Finance Committee on Jan. 17th, 2022

[The Chair, Liberal, Peter Fonseca]

Thank you.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

I think it's important just to flag that the government has committed numerous times to not taxing the sale of primary residences. I wanted to emphasize that in response to the discussion earlier.

Thank you, Chair.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Baker.

We're moving to the Bloc.

Monsieur Ste-Marie, you have two and a half minutes.

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

Thank you, Mr. Chair.

Mr. Baker spoke once again about the main causes of inflation, this time in reference to the housing sector and earlier in reference to the economy as a whole.

When we look at the effect of inflation is having on the economy, we are concerned that society as a whole may come to expect higher rates of inflation. That would mean that the various economic agents would no longer expect inflation of 2% but a much higher rate of inflation. It could have a snowball effect and become a matter of concern.

Mr. Arora, do you currently see any signs of such a phenomenon in the measures of various prices in the economy? For example, could businesses increase their prices to safeguard against future inflation? The same thing could happen with some wages. I am not judging those people or businesses. I just want to try to figure out whether there could be a snowball effect if people expect inflation to be higher than 2%.

Do your statistics currently give you any indications in that regard?

[Anil Arora]

The Bank of Canada conducts surveys on consumer confidence so it might be better to ask our Bank of Canada colleagues that question. I think you actually have the results of those surveys.

To my knowledge, we have not conducted any surveys because there is already a way of collecting that type of data.

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

In other words, when you measure increases in wages or the price of goods and services in the economy, you do not break down the results in terms of the possible causes for those price increases. Is that correct?

[Anil Arora]

We, of course, cannot see what the components are. However, it is a retroactive not a speculative perspective. I hope that helps.

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

That was very clear.

Thank you.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Ste-Marie and Mr. Arora.

If everybody could slow down the pace of speaking for the interpreters, that would be appreciated.

We have the NDP now.

Mr. Blaikie, you are up for two and a half minutes.

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

Sure.

There is an issue on which I'm hoping to get a little bit of clarity for the record. There's been conversation about how government spending, in one way, shape or form, has had an impact on the housing market. In the pandemic, of course, when many people think of public spending, I think they think of pandemic income benefits, such as either the wage subsidy or the CERB and its successor programs. But the experience for many Canadians when they went on CERB was a revenue reduction. In many cases, they were making over $2,000 a month, and it meant less income. In the cases of those Canadians for whom it was an increase in income, it seems unlikely—but I'm looking maybe for some comment—that banks would give someone a mortgage based on their having a temporary $2,000-a-month benefit.

I just want to be clear on this. When we talk about government spending that has the ability to impact the housing market, is there any evidence that the spend in pandemic income support on the CERB and the wage subsidy and like programs was the kind of spending that may have made an impact in the housing market from the point of view of driving prices up, or are we talking largely about the liquidity that was granted to financial institutions in the first days of the initial lockdown?

[Anil Arora]

We have no data to triangulate the specific transfer from the government to a business with the intentions of that amount and potentially increased savings from a lack of or reduced expenditures that relate directly to jumping into the housing market. We don't have that.

As I mentioned earlier, we have looked retrospectively at those data for transfers—who got it, how much and what it did to their overall fiscal situation—on both the business side, through our business conditions survey, as well as on the household side. There was nothing that said that resulted in their wanting to get into a particular market.

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

Who do you think the committee could invite to try to get an answer with respect to what kinds of pandemic spending by the government might be driving inflationary pressure in the housing market and what kinds likely aren't?

[The Chair, Liberal, Peter Fonseca]

Answer in 20 seconds, please.

[Anil Arora]

I'm not aware of exactly who or if anybody, frankly, is going to be able to say, “This dollar went here and this dollar went here”. In general, you can see what the basket is and what the result is, but to associate one with the other.... Everybody would struggle quite a bit to be able to say this is causality on this part.

[The Chair, Liberal, Peter Fonseca]

Thank you.

Now we're moving to the Conservatives, and we have Mr. Chambers up for five minutes.

[Adam Chambers, Conservative, Simcoe North, ON]

Thank you, Mr. Chair.

I would like to go back to some of the methodology and talk about used cars for a moment. The Globe and Mail reported that the CPI uses new cars as a proxy for used car prices. In the U.S., there has been a 40% increase, which has significantly increased their reading of inflation.

In Canada, Auto Trader has used car inflation at about 9%. An online platform, CarGurus, has it at 15%. I understand that it represents a reasonable portion of the basket, so I want to confirm whether we are using new car sales as a proxy, or if we have a good measure for used car sales in the CPI.

[Anil Arora]

First of all, used cars are included in the CPI, so it's in that basket. It makes up a relatively small weight of 1.43%, give or take. Because there is no real quality data in Canada just yet—we haven't stopped looking and we are doing some work on that front, by the way—in the absence of that, we use the Canadian new market change, which is about half the percentage. It's 6.6%, as opposed to double that amount in the States.

I want to make sure that it's put into perspective that it's not a massive determinant of the overall CPI. It's not something that we dismiss. We just don't have the kind of ecosystem they do in the States to try to get a really good sense.... Even in the States, by the way, they use one specific private sector source that contains dealer-bought used cars.

[Adam Chambers, Conservative, Simcoe North, ON]

Okay, so it is understated. Anecdotally, we see significant increases in used car sales. Used cars that are just two years old are selling now for 95% of the cost of a new car. That's a huge jump up from what would normally be 60% of the total value. I totally recognize that.

I'd like to shift to money laundering for a moment and some of its effects. Many of my colleagues have talked about an 85% increase in housing prices since 2015. This follows $400 billion of new cash being pumped into financial markets and liquidity granted to financial institutions to continue underwriting record numbers of mortgages. Bloomberg says we have the second-highest housing bubble. It's eating up two-thirds of gross income.

We absolutely care about the housing market and affordability, as well as the effect that money laundering and non-resident purchases and activities have on housing prices overall. There has been a journey to gather some data on non-resident participation in the housing market. Your most recent study had an improvement, but there's still a bit left to be desired in terms of data quality there.

What have you asked the government for, or is there an outstanding list of things you need to do a better job on or to get better information on how much non-resident activity there is in the housing market?

[Anil Arora]

Given the importance of the housing sector in the country, we have indeed put a fair amount of effort into various elements of it. We're the statistical agency, so we're not going to be able to say if there's a transaction. There are other agencies that go into that. Our job is to be able to show what the different components are of who is buying those houses. As my colleague mentioned earlier, we put a lot of effort into understanding non-resident owners and their impact on price changes.

I encourage you, in the interest of brevity, to have a look at some of the work that we've done in Vancouver and in Toronto [Technical difficulty—Editor], but they're very small numbers.

[Adam Chambers, Conservative, Simcoe North, ON]

Thank you very much.

I have one final quick question. This should be a yes or no. In 2018 there was some discussion about StatsCan requesting personal financial data from banks. We heard that in 2018 you were pausing that request. Can you confirm for the committee and for Canadians whether that's still on pause or whether you're seeking that information from financial institutions today?

[Anil Arora]

It's still on pause. We continue to work with the Privacy Commissioner to make sure we can provide the kind of detail that you're referring to while protecting the privacy and confidentiality of Canadians, which they deserve.

[Adam Chambers, Conservative, Simcoe North, ON]

Thank you very much.

[The Chair, Liberal, Peter Fonseca]

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

We're moving to the Liberals.

Madame Chatel, you have five minutes.

[Sophie Chatel, Liberal, Pontiac, QC]

Thank you, Mr. Chair.

I have been following the increase in the price of housing units, that is houses and other accommodations.

Since the end of 2014, all of the OECD countries have seen an increase in housing prices. That increase has been more pronounced recently, during the pandemic years. We are worried about that and we really want to find solutions.

I read an article by Jean-François Perrault from Scotiabank that indicated that this is basically a supply and demand issue. The problem is that there is not enough housing to meet the demand. All of the OECD countries have experienced population growth. How can we increase the housing supply?

People in my riding have talked to me about the problems they have had and the obstacles they have faced in trying to get permits to build new housing in the community.

I would like to mention that I am proud of our government's announcement of a $35-million investment to help small municipalities welcome new refugees. That is a good investment in housing in rural areas. What is more, we announced that we will be holding a summit in partnership with the Federation of Canadian Municipalities.

Do you think that the solutions designed to boost supply and encourage urban intensification will work?

[Anil Arora]

Quite frankly, that does not fall within our purview. You would have to ask that question to our colleagues who are involved in solution finding and policy development. They are the ones who could talk about working with other levels of government and the distribution of public funds. That is an important question that you would be better off asking our colleagues.