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.

On the agenda

MPs speaking

Also speaking

Clerk of the Committee  Mr. Alexandre Roger
Romy Bowers  President and Chief Executive Officer, Canada Mortgage and Housing Corporation
Peter Routledge  Superintendent, Office of the Superintendent of Financial Institutions
Bob Dugan  Chief Economist, Canada Mortgage and Housing Corporation

1:15 p.m.

Liberal

The Chair Liberal Peter Fonseca

You have about 45 seconds, Mr. Stewart.

1:15 p.m.

Conservative

Jake Stewart Conservative Miramichi—Grand Lake, NB

Okay.

Mr. Routledge, with regard to variable mortgages, what type of oversight does your entity have of the banks in terms of prospective buyers? Hypothetically, I guess, if the banks were more inclined to prefer variable mortgages, what type of oversight would you provide in that situation? With variable mortgages and the climate we have now, people are going to be paying through the roof; they already are. What type of oversight would you provide for that part?

1:15 p.m.

Liberal

The Chair Liberal Peter Fonseca

Give a short answer, please.

1:15 p.m.

Superintendent, Office of the Superintendent of Financial Institutions

Peter Routledge

We have rather rigorous oversight for all mortgages, including variable mortgages, through our residential mortgage underwriting guideline. This would include measures in place to guard against the very scenario the honourable member outlined—rising variable rates. We want to ensure that borrowers can service their mortgage in that environment.

1:15 p.m.

Liberal

The Chair Liberal Peter Fonseca

Thank you, Mr. Routledge and Mr. Stewart.

We're moving to the Liberals.

Mr. MacDonald, you have five minutes....

You're on mute, Mr. MacDonald.

1:15 p.m.

Liberal

Heath MacDonald Liberal Malpeque, PE

Is that better?

1:15 p.m.

Liberal

The Chair Liberal Peter Fonseca

That's great.

1:15 p.m.

Liberal

Heath MacDonald Liberal Malpeque, PE

Mr. Chair, if you don't mind stopping me at around two and a half minutes, I'll cede some of my time to Ms. May.

1:15 p.m.

Liberal

The Chair Liberal Peter Fonseca

Will do.

1:15 p.m.

Liberal

Heath MacDonald Liberal Malpeque, PE

I want to go back to the CMHC. With regard to the proposed housing accelerator fund, can you advise us on what it will look like and how stakeholders can weigh in on this process going forward?

1:15 p.m.

President and Chief Executive Officer, Canada Mortgage and Housing Corporation

Romy Bowers

I can't comment on what the program will look like, because it's under development, but I would like to highlight that we are conducting a public consultation on possible design choices that we could make. We've sort of launched it through our social media. We're asking Canadians and other stakeholders to provide feedback on decisions that we could make on its design.

In addition to that, we are conducting a housing supply summit. We're consulting very broadly with the housing community to design a program that we think would result in the best outcomes for Canadians.

1:20 p.m.

Liberal

Heath MacDonald Liberal Malpeque, PE

Thank you.

The housing supply challenge is that obviously supply is outweighing demand. However, what can we do as members to help in the area of housing to expedite co-operation and collaboration with provincial governments in our districts and municipalities? Is there an outline or a vision for CMHC to provide more direction and more decisiveness to expedite some of these programs and processes?

1:20 p.m.

President and Chief Executive Officer, Canada Mortgage and Housing Corporation

Romy Bowers

At the federal government level, we have an FPT housing forum. It's a very good opportunity for the CMHC and the federal government to connect with housing authorities at the provincial and territorial levels. We also work very closely with the Federation of Canadian Municipalities to have round tables on the issue of housing supply.

From the perspective of members of Parliament, you understand your communities best. We have regional staff in all areas of Canada. We appreciate members' feedback and any insights about the very specific housing supply challenges that your constituents face across the country. Housing is one of those things where there's no solution...because housing is very local. We like to make sure that we connect with the local communities to understand the issues in the particular regions.

1:20 p.m.

Liberal

The Chair Liberal Peter Fonseca

Thank you, Ms. Bowers and Mr. MacDonald.

Now we'll pass it over to Ms. May.

Ms. May, you have about two and a half minutes.

1:20 p.m.

Green

Elizabeth May Green Saanich—Gulf Islands, BC

I'd like to start by thanking Heath MacDonald for his generosity on time. Mr. Ste-Marie also offered me some time. I will try to be very succinct. I thank my colleagues for their generosity.

Ms. Bowers, I'm going to ask you a question, but first I have a brief preamble to make that I hope will reassure my friend Mr. McLean.

I looked up the CMHC climate labs program with Generation Squeeze, because over time I've found Professor Kershaw and his research group to be extremely useful and rigorous. I know it was unintentional if there was any sort of slight toward Professor Kershaw, but I found that the project with climate labs with CMHC involved more than 60 experts from community, industry and academic backgrounds, including several from the University of Calgary. I was pleased to see that. I'm sure it was a well-used grant from CMHC.

My question for you, Ms. Bowers, prompted by the context of this whole discussion with the finance committee, is about the problem of the extremely unacceptable level of barriers to people owning their own homes or even finding places to rent. It's a real crisis across Canada, but it's all about supply, and I want to ask you a bit more about that.

Certainly as British Columbians, we're well aware that our housing prices began to take off in ways that were insane, with money laundering and criminal activity and offshore investors. We still have the problem of people buying homes to put them into Airbnbs, not as homes but as investments. How many of those factors are now still active in creating this disconnect between supply and demand?

1:20 p.m.

President and Chief Executive Officer, Canada Mortgage and Housing Corporation

Romy Bowers

I will say, in response to that question, that at CMHC we like to focus on supply, but we understand that there are demand factors that create house price escalation in the short term. We are concerned about things like money laundering. One of the concerns is that we don't have a lot of good data that really helps us assess the extent of money laundering in Canada. There was a recent commission in B.C. to study this problem in more detail. According to that study, I believe it was estimated that perhaps about 5% of the price increases could be attributed to money laundering. Again, it was based on very imperfect data.

I think what's really important on the topic of money laundering is that many jurisdictions are putting into place a better way to keep track of who actually owns the homes, with beneficial ownership registers. I think that's something that can go a long way toward really understanding who is buying the properties. CMHC would be very supportive of the expansion of those kinds of efforts.

1:25 p.m.

Liberal

The Chair Liberal Peter Fonseca

Thank you, Ms. Bowers and Ms. May.

We are moving into our fifth round, starting with the Conservatives.

Mr. Chambers, you have five minutes.

1:25 p.m.

Conservative

Adam Chambers Conservative Simcoe North, ON

Thank you, Mr. Chair.

Ms. Bowers, if you look at market share data, CMHC market share seems to have been declining for a number of years. Recently, it looks like CMHC has regained some market share. Is this a strategic and deliberate shift by CMHC to grow its market share?

1:25 p.m.

President and Chief Executive Officer, Canada Mortgage and Housing Corporation

Romy Bowers

The mortgage insurance business is a very important part of our business. During the last financial crisis, CMHC's market share grew very substantially. At one point, because there was the withdrawal of private insurers, CMHC had about 90% market share of the insured space. Since the last financial crisis, we have been deliberately decreasing our market share, because we feel it's good to have competition from our private sector competitors in the mortgage insurance space.

Having said that, we're very aware of the importance that mortgage insurance plays in financial stability. We have a target that's approved by our board to strive for about 40% to 50% of the market. We're a little bit below that right now, and we're working hard to achieve more market share, but again, we have to compete with the private sector players and we have to up our game in terms of providing better service to our clients.

However, even though we have a lower market share than we'd like, I am not concerned about that, because we have the expertise and capabilities in-house to scale up our business if needed. From the perspective of acting on our financial stability mandate, we feel that CMHC has the capability to support government and the needs of the day.

1:25 p.m.

Conservative

Adam Chambers Conservative Simcoe North, ON

Thank you, Ms. Bowers. Increasing market share will inevitably increase our risk to taxpayers if we crowd out the private sector.

Switching gears here, in 2017-18 there were some new proposals by Natural Resources Canada to look at improvements, or what they called “improvements”, to the building code. Many industry players voiced some concerns about building code changes that would actually increase the cost to build new homes—the construction costs. Of course, we're talking about inflation and housing, and the cost to build a home is important.

Was CMHC consulted, or have you done any work with Natural Resources on those proposals?

1:25 p.m.

President and Chief Executive Officer, Canada Mortgage and Housing Corporation

Romy Bowers

I am not familiar with those specific roles. Those predate my role as CEO. I can certainly get back to you to determine CMHC's involvement. Generally building codes are not within our area of responsibility, but we may have been consulted. I'll have to check.

1:25 p.m.

Conservative

Adam Chambers Conservative Simcoe North, ON

Thank you very much.

Mr. Routledge, do you have any data you could share about how the stress test is applied regionally? Statistics Canada typically only reports on national debt service ratios and not regional ones. I'm wondering if that is something OSFI looks at. Could you provide that to the committee?

1:25 p.m.

Superintendent, Office of the Superintendent of Financial Institutions

Peter Routledge

Mr. Chair, we apply the stress test uniformly across institutions, and that would lead to a uniform application across Canadians in all regions.

With respect to debt service ratios by region or province—and I'm making the assumption that's what they are asking for—I will look into that. I don't have that off the top of my head.

You may assume that in high-price cities, debt service ratios tend to be higher than in low-price cities.

1:25 p.m.

Conservative

Adam Chambers Conservative Simcoe North, ON

Thank you very much, Mr. Routledge.

In 2015-16 OSFI had a strategic imperative for the organization to get a handle on or to learn more about the shadow banking sector. The C.D. Howe Institute recently indicated that the sector is now at about $1.5 trillion annually. That has about doubled since 2005, I believe.

Do you feel as though in the last five years we have made good progress on understanding that sector, or do you think there are still some vulnerabilities there that we need to uncover?

1:25 p.m.

Superintendent, Office of the Superintendent of Financial Institutions

Peter Routledge

Mr. Chair, might the honourable member clarify what he means by shadow banking sector?