Finance Committee on Jan. 21st, 2022

[The Chair, Liberal, Peter Fonseca]

I call this meeting to order.

Welcome to meeting number 13 of the House of Commons Standing Committee on Finance. Pursuant to the motion adopted in committee on January 12, the committee is meeting on inflation in the current Canadian economy.

Today's meeting is taking place in a hybrid format, pursuant to the House order of November 25, 2021. Members are attending in person in the room and remotely using the Zoom application. The proceedings will be made available via the House of Commons website. Just so that you are aware, the webcast will always show the person speaking rather than the entirety of the committee.

Today's meeting is also taking place in a webinar format. Webinars are for public committee meetings and are available only to members, their staff and witnesses. Members enter immediately as active participants. All functionalities for active participants remain the same. Staff will be non-active participants and can therefore only view the meeting in gallery view. I'd like to take this opportunity to remind all participants to this meeting that screenshots or taking photos of your screen will not be permitted.

Given the ongoing pandemic situation and in light of the recommendations from health authorities, as well as the directive of the Board of Internal Economy of October 19, 2021, to remain healthy and safe, all those attending the meeting in person are to maintain two-metre physical distancing and must wear a non-medical mask when they are circulating in the room. It is highly recommended that the mask be worn at all times, including when people are seated. Participants must maintain proper hand hygiene by using the provided hand sanitizer at the room entrance. As the chair, I'll be enforcing these measures for the duration of the meeting. I thank members in advance for their co-operation.

To ensure an orderly meeting, I'd like to outline a few rules to follow. Members and witnesses may speak in the official language of their choice. Interpretation services are available for this meeting. You have the choice at the bottom of your screen of floor, English or French. If interpretation is lost, please inform me immediately. We will ensure that interpretation is properly restored before resuming the proceedings. The “raise hand” feature at the bottom of the screen can be used at any time if you wish to speak or to alert the chair.

For members participating in person, proceed as you usually would when the whole committee is meeting in person in the committee room. Keep in mind the Board of Internal Economy's guidelines for mask use and health protocols.

Before speaking, please wait until I recognize you by name. If you are on the video conference, please click on the microphone icon to unmute yourself. For those in the room, your microphone will be controlled as normal by the proceedings and verification officer. When you're speaking, please speak slowly and clearly. When you're not speaking, your mike should be on mute. This goes a long way toward helping our great interpreters do their job effectively and safely. I will remind you that all comments by members and witnesses should be addressed through the chair.

With regard to a speaking list, the committee clerk and I will do the best we can to maintain a consolidated order of speaking for all members, whether they are participating virtually or in person.

The committee agreed that, during these hearings, the chair will enforce the rule that the response by a witness to a question take no longer than the time taken to ask the question. That being said, I request that members and witnesses treat each other with mutual respect and decorum. If you think the witness has gone beyond the time, it is the member's prerogative to interrupt or ask the next question. To be mindful of other members' time allocation during the meeting, I also request that members not go much over their allotted question time. Though we will not interrupt during a member's allotted time, I'd like to keep you informed that our clerk has two clocks, to time our members and witnesses.

This meeting is scheduled for a longer duration. In consideration of the fact that our witnesses may not get an opportunity to leave their virtual set-up, at around the halfway mark, I will be suspending the meeting for a five-minute health break.

I would now like to welcome our witnesses.

From the Canada Mortgage and Housing Corporation, we have Ms. Romy Bowers, president and chief executive officer, and Mr. Bob Dugan, chief economist. From the Office of the Superintendent of Financial Institutions, we have Mr. Peter Routledge, superintendent.

For opening remarks, we will have the CMHC—

[Terry Beech, Liberal, Burnaby North—Seymour, BC]

I have a point of order, Mr. Chair.

[The Chair, Liberal, Peter Fonseca]

Go ahead.

[Terry Beech, Liberal, Burnaby North—Seymour, BC]

I'm hearing that the phone lines aren't up yet for the staff. Can we check with the clerk to see what their status is?

[The Chair, Liberal, Peter Fonseca]

The clerk will be checking on the phone lines.

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

They're going to get back to me in just one moment.

They're working on it right now. There might need to be a suspension, but I'll let the chair know in time. It won't be more than a five-minute interruption.

[The Chair, Liberal, Peter Fonseca]

Okay. It will be five minutes until the lines are up and running.

As I said, we also have, from the Office of the Superintendent of Financial Institutions, Mr. Peter Routledge. He's the superintendent.

As I was saying, each of the CMHC and OSFI presenters will have up to five minutes to make their opening remarks.

We're just going to take a few minutes now. We'll suspend to see if we can get the phone lines up and then we'll get started.

[The Clerk]

I'm not sure that they're ready to suspend right now. They're working on it, but I can let the chair know whenever the suspension is needed, and we can suspend at that time.

[The Chair, Liberal, Peter Fonseca]

I misunderstood. I thought we were suspending so that they could get the phone lines up and going.

[The Clerk]

Yes, but I'm just not sure if they're ready to do so right now.

They're working on the phone lines, but I don't know if they.... It's up to you. We can suspend until we get the phone lines up, or we can start the meeting without the phone lines. When we're ready, I can let you know, and we can suspend at that time.

[The Chair, Liberal, Peter Fonseca]

Okay. Let's start with the opening remarks from CMHC first, for up to five minutes.

[Romy Bowers, President and Chief Executive Officer, Canada Mortgage and Housing Corporation]

Thank you very much, Mr. Chair.

I'm joining you today from Toronto, on the traditional territory of many nations, including the Mississaugas of the Credit, the Anishnabe, the Chippewa, the Haudenosaunee and the Wendat peoples, and now home to many first nations, Inuit and Métis peoples.

I am pleased to be here on behalf of Canada Mortgage and Housing Corporation. As Canada's national housing agency, we have 75 years of proven expertise across the housing system.

Housing affordability is our top concern. We've mobilized all our resources to address it. We're doing this because the current trend of escalating house prices is worse than at any time over the past 30 years. It hasn't slowed despite the economic uncertainty of the COVID‑19 pandemic. In fact, growth in house prices has accelerated over the past 18 months.

At the same time, according to our housing market assessment, the national housing market has now reached a very high degree of vulnerability. Escalating prices relative to incomes have made it more difficult to enter the home ownership market. It also means that home owners are burdened with record levels of mortgage debt.

Canadians now owe $1.72 for every dollar of disposable income the household has earned. This makes households more vulnerable to events that adversely affect their income. However, it's very important to point out that housing unaffordability isn't just a problem for homeowners. The high cost of residential real estate is also having a ripple effect in the rental markets, and those who are most affected are vulnerable populations.

Some 13% of Canadian households are in core housing need. This means that they're spending more than 30% of their income on housing or that they're living in housing that is inadequate or unsuitable. It's also very important to point out that on any given night, as many as 35,000 people across our country may be experiencing homelessness.

Why is this happening and what can we do about it?

Canada's housing system is complex and there are a number of reasons for the continued steep price escalation. However, it is CMHC's position that the main problem is supply not keeping pace with housing demand. Canada has the fastest population growth of any G7 nation, and our housing supply has not kept pace with this growth.

The answer seems quite simple: build more housing. That's what we're encouraging through the national housing strategy, but it's simply not enough. It's not money or investments alone that will fix the problem.

Other barriers that prevent housing supply from matching demand include inflexible development processes and long timelines at the local level, as well as Nimbyism in our neighbourhoods. The housing crisis calls for collaboration across all orders of government, as well as the non-profit and private sectors.

Working together to unlock supply barriers is what we'll be focusing on when we talk at an upcoming housing supply summit that CMHC is co-hosting with the Federation of Canadian Municipalities. We will also be releasing an in-depth report in June, which will use the latest economic data to assess how much housing supply will be needed in the coming years.

Thank you, Mr. Chair, for the committee's study of this very important issue. Housing unaffordability poses a significant economic risk to our country, and it threatens our collective vision of Canada as an inclusive country where everyone has a chance to thrive and prosper.

At this time, I will be very happy to take any questions you may have. Thank you.

[The Chair, Liberal, Peter Fonseca]

Thank you, Ms. Bowers.

Now we're going to hear from Mr. Peter Routledge from the OSFI for up to five minutes.

Go ahead, Mr. Routledge.

[Peter Routledge, Superintendent, Office of the Superintendent of Financial Institutions]

Good morning, Mr. Chair, and committee members. Thank you for the opportunity to answer questions today.

I intend to be brief, as I know you have some questions for me.

I would also like to acknowledge that I am speaking from traditional unceded territory of the Anishinabek Nation. I am grateful to have the opportunity to present in this territory.

Created in 1987 in response to a period of financial system volatility, the purpose of the Office of the Superintendent of Financial Institutions is to ensure that financial institutions and pension plans are regulated by an office of the Government of Canada so as to contribute to public confidence in the Canadian financial system. We call ourselves OSFI and I'm happy to respond as such.

We pursue that purpose by supervising financial institutions to ensure that their boards of directors and senior executives keep their institutions in sound financial condition and adopt smart forward-looking policies to manage risk. We also evaluate system-wide risks that could impair the soundness of financial institutions. The risks within Canadian housing finance require that systemic view and I commend the committee's timely motion to study the interrelated topics of inflation and housing finance.

While affordability and the sustainability of housing in Canada are issues that touch all Canadians, OSFI's role centres on preserving and protecting the availability and quality of credit that sustains the housing market. A stable housing finance system with reliably available credit at prudent risk-based prices is, in our judgment, a prerequisite for a healthy housing market.

At OSFI, we have focused intently on the risks in housing finance every day since the global financial crisis. In that time, OSFI and our federal regulatory partners have consistently taken regulatory actions to add more discipline and reduce unproductive exuberance in the housing finance system, over 25 significant federal actions by my count.

And we will never let down our guard. In fact, we constantly challenge ourselves to foresee housing market risks beyond the horizon and adapt early to them.

That is our aim in this regard—a stable housing finance system that helps every Canadian to have a home they need at an affordable price. Our strategy is to ensure the housing finance system and the Canadian financial system have sufficient buffers to absorb the inevitable uncertainty and volatility one finds in capital asset markets such as housing.

With respect to housing finance, we have multiple buffers in the housing finance system and one will find them at the individual level, the institution level and the systemic level.

I look forward to expanding on the strategy when answering your questions.

Our strategy makes sense in good times and bad. And our strategy is particularly constructive during periods of elevated uncertainty.

The very substantial increase in housing prices, since the pandemic recovery began, adds to the uncertainty in our housing finance system and marks a sound rationale for discussing related issues here today.

At OSFI we are ready and willing to take early, risk-based decisions in response to that uncertainty and in pursuit of our overarching aim.

I look forward to contributing to the committee's study and to answering the members' questions.

Thank you.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Routledge and Ms. Bowers.

Members, we're going to suspend at this time to get our phone lines fixed—

[Pierre Poilievre, Conservative, Carleton, ON]

Mr. Chair, I have a point of order.

[The Chair, Liberal, Peter Fonseca]

Go ahead on your point of order.

[Pierre Poilievre, Conservative, Carleton, ON]

I'm sorry; I missed that. Who are the phone lines for?

[The Chair, Liberal, Peter Fonseca]

Well, we're going to get our phone lines fixed—

[Pierre Poilievre, Conservative, Carleton, ON]

For who?

[The Chair, Liberal, Peter Fonseca]

Well, we're getting our phone lines fixed—

[Pierre Poilievre, Conservative, Carleton, ON]

For who?

[The Chair, Liberal, Peter Fonseca]

—Mr. Poilievre.

[Pierre Poilievre, Conservative, Carleton, ON]

For who?

[The Chair, Liberal, Peter Fonseca]

Mr. Clerk, if you can work on the phone lines, thank you—