Finance Committee on Jan. 21st, 2022

[The Chair, Liberal, Peter Fonseca]

Give a short answer, please.

[Romy Bowers]

In a supply-constrained market, you have to be very careful about measures that impact demand. If CMHC is asked to provide policy advice, we would take that into consideration when providing our advice.

[The Chair, Liberal, Peter Fonseca]

Thank you.

Thanks, Mr. Chambers.

We're now moving to the Liberals. I have Madame Chatel up for five minutes.

[Sophie Chatel, Liberal, Pontiac, QC]

Thank you very much, Mr. Chair.

Ms. Bowers, Mr. Routledge and Mr. Dugan, thank you for being here.

I'd like to ask you some questions about specific cases.

I understand very well that it's a supply and demand issue. What I'm reading confirms that.

Ms. Bowers, earlier you mentioned the idea of a study to determine what number would be ideal from a supply perspective.

What would the best number be that you could come up with as the ideal supply in the housing market? I'm interested in that study

I'd like to know exactly what the steps will be and when this study will be available. It's an essential tool for instituting good policies.

[Romy Bowers]

I'd like to give my colleague Bob Dugan a chance to respond, because it's his group that's actually doing the study and it's probably best that you talk directly to Bob.

Bob, could I ask you to speak about the supply view that your group is working on?

[Bob Dugan]

Thank you very much, Ms. Bowers.

It will be a complex study to carry out. We hope to release the report later this year in June.

The study covers a specific time period. We're trying to determine what the supply will be from now until 2030. You have to forecast if you want to understand the rising demand that comes with population growth, income growth and so on.

We want to look at all these issues together, to try to forecast the number of units that will be needed to meet growing demand by 2030. It's a fairly complex study, although we already have some information on hand. Studies by some organizations have shown that Canada's per capita housing stock is currently below average compared to the other G7 countries. A variety of Canadian provinces, such as Ontario and Alberta, are facing even bigger shortages.

For us, these studies provide a starting point. We want to refine them to obtain a better answer and understanding of how this shortage will evolve over the next few years. As I mentioned, growth in demand is caused by population growth, income growth and other factors.

[Sophie Chatel, Liberal, Pontiac, QC]

Thank you very much, Mr. Dugan.

You mentioned the G7 countries. I had a look at the curve for all the G7, G20 and OECD nations. All countries have shown strong housing price growth since late 2014.

What global factors contribute to that? Is it because OECD countries have more immigration and their populations are rising faster than the industry's ability to provide housing?

[Bob Dugan]

That's a very good question.

Canada Mortgage and Housing Corporation has not done any studies on other OECD nations. So my answer can only cover Canada.

In Canada, a number of factors have caused demand to go up: low interest rates, population growth and income growth. On the one hand, all these factors have resulted in strong growth in demand for housing in Canada. On the other hand, supply has not kept up. In some places, like Toronto and Vancouver, we've seen a long-term trend of supply not keeping pace with demand. In those cities, we have also seen fairly strong growth in house prices over a long period.

In the rest of Canada, it's a more recent phenomenon. During the pandemic, many people left the cities for the suburbs and rural areas. This led to a very sudden increase in supply. The increase in house prices spread from Vancouver and Toronto to other major urban centres.

[Sophie Chatel, Liberal, Pontiac, QC]

Thank you very much, Mr. Dugan.

I'd like to ask another question, but the Chair is signalling that I don't have enough time left.

[The Chair, Liberal, Peter Fonseca]

Thank you, Madam Chatel. Your time is up.

We are moving now to the Bloc and Mr. Ste-Marie for two and a half minutes.

[Sophie Chatel, Liberal, Pontiac, QC]

All right, thank you.

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

Thank you, Mr. Chair.

Mr. Dugan, we're very much looking forward to the study to be released in June. I'm sure it will be of interest to all committee members.

If I understood your explanation earlier, because housing prices went up and interest rates went down, monthly housing-related payments have not increased as much as housing prices since the beginning of the pandemic.

If interest rates were to go up in an environment where, as you have reiterated, supply is lacking, would that be liable to bring down housing prices? What is your analysis of that and what would you have to say about it?

[Bob Dugan]

Of course, it's going to depend on how much interest rates go up. In my opinion, the interest rates we're expecting right now will likely not be high enough to bring on a correction in housing prices.

Some markets in Canada are overvalued right now. House prices are high compared to fundamentals, so rising interest rates will surely hurt demand.

It's important to keep in mind that this is really a marginal phenomenon. First-time homebuyers and those renewing their mortgages will be subject to higher interest rates, but the vast majority of Canadians have fixed-rate mortgages and will not experience higher mortgage rates for a certain amount of time.

All of this will nonetheless have a stabilizing effect. Also, keep in mind that most homeowners with mortgages are already qualified for loans with higher interest rates than they are paying right now. So that gives them some leeway to absorb rising mortgage rates.

In my opinion, this is really a marginal phenomenon that mostly applies to first-time buyers, who will be subject to higher mortgage rates.

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

Thank you.

I see that my time is up. Thank you very much.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Ste-Marie.

We are moving now to Mr. Blaikie for two and a half minutes.

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

Thank you.

To Ms. Bowers, one of the things I've heard when talking to folks who were involved in producing social housing in what I will call the “heyday” of the CMHC, prior to the mid 90s, is that the availability of regular and predictable annual funding meant that organizations could hope to engage in a planning process, acquire land and then work toward succeeding at one of the annual regular offerings. However, without that, they're in a very reactive position. Their land or buildings become available and they're trying to figure out how to secure the capital to snatch up the land or the building. They're competing with investors, and it's very hard to make a plan for how to move forward on social housing, because they don't know when funding windows are going to open and close. I can understand the reticence to acquire land and other liabilities when they don't know when funding is going to be made available.

To what extent do you think that, even with the new national housing strategy, the CMHC and its partners and the non-profit sector are still operating in that kind of reactive way? What are some of the ways that government might help them be able to engage once again in a more proactive planning process to deliver social housing?

[Romy Bowers]

I agree with that assessment. The non-profit sector that is providing housing for the most vulnerable in our society often doesn't have very robust balance sheets. It's dependent on various levels of government for support. I can imagine that it is very difficult to engage in something as complex as housing development in the absence of that funding.

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

Are you aware of or do you think it would be helpful to have an inventory of federal lands that could be put to use for those organizations that are looking to develop new social housing in areas where there's housing demand?

[Romy Bowers]

Yes, definitely this would be helpful, I think, and not only federal lands, but also municipal, provincial and territorial lands. I think there are many opportunities in support of affordable housing to use either surplus land or land that is not being used to the greatest intensity. There is a program under the national housing strategy called the “federal lands initiative” that makes surplus federal lands available to non-profits.

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

Thank you very much.

[The Chair, Liberal, Peter Fonseca]

Thank you. That's the time.

Thanks, Mr. Blaikie.

We're moving now to the Conservatives and Mr. Poilievre for five minutes.

[Pierre Poilievre, Conservative, Carleton, ON]

What is the total dollar value of insurance in force at the CMHC? Just the number, please.

[Romy Bowers]

Currently, our insurance in force is $404 billion.

[Pierre Poilievre, Conservative, Carleton, ON]

Also then, what is the total value of guarantees of mortgage-backed securities and Canada mortgage bonds under the National Housing Act—the total, please, the number?

[Romy Bowers]

The total is $460 billion—