Finance Committee on Dec. 7th, 2023

[Mike Morrice, Green, Kitchener Centre, ON]

Thank you, Mr. Ste-Marie.

Minister, I appreciate your being here.

I'd like to ask about investments needed in housing from the federal government, starting with a recognition that back in the 1970s, 40% of all housing starts had federal assistance. Our Minister of Housing has publicly said that both Liberal and Conservative governments have reduced funding to the point that it has partly caused the crisis we're in.

Our current social housing stock, as you know, is 3.5%. CMHC has called out the $3.5-million affordability gap by 2030 and the Governor of the Bank of Canada has said that investments in housing supply are not inflationary—in fact, the opposite—yet in the fall economic statement, we saw only 100 million new dollars, at least in the next two fiscal years.

Can you comment from your perspective on what the hesitation is in not putting in place more ambitious investments in housing and to at least start by, say, doubling social housing, which would put us only to the middle of the G7?

[Chrystia Freeland, Liberal, University—Rosedale, ON]

Thank you for the thoughtful question.

I would just say I think we agree on the objectives and the need.

I would point to the really aggressive approach we've taken in housing since the beginning of this fall session, such as by completely eliminating the GST on construction of all purpose-built rental housing. That was a very big step. We did that in September.

Adding $20 billion to the Canada mortgage bonds was also a really big step. I am already hearing from builders across the country that it will lead to more purpose-built rental housing, including affordable rental housing, being built.

With due respect—and I don't mean that in a snarky way; I mean that in a really serious way—adding $15 billion to the apartment construction fund is making a difference right now. That fund initially had $25 billion, and $17 billion has already been committed, so what we did in the fall economic statement was add another $15 billion, so it's $40 billion in total.

Putting that money in there is having an impact right now, because if people are beginning a project—proposing it—at the end of 2023 or the beginning of 2024, it takes them a while to have the plans, to have the permitting. Now they know there is money in that fund that they can apply for and build their plans around. That is money that's going to make a difference today.

That's actually true, really true.

[The Chair, Liberal, Peter Fonseca]

Thank you, Minister. Thank you, MP Morrice.

This will be our final questioner for the minister. MP Blaikie, you'll have the final time.

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

Thank you very much.

Minister, in your opening remarks, I think, or in one of your answers here so far, you made reference to the new mortgage charter.

I'm wondering if you could explain for the committee the legal consequences for a financial institution that disregards the mortgage charter.

[Chrystia Freeland, Liberal, University—Rosedale, ON]

We developed the mortgage charter in collaboration with financial institutions. It's been, I would say, a co-operative approach. What we have found is that financial institutions actually share our government's view and—I'm going to presume here, but I don't think much—your view also, which is that we want Canadians to keep their homes.

Financial institutions do not want people to lose their homes. We believe the mortgage charter is something that financial institutions are able to abide by and are supportive of, because we developed it together with them. I thought it was really important to have it down in black and white, because I at least have found there are elements in there that people just don't know about, and not knowing about it is causing real stress and anxiety.

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

However, strictly speaking, there are no consequences for financial institutions for disregarding the charter.

[Chrystia Freeland, Liberal, University—Rosedale, ON]

We actually have been stepping up, as I know you know, our enforcement abilities in the financial sector. We are now setting up something that consumer finance NGOs have been calling for for a long time: a fully independent ombudsman Canadians can go to when they have concerns about their financial institutions. That has never been the case. Financial institutions have been able to pick and choose. We're creating a fully independent ombudsman, which I think is going to help people.

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

Will the charter be a legally enforceable document?

[Chrystia Freeland, Liberal, University—Rosedale, ON]

The charter is published by the finance minister. Canadians can see it and refer to it. They can use it when they refer to the ombudsman and to the Financial Consumer Agency of Canada.

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

On that question, I'm going to take that as a no, unless you tell me I'm wrong.

I am curious, in this question, about the stress test, though, because it does seem to me that requiring somebody who has an uninsured mortgage to renew with the same institution, even if it's a higher rate than other rates that are available in the market, is probably not very helpful, unless the goal is to increase the odds of default for uninsured mortgage holders.

Can you explain why the decision was made to move ahead with eliminating the stress test for one category of mortgage holders and not for the other?

[Chrystia Freeland, Liberal, University—Rosedale, ON]

There is, of course—and I know you know this—no requirement to renew at the same institution. The distinction is that if you have an insured mortgage, you do not need to pass the stress test again. I think that gives people comfort, confidence and ease of shopping around.

Another consideration I think we all need to bear in mind is the safety and security of the Canadian financial system overall. That is an important consideration. That's something the superintendent of financial institutions is principally charged with, but we take his opinion seriously. The Canadian financial system and the institutions that maintain it really have stood the test of time. We saw that in 2008.

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

On that point, if “Joe” has an uninsured mortgage with bank X, and he wouldn't pass the stress test, he can get a mortgage at a higher rate with bank X again, which is not going to be better from the point of view of making his mortgage payments. Why would we require him, with an uninsured mortgage, to have to do the stress test to get a lower rate, which would make it more likely that he wouldn't lose his mortgage? I don't understand why we would make it harder for someone to get a lower rate while allowing them to renew at a higher rate with the same institution. There's a circle that doesn't square there for me. Perhaps you could shed some light on that.

[Chrystia Freeland, Liberal, University—Rosedale, ON]

Our intention is to provide comfort to people who currently have mortgages, first of all, by reducing the anxiety by giving them options and tools that allow them to stay in their homes. That is what the mortgage charter is about.

I would also say, as we all know, that the key issue here is the interest rate. We haven't really been talking about it, although it's been the subtext of our entire conversation on housing, which is why our government is really focused on doing our part to create the financial circumstances that allow prices to stabilize such that interest rates can move from their current contractionary position. I think we need to have that very much in mind when we're talking about anything to do with the economy, and particularly anything to do with housing.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Blaikie.

Thank you, Deputy Prime Minister Freeland. We thank you for your testimony.

We also thank you, Deputy Minister Forbes, for your testimony; although, you'll be sticking around with us for the second hour.

Members, we are going to suspend for five minutes as we transition to our second panel.

Thank you.

[The Chair, Liberal, Peter Fonseca]

I call this meeting back to order.

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.

With us today for the second hour—well, he was also here the first hour—we have the deputy minister, Chris Forbes.

Welcome, Mr. Forbes.

With the deputy minister is the assistant deputy minister, federal-provincial relations and social policy branch, Alison McDermott.

Welcome, Ms. McDermott.

The assistant deputy minister, financial sector policy branch, Grahame Johnson, has also joined us. Thank you for being here with us for the members' questions.

MP Chambers has a point he would like to make.

[Adam Chambers, Conservative, Simcoe North, ON]

Thanks very much, Mr. Chair. I'll be very quick.

FCAC was invited by the clerk to appear on this study. They have declined that invitation, suggesting that they are not responsible for the mortgage study, or they have no responsibility.

I think that's not correct. I'd like to seek unanimous consent from the committee to reissue the invitation to FCAC, the Financial Consumer Agency of Canada.

[The Chair, Liberal, Peter Fonseca]

MP Chambers, can I allow the clerk to give a little background and speak to that?

[Adam Chambers, Conservative, Simcoe North, ON]

Sure. Thank you.

[The Chair, Liberal, Peter Fonseca]

Go ahead, Clerk, if you can.

[The Clerk of the Committee, Mr. Alexandre Roger]

Sure. I'll be paraphrasing here.

They didn't send an official email. They called and had a chat with me. They were saying that housing is not within their mandate. They are more about regulating the banks and overseeing the compliance of financial institutions and financial literacy in Canada, among many other things in their mandate.

They politely declined our invitation.

[Adam Chambers, Conservative, Simcoe North, ON]

Mr. Chair, if I may, I believe they are involved in discussions on mortgage amortizations and extensions with the banks. They also are part of the mortgage charter discussion.

In my view, they are very relevant to have here. I'd like to seek unanimous consent to invite them to appear, with no date but as part of the study.

[The Chair, Liberal, Peter Fonseca]

Yes, so the clerk will reach out again.

Go ahead, MP Dzerowicz.

[Julie Dzerowicz, Liberal, Davenport, ON]

In theory, I don't have a problem with that. I just find it odd that you have the agency coming back and not mentioning that they're actually in charge of that. Can we not sort of put it to them to say they're also in charge of mortgage amortization and all these other things?

[The Chair, Liberal, Peter Fonseca]

That can be added to the email or whatever.

[Julie Dzerowicz, Liberal, Davenport, ON]

Yes. We could just add that it's because they're in charge of X, X and X that we're inviting them, if that's okay.

Thank you.