Finance Committee on Nov. 13th, 2023

[Mathieu Lavigne]

Yes, that's right. You have to understand that the last thing these SMEs need is one more form to fill out. They need help, but they don't necessarily need more paperwork.

[Caroline Desbiens, Bloc, Beauport—Côte-de-Beaupré—Île d’Orléans—Charlevoix, QC]

Thank you, that's a great response.

[The Chair, Liberal, Peter Fonseca]

Thank you.

We're going to MP Boulerice, who will be the final questioner of this first panel.

You have two minutes.

[Alexandre Boulerice, NDP, Rosemont—La Petite-Patrie, QC]

Thank you, Mr. Chair. Allow me to make a brief comment on the universal public drug plan.

The Quebec plan has advantages, but also disadvantages. Among other things, part-time employees who have supplemental insurance often see 25% to 40% of their salary sent back to pay for this famous supplemental insurance. What's more, the costs of this are rising every year due to rising drug prices.

According to the most recent Hoskins report, the best way to reduce drug costs is to have this kind of plan, and it must be done in collaboration with the provinces. Such a plan will benefit not only workers, but also employers and the hospital system in general, because everyone will save money.

Mr. Milliard, you spoke earlier about the delays in bringing in talent from elsewhere. There are major problems linked to these delays in immigration at the moment. In the riding I represent, Rosemont-La Petite-Patrie, there are just SMEs. There are no big companies. In particular, there are video game companies, including Moment Factory, and artificial intelligence companies.

You said there were more resources in the Maghreb offices. Why target these offices in particular?

[Charles Milliard]

It's because they're French-speaking countries. As far as the question of the Canadian francophonie is concerned, it seems crucial to us to favour these countries or, at any rate, to pay special attention to them. In fact, many of these countries are extremely interested in the Canadian or Quebec dream.

It's also in a context where it would allow us to better develop these international Francophonie markets. French in Canada is in a situation of extreme vigilance. We all agree on that, but internationally, French is following a completely opposite trajectory. It's a language that's experiencing phenomenal growth. According to the Organisation internationale de la Francophonie, or OIF, the number of speakers will rise from 325 to almost 800 million in 50 or 60 years. We have every interest in succeeding in these markets too, because success in business for Quebeckers often means success in the United States. But who can do without a market of 700 to 800 million people? People who come here also come with their networks of contacts, which can also help the international trade situation.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Boulerice.

On behalf of the finance committee, we want to thank the excellent expert witnesses we had with us in this first panel. We thank you for your testimony and for answering the many questions we had in our pre-budget consultation in advance of the 2024 budget.

With that, members, we are suspended for five minutes as we transition to our second panel. Thank you.

[The Chair, Liberal, Peter Fonseca]

I'd like everybody's attention. We just had an excellent first panel. I'm sure we'll have the same with our second panel.

Witnesses, you're here for our pre-budget consultations in advance of the 2024 budget. We thank you for joining us. We are delighted to be here in Quebec City as we do a tour right across Canada. We've done the Atlantic provinces, and now we are starting in Quebec and moving across Canada until we get to our most western province, British Columbia.

With us today we have, from the Aluminium Association of Canada, the president and chief executive officer, Jean Simard, and from the Association des professionnels de la construction et de l’habitation du Québec, the vice-president of development, public affairs and strategic innovation, Isabelle Demers, and the director of the economic department, Paul Cardinal.

From Equiterre we have the director of government relations, Marc-André Viau, and from the organization Amélie et Frédérick, Service d'entraide, we have Véronique Beaulieu and Louis-Philippe Delisle.

We also have, from the Union des municipalités du Québec, the senior vice-president and mayor of Mascouche, Guillaume Tremblay. Welcome, Your Worship. The strategic policy adviser, Samuel Roy, is with us as well.

With that, we're going to get going because we have limited time. We want to get as much time in for members and witnesses as we can.

We'll start with the Aluminium Association of Canada for five minutes.

[Jean Simard, President and Chief Executive Officer, Aluminium Association of Canada]

Mr. Chair, ladies and gentlemen, good morning. Thank you for this invitation.

The members of the Aluminum Association of Canada are responsible for 100% of the primary production made by Alcoa, Rio Tinto and the Alouette aluminum smelter. This morning, my talk will focus on our industry's needs to answer the call to decarbonize North America through electrification.

As part of the decarbonization of our North American continent, aluminum produced here in Canada is set to play a highly strategic role. Indeed, Canada produces 80% of all primary aluminum manufactured in North America. According to the World Bank, this material is the only critical, high-impact, cross-cutting material required to meet the electrification needs leading to decarbonization. Aluminum is found in solar panels, wind turbines, transmission lines—where it makes up 100% of the material—and electric vehicle batteries. Ultimately, the electrification of America only makes sense if it is based on materials that are themselves decarbonized, of which aluminum is one.

Facing carbon-intensive competition from India, the Middle East and China, Canadian industry, in partnership with the governments of Canada and Quebec, is developing the inert anode, which will enable us to completely eliminate greenhouse gas emissions from our processes.

While our competition—China, India and the Middle East—is vying to get where we are today by 2040, we are leapfrogging into the future to keep the edge by developing the Elysis game-changing technology taking us from low to no CO2. It also means developing here in Canada an entirely new world-class industrial manufacturing ecosystem providing jobs of the future and for the future for Canadians.

Elysis changes the aluminium production process to avoid CO2 emissions while releasing only oxygen into the atmosphere. At term, this technology could eliminate the remaining 6.5 million tonnes of GHG emissions from our plants, potentially setting the mark and displacing our high carbon-based competition from India, China and the Middle East.

We are in a high-stakes, high-risk environment leading to industrial scale-up and deployment. Being there today is the result of a partnership between Alcoa and Rio Tinto, as well as Canada and Quebec. The capital intensity and high risk involved are such that they can only be achieved through a partnership. Such a highly capital-intensive undertaking needs de-risking all along, and without access to enabling tax policies, the pathway becomes less certain.

This is as large a strategic industrial transition as electric vehicles and batteries. We deserve the same attention and investment tax credit for clean technologies and for clean technology manufacturing.

While we make aluminium with the lowest carbon footprint in the world here in Canada, we are also an emission-intensive industry. For every one tonne of aluminium we make, we produce two tonnes of CO2. We want to eliminate this entirely.

As China and Russia have recently announced merging their research capacity to accelerate the development of the Russian inert anode technology, Canada must keep its momentum going and accelerate the pace of the demonstration and deployment phases. This is our race to the moon. This is Canada's moment. Zero-carbon aluminium is currently out of scope for federal tax credits in Canada, while the IRA supports the aluminium industry and clean-tech manufacturing, such as inert anodes, with a 10% tax credit on production costs.

Recognizing the critical importance of aluminium to energy transformation, the need to decarbonize aluminium production to achieve carbon neutrality by 2050 and the opportunity for Canada to become the global anchor for carbon-free aluminium smelting and supply chain technologies, the Aluminium Association of Canada recommends that governments include all aluminium sector decarbonization technologies in their lists of tax-credit-eligible technologies. More specifically, the following types of equipment should be eligible for the credit: equipment intended to produce aluminium by a process that eliminates substantially all of the greenhouse gases resulting directly from the electrolysis of alumina. This material includes the goods necessary to manufacture, transform and assemble the materials required for this aluminium production, such as anodic and cathodic materials.

Activities related to clean-technology manufacturing in the aluminium value chain should also be eligible. As we fast-forward this game-changing technology development and industrial scale-up, massive investments in the billions of dollars are required and will only materialize in an enabling fiscal environment, de-risking and grounding the technology here in Canada.

This is Canada's moment to be world first and world leading through its 100-plus years of aluminium legacy.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Simard.

I now yield the floor to Mr. Fabrice Fortin, from the Association des professionnels de la construction et de l'habitation du Québec.

[Fabrice Fortin, Director, Government and Public Affairs, Vice-President, Strategic Development, Public Affairs and Innovation, Association des professionnels de la construction et de l'habitation du Québec]

Thank you, Mr. Chair.

First of all, thank you for welcoming us today to the Standing Committee on Finance as part of pre-budget consultations for the 2024 budget.

The Association des professionnels de la construction et de l'habitation du Québec, or APCHQ, is a private, non-profit organization that brings together more than 20,000 companies in 13 regional associations. Specializing in housing and renovation, it has been, since 1995, the employer representative with the mandate to negotiate the collective agreement for 16,000 employers in the residential sector.

The APCHQ's mission is to be a unifying agent of change for the benefit of Quebec society by representing and supporting professionals in the residential construction and renovation industry. The APCHQ's 20,000 members, through their residential construction and renovation activities, contribute to the province's economic and social development by housing Quebeckers. Our industry represents an economic contribution of $45.6 billion and 270,000 direct and indirect jobs. More specifically, 70% of our members work in renovation, and 30% in new construction. Finally, our members work mainly in the residential sector.

Since the early 2000s, the real estate market has been in deep imbalance. The resale market systematically favours sellers. Property prices have quadrupled. Affordability is currently at its worst level in three decades. Quebec's homeownership rate is declining for the first time in its history, and young people are the hardest hit. Quebec is also lagging far behind the rest of Canada. Indeed, the homeownership rate stands at 59.9% in Quebec, while it is 66.5% in Canada.

We are therefore collectively creating the first generation that will not be able to own a home, a generation that, in 20 or 30 years' time, will be more vulnerable. Given the impact of home ownership on household wealth, this is very worrying.

Furthermore, the rental vacancy rate is below the equilibrium threshold of 3% across the province, falling from 2.5% in 2000 to 1.7% in 2022. In the absence of supply, upward pressure on rents is strong. It's what you might call a perfect storm.

Following on from this state of play, let's now talk about the causes of this historic downturn. The problem is not cyclical, but structural. Over the past few decades, the supply of new housing has not kept pace with demand. As elsewhere in the country, there is now a strong consensus that Quebec has been underbuilding for several years. In 2023, housing starts in Quebec are already down by 37% after three quarters. The meteoric rise in construction costs, which have reached nearly 40% since the pandemic, and the more recent surge in financing costs, mean that many real estate projects remain on ice, as they are simply no longer financially viable.

The APCHQ forecasts 37,000 residential housing starts in Quebec in 2023, a decrease of 35%, and a very slight recovery of around 11% in 2024, with 41,000 starts. In short, we're heading for the worst year for residential construction since 2001.

The APCHQ is proposing several measures to accelerate the pace of residential construction, but also to promote access to home ownership over the next few years. Already, we welcome the abolition of the GST on the construction of rental housing. This is a structuring measure that is particularly appreciated by the industry. There is no justification for taxing an essential good. Having a roof over your head is not a luxury.

This work must continue, notably by ensuring better financing for the construction and renovation of social and affordable housing; substantially improving the GST rebate for new homes; extending the maximum amortization period for insured mortgages to 30 years; relaxing the “stress test” when qualifying for a new loan, and eliminating it altogether for a renewal.

But this won't be enough, as demand will remain very strong, if not stronger. Our net migration has reached new records. The federal government announced two weeks ago that it was maintaining a threshold of 500,000 new arrivals by 2025, a target that will be maintained over the next few years. In addition, we will need to continue to welcome a high number of temporary workers over the next few years, due to our widespread labour shortage and aging population.

In conclusion, we invite the federal government to spare no effort, to work closely with the Quebec government and municipalities; in short, to be nimble, together.

To unravel the crisis, concerted, strong and targeted interventions are needed, and this from all stakeholders in the housing industry.

Thank you.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Fortin.

Now we're going to hear from Equiterre, please.

[Marc-André Viau, Director, Government Relations, Équiterre]

Mr. Chair and members of the Standing Committee on Finance, thank you for coming to meet with us here in Quebec City this morning.

I represent one of the largest environmental organizations in Quebec, Équiterre, which has more than 150,000 members and supporters.

I'll start by saying that the climate crisis is not just a theoretical problem. It affects our economic sectors, our supply chains and our personal finances. For example, Les Producteurs de pommes du Québec asked for $30 million in assistance from MAPAQ, Quebec's department of agriculture, fisheries and food, to adapt to climate change. I noticed apples on display at the moment with some members of Parliament, which is a good thing because we grow excellent apples here. However, this industry, and many others, must be protected. To do so requires solid conservation, adaptation and climate change policies.

In terms of personal finances, Quebeckers understand the link between the climate crisis and the cost of living. According to our recent survey, which was conducted by Leger, 89% of Quebeckers agree that extreme climate events have an impact on crops, and therefore on the price of groceries. In addition, 82% of Quebeckers agree that extreme climate events have an impact on infrastructure, and therefore lead to an increase in municipal taxes. The same proportion agrees that extreme weather events have an impact on personal property, which in turn leads to insurance premium increases.

If we do not take climate change seriously and adapt to its consequences, we will not be able to seize opportunities to reduce the cost of living for families. The survey we conducted also shows that 54% of future vehicle buyers consider that the supply of vehicles does not match their budget. This is not surprising, since the cost of purchasing a new vehicle has skyrocketed in Quebec since 2019. It went from $34,000 to an average of $64,000. It's not carbon pricing or any kind of environmental regulation that makes vehicles unaffordable; it's just an industry choice.

Some of the solutions to the rising costs of travel include funding for active and collective mobility. That is why we recommend, in our brief, that $750 million in funding for public transit operations be extended to maintain essential service levels, which also helps reduce mobility expenses for Canadian families.

We also propose the expansion of the zero-emission vehicle incentive or iZEV program, to support the purchase of 50,000 electric assisted bikes, by offering a purchase subsidy. This represents an investment of $75,000 over two years and would help replace motor vehicle travel, which, I would remind you, is becoming less and less affordable.

In terms of food, I would like to point out that sadly, 15% of Quebec children live in families that are food insecure. Rising food prices does not help. If committee members want to help families pay their grocery bills, we recommend that the government increase funding for school food programs by $1 billion over five years in partnership with the provinces.

With respect to agriculture, we encourage the members of this committee to help young farmers deal with the exploding cost of land access caused by speculation through a fund to support access to farmland for the farming community. We're looking for an initial investment of $200 million over five years.

In closing, encouraging repairs would be another way to help Canadian families reduce their budget expenses. One study estimated potential annual savings at $515. Budget 2023 announced the federal government's intention to introduce a right to repair using a 15% tax credit to cover a portion of the costs used to extend the life of appliances. However, as tax credits do not directly reduce the cost of repair, they are identified by consumers as a significant barrier to repair. That is why we encourage the Standing Committee on Finance and the government to explore other approaches. Équiterre proposes to assess the implementation of measures that will help reduce the cost of repairs when people go to repair companies. This could take the form of financial assistance supported by a fund for the repair of appliances and electronics, which would initially cost an estimated $87 million over the first three years, to reduce the cost of repairs made to goods that are not under warranty. We would also like the government to consider giving repair companies a reprieve from the GST.

Thank you for taking the time to come and meet with us and listen to us. We encourage you to take a closer look at our submission.

[The Chair, Liberal, Peter Fonseca]

Thank you Mr. Viau.

Now we'll hear from the Union des municipalités du Québec.

[Guillaume Tremblay, Senior Vice-President, Mayor of Mascouche, Union des municipalités du Québec]

Thank you very much, Mr. Chair.

Ladies and gentlemen, members of the committee, thank you for giving us the opportunity to take part in the pre-budget consultations ahead of the next federal budget.

I am accompanied by Samuel Roy, Strategic Policy Advisor at the Union des municipalités du Québec.

I would start by reminding you that, for more than 100 years now, the Union des municipalités du Québec has been bringing together local governments from all regions of Quebec in order to garner municipal expertise, support its members in their work and promote municipal democracy. Our members represent more than 85% of the population of Quebec.

Municipalities are at the top of the national agenda. Despite all their agility, they are struggling to offer many essential services to the public with decreasing budgets. Today's pre-budget consultations are an opportunity to reiterate the priorities of Quebec's municipalities and submit constructive proposals to address current issues, specifically in terms of infrastructure, climate change adaptation, public transit and, obviously, housing.

First of all, the infrastructure maintenance deficit has been an issue for municipalities for a number of years. The replacement value of water and sewer pipes is estimated at $15 billion. That amount rises to $38 billion if we also take into account the pavement that covers those pipes as well as ad hoc water infrastructure. Quebec municipalities do not have the financial capacity to meet this financial challenge on their own.

A study commissioned recently by the Union des municipalités du Québec showed that 80% of Quebec municipalities had to postpone one or more municipal infrastructure construction projects over the past year, mainly because of price increases. In the medium and long term, this disinvestment could undermine the quality of services provided to the public and result in greater costs for future generations.

The gas tax and Quebec's contribution program, or TECQ, which is funded through the Canada community futures fund, is very much appreciated by the municipal community because it is relatively flexible and predictable.

However, a good number of municipalities have used up the amounts set out in the TECQ program from 2019 to 2023, and there is no word yet if the program will be renewed. A number of municipalities want to plan work now for 2024 and subsequent years, but it is difficult for them to do so without knowing the amounts that will be granted by the other levels of government.

As such, we recommend that the Government of Canada permanently double funding for the Canada community-building fund for municipal infrastructure. By the same token, we recommend that it quickly reach an agreement with the Government of Quebec to ensure that the transfer of funds takes place without any new conditions.

All Quebec municipalities will have to spend an extra $2 billion per year until 2055 because of climate change-related stressors. This increase represents about 12% of current expenditures for Quebec municipalities. This will be the main new expense for municipalities, which will not have the capacity to make these investments on their own. Without adequate adaptation, municipal infrastructure will deteriorate more quickly. Given the future climate, they will be more prone to failures and will cost more.

The science is clear: regardless of our efforts to reduce greenhouse gases, we are vulnerable in many ways. In recent years, a number of municipalities have experienced extreme weather events, such as floods, tornadoes, coastal erosion, forest fires and periods of torrential rain. These events will be amplified and become more frequent in the coming years as a result of climate change.

As such, we recommend that the Government of Canada significantly increase its investments in the disaster mitigation and adaptation fund to accelerate the deployment of climate-resilient infrastructure.

The construction, renovation and upgrading of recreational and sport infrastructure projects play a major role in Quebec's regional socio-economic recovery. The recreational and sport infrastructure financial assistance program, jointly funded by the Governments of Canada and Quebec and implemented in 2018, was deemed insufficient, with projects submitted totalling $1.5 billion, compared to the $294 million in available funding. This meant that five out of six projects were rejected.

Since the end of this program, no additional contribution has been announced by the Government of Canada, even though the Government of Quebec has announced a new 10‑year $1.5 billion program to fund Quebec sports infrastructure.

Quebeckers expect elected officials of all levels of government to provide them with quality recreational and sports infrastructure. You will agree that the COVID‑19 pandemic has highlighted their importance, whether that be in terms of accessibility, health and healthy living or socialization. That is why we are asking the Government of Canada to recommit to funding this infrastructure.

Quebec transit authorities are facing a major funding challenge. Over the next few years, their financial situation is likely to worsen, in part because income streams are stagnating while expenses continue to rise due, among other things, to aging assets. In 2027, the structural deficit of Quebec transit authorities could reach nearly $1 billion, putting the services at risk. We are therefore asking the Government of Canada to support Quebec transit authorities by providing additional funding to increase investments in asset maintenance.

Finally, in Quebec, the housing crisis has been getting worse and worse for several years. I'm sure you know the vacancy rate. Given the rise in interest rates, we are currently seeing a slowdown in housing starts. This crisis has real consequences for our citizens.

Thank you, Mr. Chair.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Tremblay.

Thank you to all of our witnesses for their opening remarks.

We have limited time, so we want to get right into questions. In the first round of questions from members, each party will have up to six minutes to ask questions.

We are starting with MP Paul-Hus.

[Pierre Paul-Hus, Conservative, Charlesbourg—Haute-Saint-Charles, QC]

Thank you, Mr. Chair.

Good morning to the witnesses.

My question is for the representatives of the Association des professionnels de la construction et de l'habitation du Québec.

Gentlemen, in the first recommendation of your brief, you describe a rather dramatic situation. You say that, in 2021, there was already a shortage of 100,000 housing units in Quebec. You say that in order to fill the need in the province, up to 860,000 units will have to be built by 2030. That's not far away; it's seven years from now.

In the second paragraph, you say that this year there will be a 35% to 40% decrease in the number of housing starts.

How can that be resolved? What drastic measures can the federal government take to really help this sector? I think those are huge numbers. The announcements that are being made right now talk about a few thousand units, but you're talking about close to a million units.

What can be done quickly?

[Paul Cardinal, Director, Economic Department, Association des professionnels de la construction et de l'habitation du Québec]

Good morning, Mr. Chair and members of the committee.

That's a very good question.

First, I would like to clarify something. The Canada Mortgage and Housing Corporation, a federal institution, estimates that 860,000 housing units must be built by 2030 to eliminate the housing deficit in Quebec.

To do that, we would have to triple the pace of housing starts that we have seen in recent years in Quebec. Obviously, the challenge is enormous. We will probably not get there, unfortunately, but various things can still be done. We applaud the goods and services tax exemption on new rental housing construction. Of course, we are making the same request to the provincial government with regard to the Quebec sales tax, which is almost 10%. This would reduce construction costs and relaunch some of the rental housing construction projects that are currently on hold because they are not financially viable.

Of course, that will not be enough either, but we could also amend some bylaws. They could beless restrictive and allow more auxiliary dwellings to be built. We could let people convert their homes into duplexes, turn a basement into an apartment, create intergenerational homes—

[Pierre Paul-Hus, Conservative, Charlesbourg—Haute-Saint-Charles, QC]

I have to move on, because my time is limited.

I would like to hear your opinion on Bill C‑356, which was introduced by Mr. Poilievre and whose purpose is precisely to make processes simpler and faster. What does the Association des professionnels de la construction et de l'habitation du Québec think about that?

[Fabrice Fortin]

We see no reason to oppose it. This is a bill that can provide a measured response to the housing crisis by setting targets for housing construction in cities, supporting development based on public transit in those areas and encouraging municipalities to be flexible in granting building permits. This bill can help solve the housing crisis.

In early fall, we conducted a survey that revealed that the construction of at least 25,000 housing units was stalled in Quebec. Only 42 of our association's 20,000 members responded to this survey. So that's just the tip of the iceberg.

The main reasons for these blockages are the time it takes to issue construction permits and the referendum approval processes undertaken by small groups of citizens. There may be some NIMBYism.

In short, we have to work with the federal government, municipalities, the Government of Quebec and all stakeholders to find a solution to this crisis. The bill can support that.

[Pierre Paul-Hus, Conservative, Charlesbourg—Haute-Saint-Charles, QC]

I would also like to hear the opinion of the Union des municipalités du Québec on this.

[Guillaume Tremblay]

Every time I have the opportunity to speak on behalf of the Union des municipalités du Québec, it is clear that improvements must be made to the way municipalities do things. Let's not bury our heads in the sand. However, we, too, have consulted our members and have seen that processing times have been much shorter in recent months.

It must also be understood that private developers are proposing certain developments on land where zoning approval is needed. So we are being asked to make a zoning change overnight. Municipalities have to follow set procedures and are bound by certain constraints.

Let me give you a concrete example that took place in Blainville, not far from where I live. A developer proposed a project that put the onus on the municipality by indicating that there would be only one parking spot per dwelling. Where would people park their vehicles? They would end up parking on the surrounding streets. You also have to look at what is acceptable.

I think the role of the municipality is very important. We all have to work together and not bury our heads in the sand. I think if we work with developers and different levels of government, we'll be able to move much more quickly.

[Pierre Paul-Hus, Conservative, Charlesbourg—Haute-Saint-Charles, QC]

Can you tell us about two or three bureaucratic roadblocks at the federal level?

[Guillaume Tremblay]

Obviously, you can see the improvements being made with the GST itself.

I can let my colleague Mr. Roy speak to the bureaucratic roadblocks, since that's more technical.

[Samuel Roy, Strategic Policy Advisor, Union des municipalités du Québec]

Generally speaking, the federal government has invested in social and affordable housing in recent years. Various stakeholders have mentioned this. However, we've noted that it takes a very long time for the two levels of government to reach agreements. So it takes a very long time for the money to hit the ground.

When you have a crisis and it takes several years to reach an agreement, it really becomes a major issue.

For us, it's important that discussions be held quickly and that concrete funding be provided to us. That would make a big difference going forward.

[The Chair, Liberal, Peter Fonseca]

Thank you.

Thank you, Mr. Paul‑Hus.

Now we'll go over to MP Scarpaleggia, please.