Finance Committee on Feb. 13th, 2024

[The Chair, Liberal, Peter Fonseca]

Thank you, Minister and MP Hallan.

Now we're moving to MP Baker, please.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

Thank you very much, Mr. Chair, and thank you, Minister, for being here at the finance committee.

Minister, I'm going to ask a few questions that my constituents ask me all the time.

One question I get a lot is about what has caused housing prices to climb so significantly, especially over recent years. As you pointed out in your preamble, folks are struggling. Folks are struggling to buy a home—those who want to buy one. Folks are struggling to rent a home. First-time buyers in particular are struggling. Of course, the higher interest rates we're experiencing are a tremendous challenge to folks who are renewing mortgages. There are a whole series of issues around the cost of housing that people are struggling with.

Could you answer this question for me? What has caused housing prices to go so high?

[Sean Fraser, Liberal, Central Nova, NS]

I wish it were as simple as giving a quick answer, but there's not one factor. We can trace back some of the challenges to decisions made in maybe the late eighties and certainly the early nineties to cut government-funded affordable housing programs. The need for low-income families is different, although happening in parallel, to the challenges we've seen more recently in the market.

You have 30 years of a failure to invest, and I should say that both Liberal and Conservative governments are guilty of this mistake, which we started to correct in 2017 with the national housing strategy. We need to continue to use that strategy to invest in affordable housing for low-income families. We also need to increase the ambition of some of those programs to build more affordable homes, to build more co-operative homes and to build more housing supply outside of the market.

Within the market, there are a number of factors present right now. Some of them are driven by changes to the rate of interest, which have made it more difficult for people to afford the home they already have or to get into the market in the first place. Others are driven by the fact that within the market, when interest rates were very low, in some communities across Canada—including mine—a buying frenzy took place. In my community, it was disproportionately by people coming from Ontario during the pandemic, who bought up a lot of the properties on the market. This has reduced the vacancy rate in some communities, which puts pressure on, frankly, both the rental market and the home ownership market. Of course, when you layer on top of that this increase in the rate of interest, it exacerbates the nature of the challenge for people who missed the opportunity to get into the market at the time and who are now facing it.

Certain communities have seen dramatic increases in population from different sources. Again, in my community it was mostly through people coming from Ontario. There are communities with a significant influx of temporary residents, like international students, for example, in college and university towns. This has had local impacts.

There's not one factor. When you see the confluence of these various factors happening simultaneously—some that were built up over decades and some that are more recent developments—you see that it's created a perfect storm that has increased the cost of renting or buying a home. That is having a very real impact on people and we need to address it.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

I appreciate that.

We have a representative here from CMHC, who's been to the finance committee before. My question is for the minister, but I did want to raise this.

I remember asking you a very similar question a number of months ago. During your response, one thing that struck me was that you talked about how the supply of homes has not kept up with demand. In other words, the number of new homes we build has not kept up with the number of new people seeking homes in Canada.

Minister, do you agree that this has been a major factor and that it started a number of years ago?

[Sean Fraser, Liberal, Central Nova, NS]

Yes. It's not the only factor, but it is a part of it. If we're going to get out of the housing crisis, we need to build at a much faster pace. Forget for the moment that there will continue to be people from around the world who want to come to Canada. Even to meet the need we have now, we'll need to build at a much faster pace.

Absolutely, we need look at the population growth we're experiencing and build more homes to accommodate the growth that is powering our communities and powering our economy forward. This was actually one of the issues we addressed during the strategic immigration review, which produced a report a few months ago. It was looking at the issue of needing to tie population growth to housing output.

We need to do everything we can to increase the pace of building if we're going to meet the demand that exists today, let alone the demand that will exist 10 years from now as Canada's population presumably continues to experience growth.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

Another question my constituents ask me, Minister, is this: When are housing prices going to stabilize and when are they going to come down? When I speak with my constituents, they ask me this all the time. Frankly, what I say to them is that I will talk with Minister Fraser about it and ask him what he thinks.

For the sake of my constituents, could you share your perspective on when housing prices are going to stabilize and when they are going to come down?

[Sean Fraser, Liberal, Central Nova, NS]

Look, if I had a crystal ball, I would perhaps be better positioned to answer the question.

The answer is not identical for different communities. The housing markets, though interconnected, are local in nature. The impact in the housing market in rural Nova Scotia where I live may be different than it is in the GTA where you live.

When we build enough homes to meet demand and have a better vacancy rate than we have today, we will get to a point where if you lose your apartment for some reason, you will be able to find another one at the same price you were renting at before. When we build out the homes to meet demand in the buyer's market, you will, I expect, see a clear reflection of the cost of building a home in the price, rather than sellers maximizing what they can get because there's so much competition in the market. All of this is in a context impacted by factors outside the federal government's control as well, such as interest rate decisions the Bank of Canada makes independently.

My sense is we can continue to see progress over the next number of years. If you look at the rate of inflation impacting people, it has come down over the past couple of years. I expect, as we go forward—not just on a month-to-month basis but also on a year-to-year basis—things will progressively get better as we continue to see more homes being built over time.

I don't have a magic date on the calendar that I can circle when suddenly all things will be fixed, but my sense is that we can rapidly make progress and have things get progressively better, routinely, in the years ahead.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Baker.

Now it's over to MP Ste-Marie.

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

Thank you, Mr. Chair.

Good morning, Minister.

Welcome to all the witnesses.

Mr. Fraser, I have some questions for you, but first I'd like to turn to Mr. Dugan from CMHC.

Mr. Dugan, you appeared before the committee on September 28, along with other members of CMHC. At that time, you undertook to provide the committee with written answers to our questions. We are still waiting for these answers, despite the fact that the committee clerk has followed up with you on numerous occasions.

For example, we asked you to provide us with a breakdown of CMHC programs by province, as well as information on the cost per dwelling for each of these projects. We're still waiting for an answer.

I also asked you about a social housing project in Joliette. The Office municipal d'habitation de Joliette wants to build a building in which half the units would be reserved for people living with disabilities. What's holding up the project is that the land, which is enclosed and can be used for nothing else, belongs to the Société d'habitation du Québec, which has a social housing agreement with CMHC. The Société d'habitation du Québec is prepared to sell this land. For its part, CMHC does not want to sell it at the municipal assessment price, but rather at the current price. So we're talking about nearly $1 million rather than $300,000.

I asked you what could be done to unblock this situation. Was it possible to terminate the agreement on social housing? Could the minister allow CMHC to sell the land, as proposed by the Société d'habitation du Québec? We are still waiting for these answers.

I wrote to you and CMHC about this more than five months ago. I wrote to the minister five months ago, but it's still deadlocked. The Office municipal d'habitation de Joliette can't start the work because of CMHC, which still hasn't replied.

Finally, we asked you to update your study on the housing shortage, which puts the figure at 3.5 million homes. This figure needs to be updated with the revised data from Statistics Canada. On this subject, the clerk's numerous attempts have finally led us to understand that we would get this answer in the first quarter of this year. So I'd like to know if you have a date for us.

With regard to this study, I'd like to remind you of something else. This will allow me to put a question to the minister. On February 6, Bloomberg reported that CIBC economist Benjamin Tal was talking about a shortfall of at least 5 million homes, not 3.5 million. This figure takes into account population growth, including non-permanent and temporary residents.

Mr. Dugan, are you ever going to give us an answer? You represent CMHC, and you are the only witness to have committed to providing written answers to the Standing Committee on Finance without having provided them.

[Nadine Leblanc, Interim Chief Financial Officer and Senior Vice-President, Policy, Canada Mortgage and Housing Corporation]

Mr. Chair, we take the committee's requests very seriously, and we are committed to responding to them in the very near future. In fact, I have followed up, and the responses are under review. We expect them to be given to committee members very soon.

I haven't taken note of all the requests, but I'd like to comment more specifically on the issue of the Joliette land you mentioned. It's part of the agreements we have with the province of Quebec. When it comes to the sale of land covered by agreements, we have to ensure that we respect the established parameters, review the powers we have and follow the procedures in place to carry out this analysis. We are currently looking into this.

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

Thank you for your reply.

CMHC was contacted more than five months ago, and now it's the one blocking the construction of social housing. It's very worrying.

Since I don't have much time left, I'm going to put my questions to Mr. Fraser.

As the CIBC economist said, we're talking about a shortfall of 5 million housing units. According to data published by CMHC at the end of January, supply is expected to fall in 2024, because the number of new housing starts has fallen over the past year due to inflation; the cancellation of these projects is expected to start being felt this year. Added to this is population growth, which will exacerbate the housing shortage. In short, there will be a lot of homeless people this year.

What do you intend to do about this? Is it true that the government is going to cut funding for organizations fighting homelessness by 3%? That's what we're hearing at the moment.

[Sean Fraser, Liberal, Central Nova, NS]

Thank you for your question, Mr. Ste-Marie.

As part of Canada's strategy to deal with housing challenges, it's important to consider the shortage.

To address the shortage, whether it's three and a half million or five million, we still need to implement all of the measures we're dealing with, and we still need to support communities where they are taking place.

I'm not going to project on what decisions Minister Freeland may make in the budget. Suffice it to say, we continue to support community organizations that are helping folks who do not have a place to live. Just in advance of the holidays, we topped up the Reaching Home program, for example, with an additional $100 million so that it could address acute needs in advance of the cold weather setting in.

We're going to continue to work with communities at the municipal level and with service-provider organizations to identify how we can best leverage federal supports. However, I'm not in a position to project on what budget decisions may be taken in advance of the upcoming federal budget.

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

Thank you.

Mr. Chair, if I have any time left, I'll give it to my colleague Mr. Trudel.

[The Chair, Liberal, Peter Fonseca]

We're actually just at time. Both the other parties did go well over time, so I was going to allow you one really quick question, but we'll build that into our next round.

We have MP Blaikie up now.

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

Thank you very much, Mr. Chair.

Welcome back to the committee, Mr. Minister.

Around your neck of the woods, I think over 7,500 people are waiting for affordable housing, and the wait-list is about two years. Despite an election commitment to put an end to the practice of renovictions—where landlords evict tenants and improve the property, sometimes just superficially, and then jack up the rents—we know that they're still going on in areas like Dartmouth and Halifax.

One of the ways to push back against that would be to empower community organizations with experience in delivering housing to acquire buildings instead of having them sold to the types of landlords who engage in renoviction. I didn't hear anything about a non-profit acquisition fund in your opening comments. I'd like to know if that's something your government is seriously considering in this budget cycle.

[Sean Fraser, Liberal, Central Nova, NS]

Sincerely, this is not the first time we've discussed this, and I honestly believe you care about this issue for all the right reasons, as do I. A potential acquisition fund is one of the strategies we could use to grow non-market supply to help protect, in perpetuity, housing for low-income families. With the housing accelerator fund agreement that we signed with the City of Toronto, we did see that they're using a portion of their funds for the MURA program, which more or less is designed to achieve the ends you've talked about. That was our first recent foray into this space.

We're not at a place to roll out what policies may look like, but we're considering the different aspects of an affordable housing strategy that will help grow non-market supply. We will have to take decisions in the months ahead as to what the specific measures will include, but I'm not in a position today to announce that we will be moving forward with such a fund. However, it remains one of the items that we're considering. We just want to make sure that we're getting the greatest return on investment for every public dollar we spend to help address the needs of low-income families that have inadequate housing today.

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

I'm sure you've heard that Canada is losing 15 units of affordable housing for every one that we're building at the moment. How would you characterize the sense of urgency with which governments should be acting in order to shore up Canada's existing affordable housing supply?

[Sean Fraser, Liberal, Central Nova, NS]

Look, I think you're using the right language. For people who don't have a place to go and security of tenure at the place they go to sleep every night, it is an emergency. We have no opportunity to waste time. We have to work with the sector that can implement the programs. We have to come up with the policies that will roll those programs out quickly. We have to work with other levels of government to make sure we're leveraging every dollar we spend to maximize productivity.

To the extent that you're asking me whether this is urgent and demands immediate action, yes, of course, but let's not pretend that no measures have been put in place to date. I think you'll have noticed a significant uptick in the rate of policy change over the past few months, but this isn't something that just started a few months ago. I agree with what is presumably your perspective: We need to do more and to do it faster. That's what I spend most of my days trying to accomplish.

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

I think a lot of folks took it as a bad sign that in the fall economic statement, money for the recapitalization of the co-investment fund and the new version of the rental construction financing initiative, or the ACLP, which you referred to in your remarks, isn't coming for another two years. Given that we need to not only continue what spending has happened under the national housing strategy but also ramp that up, I'm wondering how you can square back-loading money in those budgetary tables with the sense of urgency you've described at the table here today.

[Sean Fraser, Liberal, Central Nova, NS]

This is an important question.

We should point out that in addition to the measures you mentioned in the fall economic statement, that document also included an additional $300 million in grant money for co-operative housing, which will be rolled out this year.

The programs you pointed to, though, are already operating. Both programs have some money in them right now. Though we anticipate that the money included in the fall economic statement will be spent a couple of years from now, that's not to say there will be nothing spent between now and then. We'll continue to work to figure out how we can leverage the money we have in these programs to build when we have good projects that are ready to go.

Do we need to continue to try to increase the output? Absolutely we do, but I don't want to signal that a two-year delay in the flowing of those specific top-ups means that the funds they were topping up don't have capitalization today. It's actually going to projects, because we are signing agreements with money that's available today. We'll continue to do that.

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

Certainly from our perspective in the NDP, we would say that making the money available sooner increases the possibility of having more projects proceed quicker. If the projects aren't ready to go and you have to sit on the money, then at least there's a good reason, but deciding in advance that the money won't flow for two years means that even if there are eligible projects, they won't be able to move forward. We're certainly hearing from community partners that those funds are oversubscribed, and there's already more demand for what's in the pot. We would certainly like to see that moved up.

I want to confirm, while I have you at the table, that for the ACLP, the government's definition of “affordable”, when it's building affordable units under that program, will be 80% of market value, as opposed to some of the other measures used early on in the life of the rental construction financing initiative.

[Sean Fraser, Liberal, Central Nova, NS]

Yes, and I think it's important to understand the purpose behind different programs. The affordable housing fund is designed for housing for low-income families to be kept at a price that low-income families can afford. As to the apartment construction loan program, to your point around the use of the word affordable, it means different things to different people. The apartment construction loan program, in my view, is meant to address the challenge of a shortage of supply in the market.

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

There are affordable housing provisions within that program, even though it's not solely for the construction of affordable units. My question is, for those affordable units within the program, whatever percentage that will be, will the government's definition be 80% of market value?

[Sean Fraser, Liberal, Central Nova, NS]

As it stands today, that is it, but just to be clear, that program is not designed to boost the supply exclusively for low-income families. It's to boost supply generally and to maintain the market at a price at or below where apartments are being rented today. It's part of the supply solution that over time will bring down prices, as we see an evening out of supply and demand, but it needs to be supplemented with such programs as the affordable housing fund so that we're targeting what's often referred to as deeply affordable housing for low-income families with serious need.

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

That's often what we refer to as social housing.