Evidence of meeting #13 for Finance in the 44th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was cmhc.
A video is available from Parliament.
Conservative
Pierre Poilievre Conservative Carleton, ON
I asked you about this at the outset. You wasted about 15 minutes trying to get phone lines reconnected. Can you tell the committee who is on those phone lines?
Liberal
The Chair Liberal Peter Fonseca
Mr. Poilievre, we were suspended. I'll take that away from your time.
Mr. Baker, we stopped your time. You now have six minutes.
Conservative
Pierre Poilievre Conservative Carleton, ON
On a point of order, I just want to clarify who's on the phone lines.
Liberal
Conservative
Liberal
Liberal
The Chair Liberal Peter Fonseca
We're going to move to Mr. Baker. That is not a point of order.
Mr. Baker, you have the floor.
Liberal
Yvan Baker Liberal Etobicoke Centre, ON
Thanks, Mr. Chair. I appreciate that.
Now is not the time to be questioning the chair. It's the time to be questioning our witnesses. I would remind all members of that.
I'd like to thank our witnesses for being here today and for meeting with us to talk about this very important topic.
Ms. Bowers, I'd like to come back to you, if I may. What I heard you say in your opening testimony is that the primary cause of the increase in the price of housing is a lack of supply. Did I hear that correctly?
President and Chief Executive Officer, Canada Mortgage and Housing Corporation
That is correct.
Liberal
Yvan Baker Liberal Etobicoke Centre, ON
I want to ask you to repeat this only for the purposes of clarity. Could you articulate what the key reasons are for the increase in the price of housing right now in Canada?
President and Chief Executive Officer, Canada Mortgage and Housing Corporation
The primary reason in our assessment is a mismatch between the demand and the supply of housing, which has been developing over a number of years. The house price escalation was made worse by this mismatch during the recent pandemic.
Liberal
Yvan Baker Liberal Etobicoke Centre, ON
My understanding is that there are a number of measures being undertaken by the government and CMHC to boost supply. Is that correct?
President and Chief Executive Officer, Canada Mortgage and Housing Corporation
That is correct.
President and Chief Executive Officer, Canada Mortgage and Housing Corporation
First of all, I'd like to point out that when you're talking about supply, there are currently about 16 million housing units in Canada, and 95% of them are owned by the private sector. I just want to give you a bit of the context to the landscape. Many of the levers that affect housing supply are at the local level. They're at the municipal and provincial levels. Having said that, there are things that can be done at the federal level to impact supply.
When you look at something like the national housing strategy, there are a number of programs under it that promote the creation of supply, especially for those who are most vulnerable in our society. It's very important that CMHC continues to deliver on our commitments under the national housing strategy with respect to supply-related issues.
In addition to that, CMHC and the federal government can play very important convening roles in bringing together the stakeholders who impact supply at the local level. We can work better with municipalities, provinces and territories, as well as non-profits, to bring in supply more quickly than it is coming in now.
Liberal
Yvan Baker Liberal Etobicoke Centre, ON
Ms. Bowers, in response to my question, you spoke about the national housing strategy and how there are a number of initiatives within it that are meant to address the lack of supply. Are you able to speak to some of those for us?
President and Chief Executive Officer, Canada Mortgage and Housing Corporation
Absolutely. There's quite a number of programs, so it's hard to choose which ones.
Perhaps I can focus on the rental construction financing initiative. It's basically a loan program that is provided to multi-unit housing developers. If you look at the development of housing in Canada over the last 10 or 15 years, there has been a fairly weak response by the development sector in creating purposeful rental. The purpose of that program is to provide low-cost financing to those developers who are interested in developing rentals versus condos, for example. The take-up on that program has been very good. That's just one example. The housing that's provided is close to market housing, but we feel it's very, very important to increase the rental stock in our country.
Another program is the national housing co-investment program. Again, this is a supply-based program providing low-cost financing and grants to other orders of government and non-profits to create housing at lower price points. Here we're trying to target housing supply, but at rents that are more affordable for those who are in need.
Liberal
Yvan Baker Liberal Etobicoke Centre, ON
Thank you very much for that. Those are two helpful examples.
I also think it's important to point out that there's a whole series of initiatives that are part of the government's housing plan—Ms. Bowers, I know you don't have time to get into them all—and certain commitments the government has made in what we're doing with regard to the housing plan. They cover a range of categories, whether that's banning foreign money from purchasing non-recreational residential property in Canada; extending Canada's first-ever national tax on non-resident, non-Canadian owners of vacant, underused housing; or creating a national homebuyers bill of rights or convening federal-provincial regulators for a national action plan to increase consumer protection. The bill of rights would also ban blind bidding, establish a legal right to a home inspection, ensure transparency of the history of recent house sale prices, ensure that banks and lenders offer mortgage deferrals in the event of a job loss or a major life event, and stop the rent evictions. We're investing $4 billion in a new housing accelerator fund, and there's a rent-to-own program.
I just wanted to highlight all of these initiatives, because I think it's important that as we enter this discussion today, everyone, including the folks at home who are watching, are aware of all that.
Ms. Bowers, thank you very much for answering our questions today.
Liberal
The Chair Liberal Peter Fonseca
Thank you. That's your time, Mr. Baker.
We will now move to the Bloc.
Monsieur Ste-Marie, you have six minutes.
Gabriel Ste-Marie Bloc Joliette, QC
Thank you, Mr. Chair.
Ms. Bowers, Mr. Dugan and Mr. Routledge, good morning. Thank you for your presentations and for being here to answer our questions.
Mr. Routledge, your office carries out resilience tests on the financial system. Obviously, with the current inflation issue, when you look at what the U.S. Federal Reserve is doing, we can expect a key policy rate hike or even a succession of hikes from the Bank of Canada in the coming days.
Have you assessed the impact of several possible successive increases in the key policy rate, and therefore interest rates, on the financial system, the housing market and other sectors of the economy?
At the same time, could you tell us what other sectors are more likely to feel the impact of a rate increase of this kind?
Superintendent, Office of the Superintendent of Financial Institutions
The direct answer to the member's question is, yes, we have been testing for that. We've done it for many years. It long predates my arrival at OSFI.
The formal way we incorporate that resilience into the system is through something we call the “minimum qualifying rate for uninsured mortgages”. Ms. Bowers at the CMHC has the same qualifying rate for insured borrowers. The rule is basically that the financial institutions we regulate are required to qualify borrowers at a qualifying rate the higher of their contract rate plus two percentages points or 5.25 percentage points.
When we think about interest rate increases, bear in mind that over the last several years, banks have been qualifying their borrowers at well above prevailing contract rates. That is a margin of safety that will help us through that period.
Bloc
Gabriel Ste-Marie Bloc Joliette, QC
Thank you.
So according to your analysis, the Canadian financial system and housing market are capable of absorbing the expected increase in interest rates.
Is that what you are confirming to me?
Superintendent, Office of the Superintendent of Financial Institutions
As a financial regulator and as the head of OSFI, I should never be too confident or overly confident in financial stability. You want a regulator who is always looking over the horizon to see what risks are coming. Having said that, the margin of safety we have with the borrowers gives me great confidence.
On top of that—and I won't go into it but can in later questions—we've put additional capital buffers, whereas if the rate rise is very rapid and households start to have problems, the system has the capital buffers to absorb it and continue to provide credit to Canadians if the future is more difficult than we anticipate.