for-profit housing. The opportunities in the not-for-profit include operating affordable housing and/or supportive housing, co-operatives, and community land trusts for keeping land as a community asset.

Non-profits bring a number of assets to help the affordable housing crisis. Not-for-profit charities are mission-driven, not profit-driven. Assuming that profit expectations are approximately 5% to 8% return or more, this is a significant savings to the public purse. Many not-for-profits own land that can be used or intensified for affordable housing with the right funding in place. Charities have a moral and legal asset lock to ensure public benefit for perpetuity, justifying investment for a long-term payoff for the community.

To give you a sense of the investment needed, I'll share a West Neighbourhood House example. We have a half acre of land worth $15 million, which we want to contribute to affordable housing. Our pro forma to build 76 units—including 36 two-bedroom or three-bedroom units for families—of moderately affordable housing at 80% to 100% of the local median market rate shows a total cost for the housing at $52 million. The rents over 50 years could sustain about a $30-million mortgage. We have $4 million in development fee waivers from the City of Toronto. We now have approximately $5 million of savings in GST and HST exemptions. Regardless of these inputs, there is still a gap of $22 million. This housing is a public benefit that needs investment, we would argue, from a revitalized national housing strategy.

From our experience, the national housing coinvestment fund needs a complete rethink and stable rules. In addition, we've not seen significant or sustained benefits from the much-vaunted private-public partnerships of investment by different levels of government, with many short-sighted terms of affordability for only 10 or 15 years.

There are promising initiatives such as the federal rapid housing initiative, which I have heard other witnesses speak of as well. It is a really great program. The federal government covers most of the capital costs. By reducing or eliminating the need for debt financing for affordable housing, we'll have freed up funds for additional affordable housing or other priorities. For our project alone, a $19-million mortgage would cost an additional $24 million in interest over the 50 years.

Building housing is expensive, but the cost of not building affordable housing is also very expensive. The City of Toronto has just released some numbers about the financial costs of shelters and hospitals in comparison, where people who are unhoused end up. It's much higher in the long run, and there are additional costs to the quality of people's lives in those places.

Given that shelter and hospital costs are mostly within provincial and municipal jurisdictions, there is a clear financial case and incentive for different levels of government to co-operate with regard to affordable housing. One example is addressing vacancy decontrol. That would have an immediate benefit.

Finally, I want to, as other witnesses have done, also offer a recommendation about stemming the losses of currently affordable housing. We recommend a tax deferral or forgiveness for private landowners who sell their multi-unit residential buildings to a not-for-profit. This would counterbalance the investor-driven takeovers of relatively affordable rental buildings much more affordably—at 30% to 40% lower cost than that of newbuilds.

Thank you again for including West Neighbourhood House today.

[The Chair, Liberal, Peter Fonseca]

Thank you, Ms. Fair, for your opening statement.

Thank you to all the witnesses for your opening statements. We have a great group of experts here on housing, and I know the members are eager to ask you many questions. We're going to get right into them.

In our first round, each party will have up to six minutes to ask you, witnesses, questions. We are starting with MP Chambers for the first six minutes.

[Adam Chambers, Conservative, Simcoe North, ON]

Thank you very much, Mr. Chair.

Welcome to our witnesses. I echo the chair's comments. It's a great panel.

I want to spend a bit of time with Mr. Butler to start off. Thank you for coming. I know you said it was an honour, and it's nice to have you here.

I've said before that nothing good ever comes from Twitter, although I would suggest in a non-partisan way that your bluntness and the advice you like to provide are perhaps some of the reasons you find yourself providing witness testimony today. Maybe in your case it's a good thing.

If you were king for a day and you could change a couple of things that would help Canadians out with respect to housing, what would you do?

[Ron Butler]

In my opening remarks I talked about things I thought about that would create immediate change.

The ban on short-term rentals would create immediate change. It would immediately reduce prices, instantly. It would discourage developers in the private sector from building micro condos, from building a 385-square foot condo, which is frankly ridiculous. It would eliminate the desire to create that product, because there's no market for it other than as an Airbnb unit. The release of inventory into the space would be immediate. The investors in these Airbnb projects would simply say, “Well, I can't make any more money; I'd better sell it,” and it would be sold to a long-term landlord or, better still, it would be sold to individuals who want to live in the unit, which is critical. That would be a great benefit.

The next move has to be that we look at the number of empty homes in major cities in Canada, in the whole of the GTA and Vancouver. This area of empty homes is real. Often people say it's false. You get that feedback on social media that it's not real, that there are no empty homes. People like to talk about that all the time, but it's also obvious that there are. The recent Toronto move to tax empty homes showed that there might have been as many as 28,000. That still has not been determined as yet. Heavens to Betsy; we should release empty homes into the hands of people who want to live in them. That should be a priority for any government. I realize we have overlapping responsibilities, provincial and federal, but getting more inventory into the hands of homebuyers quickly, efficiently and effectively would be my top priority.

[Adam Chambers, Conservative, Simcoe North, ON]

Thank you.

To follow up, you talked about investors—short-term rental investors and also foreign investors. What about retail domestic investors who use the equity built up in one property as a down payment for a future investment property? Do you have any suggestions there?

[Ron Butler]

That has to be a concern, and I'm not sure why it isn't a concern to OSFI, the banking regulator, that in reality we have created an environment of 100% financed rental properties in Canada. By the way, this is something that was eliminated in the United States after the 2008 mortgage crisis down there. They realized they didn't want to have anybody doing 100% financing of rentals anymore. It's dangerous. These are highly leveraged and, just as in the environment we see today, this is one of the reasons rents are going through the roof. People are borrowing out of the existing equity on their homes through a line of credit, using it as a down payment on a rental property and getting a mortgage for 80% of that rental property, so that's effectively 100% financing.

It's a very simple move for the banking regulator to say, “We don't want any more borrowed down payments on rental properties”. That would take a lot of the leverage out of the system and ultimately, to Jennifer's point and to the other witnesses' points, with professionally managed, safe, large-scale rental buildings, there's no such thing as renoviction or demoviction or family eviction. It's a safer model for everybody who's in a long-term rental, and this change of eliminating the borrowed down payment for rental properties would allow for the removal of that amateur landlord from the system.

[Adam Chambers, Conservative, Simcoe North, ON]

Thank you. I have a couple of quick questions with my remaining time.

Would you support an instruction or a move by CRA to verify income for the purposes of mortgage on behalf of borrowers to lenders?

[Ron Butler]

It would be my greatest wish.

To define it simply and quickly for the committee, there is way too much income document fraud in Canada. You can buy T4s for $8.99 on Reddit.

It would be very useful and a very simple fix to simply say, “CRA, we need some linkage to the big banks, which have highly secure systems.” If, in fact, we have a document that the borrower has provided us, let's verify that one single box on the notice of assessment, line 15000, is the same as CRA has in its system.

I believe that CRA even has a budget for it. They just can't be bothered today.

[Adam Chambers, Conservative, Simcoe North, ON]

Thank you. I have one last question.

Does it make sense for OSFI to enforce the B-20 rules upon renewal?

[Ron Butler]

Absolutely not. There is no sense enforcing the B-20 rules. Let's just look at a renewal. If you're a consumer, you have a mortgage. If you're a borrower, you have a mortgage. You want to get a better rate. You want to search for a better rate. You're not looking for one dollar more of financing. You're not wanting to change your mortgage one penny.

However, the banking rate literally says, “We have to impose a 2% stress test on this thing by which you cannot get one single extra cent.” You're just looking for a better deal on your mortgage and there's no reason.... The regulator has not even developed a convincing reason. It's very mysterious why they think it's still important to have a stress test. It makes no sense that you can't shop for your mortgage.

Wouldn't everybody here who has a mortgage like to be able to shop effectively for it? Why should that 2% stress test stand in the way? It doesn't make any sense.

Yes, that's a change I'd make.