Finance Committee on Nov. 6th, 2023

[Julie Dzerowicz, Liberal, Davenport, ON]

I'm sorry. What is RCFI?

[Jennifer Keesmaat]

I apologize. It is the rental construction financing incentive, which essentially is a CMHC program that allows for interest-free borrowing for the construction costs of rental housing.

This was a way of getting around the challenge of borrowing for the construction period, which in a condo is less of a challenge, because the monies from the pre-sale are used to finance the construction. Of course, in rental housing, because you're not selling anything, you don't have those pre-construction monies.

The rental construction financing program, which is referred to as RCFI, has actually been the program that has incentivized the rental housing that you have seen built over the past decade. It's been a really critical and important program.

However, it now needs to be recalibrated to do two things. It needs to be recalibrated to respond to higher interest rates, because today it's not viable. Today the program doesn't work. It was designed in a low interest rate environment. It needs to be restructured. That's the first change.

The second change is that it can be redesigned, and it should be redesigned, to specifically incentivize affordable housing and to link into municipal programs, like the one in the city of Toronto, where there are a series of incentives for building at 100% of AMR.

It depends on how that program is calibrated at CMHC. Essentially, just lowering the cost of borrowing for the construction period can, in turn, make projects like Maureen Fair's viable to build today.

[Julie Dzerowicz, Liberal, Davenport, ON]

Thank you.

I'll turn my attention to Ms. Fair over at West Neighbourhood House. Thanks for your leadership and everything you do at West Neighbourhood House. Thanks so much for being here today.

You mentioned some of the challenges you were having. You also mentioned some of the good programs that our federal government has, including the rapid housing project.

One of the other programs we have implemented is Reaching Home, Canada's homelessness strategy. We implemented over $290 million to tackle homelessness, specifically in Toronto. I know we have a lot more to do. We have way too many homeless still.

Do you have any thoughts about the roles that the federal, provincial and municipal governments need to play, moving forward, to end chronic homelessness once and for all?

[Maureen Fair]

That's a fairly difficult question, Julie.

The housing benefit could really use some rework and redesign. In addition to building affordable housing, portable housing benefits can be very useful to stack on affordability as people need it, because presumably and hopefully many people don't need the full deeply affordable housing all the time.

The housing benefit really did need to be redesigned. It had some things in it, like you had to disclose your income and income source to your landlord. That's a privacy violation, and it leads to all sorts of perverse consequences. There are a number of things in there that could be done. Not enough of the housing benefit funding was allocated.

Those are the kinds of things that can get people off the street into some housing. Then, as they progress, get more stable in their lives and get the care they might need for their mental health issues and substance use issues—although not all homeless have that—they maybe won't need those deeper subsidies, which can then be used for other people.

There is a role for portable housing benefits. That's probably what I would answer to that.

[Julie Dzerowicz, Liberal, Davenport, ON]

Thank you so much.

I think that's my time.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Dzerowicz. That is your time.

We are at our third round, members. It's going to have to be a bit of a truncated round, so I am going to cut people short if I need to, but we've had these excellent expert witnesses with us, with terrific recommendations, so we want to continue.

I have MP Chambers for the first five minutes.

[Adam Chambers, Conservative, Simcoe North, ON]

Thank you, Mr. Chair.

Ms. Keesmaat, you've mentioned the GST rebate as something that moves the needle. What about the development charges that we've seen continuing to go up significantly? I note that in Toronto, as an example, just before the last municipal election, development charges increased, in some cases, by almost 100% per unit. All of those costs need to be financed and eventually passed on.

What should the federal government do? How should it work with municipalities so that if the federal government gives a tax break, it's not just eaten up by another level of government?

[Jennifer Keesmaat]

I think you raise a critical catch-22. Part of this has to do with the desire by most municipalities to minimize their own tax increases, and as a result, one of the easy ways they've been able to pay for infrastructure without anyone really noticing is by increasing development charges on new projects and using those development charges to subsidize the building of infrastructure: ensuring the toilets will flush, ensuring the water will come out of the taps when you build the new building.

There has been, in many municipalities across Canada, an approach to infrastructure whereby new development both pays for itself but also subsidizes the existing tax base and existing infrastructure. For example, in the city of Toronto, 50% of the development charge goes to the new development, and 50% of that development charge gets spread across the city.

I used to say, when I was chief planner, that every time we build a condo in downtown Toronto, Scarborough gets a new road paved, or they get a new park, because that's the gift that new homeowner gives.

We need a new model for funding infrastructure if we want to address the development charge problem, because right now, development charges have been used as a way to fund infrastructure in the absence of having a larger strategy for funding infrastructure, and in the absence of municipalities having the guts to raise property taxes, which would be the other way to do it.

[Adam Chambers, Conservative, Simcoe North, ON]

Thank you very much.

Would you also suggest that, for example, in the city of Toronto, the double land transfer tax acts in the same cross-subsidization way?

[Jennifer Keesmaat]

It does, and it also has an unintended consequence of maintaining people in too much housing. Because of the land transfer tax, households who previously would have downsized—because there are empty bedrooms, the kids have moved out—now have a disincentive to downsize because they're going to be taxed in doing so. The land transfer tax has also resulted in some wonky outcomes in terms of being able to ensure that families are living in homes that have been designed for families.

[Adam Chambers, Conservative, Simcoe North, ON]

Thank you.

Just to summarize, new home purchasers—or any home purchasers, really, in particular in the city of Toronto—are subsidizing other infrastructure needs of the city than what you would think they're paying for when they purchase a new home, or have to pay double land transfer tax. Is that about right?

[Jennifer Keesmaat]

That is entirely correct.

[Adam Chambers, Conservative, Simcoe North, ON]

Okay. Thank you very much.

Mr. Butler, FCAC, which is the Financial Consumer Agency of Canada, has asked banks to allow certain customers in some circumstances to extend amortization beyond what is normally allowed.

At the same time, OSFI is out banging the B-20 drum that you can't have amortization extensions, and that you must enforce B-20 guidelines on renewals, potentially not for insured mortgages but certainly for uninsured mortgages.

Do you get the sense that OSFI and FCAC are working against each other? What's your interpretation of what's happening at the regulatory level?

[Ron Butler]

The general appearance is that the agencies don't communicate.

The simplest reaction should be this: For people in genuine financial hardship.... We have this incredible acceleration of interest rates—the steepest and fastest in the history of this country. If they are in genuine trouble on their renewal and can't afford to make those payments—and that should be provable financial hardship—there's no reason not to extend to 30 years or even 35 years.

However, OSFI is also correct. The idea of infinitely extending amortization is a demand stimulus. There's no question about that. It needs to be handled in the correct way, but we also have to take the approach.... Some people had a 2.49% rate and now have a nearly 6% rate. That's a difficult problem.

[Adam Chambers, Conservative, Simcoe North, ON]

Thank you very much, Mr. Chair.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Chambers.

MP Thompson, you have five minutes.

[Joanne Thompson, Liberal, St. John's East, NL]

Thank you, Mr. Chair.

Welcome to all the witnesses. It's been an incredibly interesting afternoon.

I'd like to start with you, Ms. Keesmaat.

I'll speak about the importance of densification in addressing the housing crisis, but with the lens—we'll call it the values or philosophy—of your company. Obviously, it's affordable, sustainable, beautiful and connected to transit. My province, Newfoundland and Labrador, will often reference to that as “place” and how we live in a place—not just the smaller place where we reside but also the larger community. That obviously lends itself to well-being, a sense of connectivity and a sense of community.

I'm very interested. Could you link that to the need to look at density?

[Jennifer Keesmaat]

We're going through a fundamental shift in terms of how we pay for housing, think about housing and think about quality of life.

I'll give you a personal anecdote with respect to that.

I have a 23-year-old daughter. When we were presenting to the city our project in the north of the city, Tyndale Green—which has six-storey and eight-storey buildings in a walkable community with, at the centre of the development, an affordable day care, a new community centre, a café and food—my daughter, who grew up in a single-family home at Yonge and Eglinton, in the core of the city, texted me and said, “Mom, can I live there?”

I think this is very important, because it reflects two things.

It reflects how young people think differently about housing than we might have in the past. They want something different from what many of us may have thought about in the past in terms of housing, and they think differently from how many new immigrants thought about housing in the past: the Canadian dream of a single-family home. That has shifted significantly. Today, we know access to stable housing in an environment where people can be part of a community, and where the home can be affordable over time, is the key priority.

One of the ways we achieve that is by building higher-density communities focused not around the car but around community places, community spaces, high-quality public parks and, where possible, public transit and cycling infrastructure. We know there is an entire generation—and newcomers—who are very passionate about that part of the Canadian dream. One way we know this is by looking at home prices in communities that offer all those amenities. They are the highest. One of the fastest-growing areas in Canada is the 12 or 14 square kilometres of downtown Toronto where nearly 500,000 people live—in 14 square kilometres. Seventy-five per cent of the residents in that area do not own a car. They primarily walk or take transit to get to work.

Shifting our thinking about housing in a fundamentally different way, then designing and delivering that housing in a different way, is more affordable from the perspective of overall household costs, and it fits with our sustainability objectives as a country.

[Joanne Thompson, Liberal, St. John's East, NL]

Thank you. I appreciate that, because I think it's incredibly important as we move forward in understanding what our housing and communities need to look like.

I want to shift for a second to Ms. Fair.

It's a somewhat similar conversation—housing being very much on a continuum. Homelessness in its truest form is that moment of not having a place to call home, but we also understand—I've worked in the sector, so I appreciate what you do—that it's more complicated than that. For some, it's about the availability of a unit. For others, it's much more complicated. They need levels of support to be able to sustain housing.

Could you speak about the role of your community centre, not-for-profits and community supports, with layers of government, to address the complexities of homelessness, so we understand the continuum of need and the need to have supports along that continuum?

[Maureen Fair]

Certainly.

[The Chair, Liberal, Peter Fonseca]

I apologize, but I do need a very short answer, please.

Thank you.

[Maureen Fair]

Yes. There's a need for additional supports, but I would say that income and affordable housing access will do a lot to reduce the needs.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Thompson.

I apologize for that, Ms. Fair.

Now we'll go over to MP Ste-Marie, please.

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

Thank you, Mr. Chair.

Madam Mayor, you mentioned how important it is to preserve the existing private and social housing stock. Consequently, you want the maintenance and renovation of that housing stock to be a government priority.

Would you please tell us more about that?

[Catherine Fournier]

Of course.

We're building more units, which is obviously necessary, but we're seeing that, for all kinds of reasons, we're still losing affordable units that are on the market. That's why we should establish acquisition funds that enable non-profit organizations, for example, to acquire units in order to remove them from the speculative market and ensure long-term affordability.

Various studies have shown that 20% of units should be removed from the private market in order to guarantee an affordability threshold. That's definitely a potential suggestion that the federal government might also consider. For example, British Columbia has established a $500 million acquisition fund to take units off the market. I think the federal government may also have a role to play in that regard.

As for maintaining the existing rental stock, housing quality and cleanliness are also basic issues. We need funding that will meet needs so we can prevent the depreciation of our real estate assets. These investments are important. When housing is substandard and of poor quality, it obviously becomes an incentive for major renovations that will obviously have a significant impact on rents. Consequently, if existing rental housing is well maintained, we can preserve a supply of affordable housing.