Finance Committee on Jan. 21st, 2022

[Romy Bowers]

Again, my answer to this is a little bit anecdotal, because CMHC doesn't have a direct view of where the funding is coming from, but there have been a number of reports issued by Canadian banks that have shown a transfer of funds from parents or grandparents to first-time homebuyers.

We believe some of that wealth transfer is happening.

[Julie Dzerowicz, Liberal, Davenport, ON]

Thank you.

Then I wouldn't mind getting into a few solutions. In my riding of Davenport we have a number of non-profits that are land rich but not cash rich, and they would love support in order to build some affordable housing on their particular land.

Is there a role that CMHC currently performs in helping non-profits, and if not, is that a role that you think CMHC could actually take on?

[The Chair, Liberal, Peter Fonseca]

Give a short answer, please.

[Romy Bowers]

This is a role that CMHC currently plays. When you look at the programs in the national housing strategy, many of them are in fact financing programs designed specifically to help non-profits and other affordable housing providers.

[The Chair, Liberal, Peter Fonseca]

Thank you, Ms. Dzerowicz.

Now we're moving to the Bloc and Monsieur Ste-Marie for two and a half minutes.

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

Thank you, Mr. Chair.

My next questions are for Ms. Bowers or Mr. Dugan from CMHC.

Given the potential for rising interest rates, do you foresee an increase in mortgage defaults among the clients you insure?

[Romy Bowers]

Of course we're concerned about the impact of interest rate increases on families, because we understand that families are stretched and additional expenses can stretch family pocketbooks. Having said that, when we look at the mortgages that CMHC insures, which we stress test on a regular basis, our observation is that mortgage defaults are caused primarily by surges in unemployment. That's what causes mortgage defaults. For most families, we find that interest rate changes can have an impact, but it's a very small factor relative to others.

One thing that's worth pointing out is that we have a system in Canada such that when a first-time homebuyer, for example, qualifies for a mortgage, they're qualified at a stress rate. This buffer between the contract rate and the stress rate provides a bit of a cushion for some of those unanticipated interest rate changes.

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

Okay, thank you. That is consistent with Mr. Routledge's answer.

Does CMHC measure the percentage or proportion of household income spent on housing? If so, have you kept track of it since the beginning of the pandemic? Can you provide any information on it?

[Romy Bowers]

Thank you very much for the question. I've noticed that I've been talking all the time, so I'd like to pass the mike to our chief economist, Bob Dugan, who will be able to provide a very comprehensive response to this question.

[Bob Dugan, Chief Economist, Canada Mortgage and Housing Corporation]

Sure. Thank you, Romy.

We've seen an increase in house prices during the pandemic, which has led to an increase in the amount that people have to borrow to buy homes. This has been offset by decreasing interest rates or mortgage rates. When you look at mortgage payments as a share of income, they cycle around a bit, but what we have seen is that the trend overall has been flat over that period. We haven't seen a big increase in the principal and interest payments as a share of income during the pandemic.

Of course, going forward, if interest rates start to increase, there is some risk that that could start to rise slowly. Bear in mind, though, that many Canadians have fixed mortgage rate contracts, so it won't affect everyone right away when interest rates go up. For example, people with a five-year mortgage rate that was recently negotiated don't have to worry about that for another five years. People with variable rates or shorter terms will be affected a little more quickly, but overall we've seen very flat mortgage interest payments to income ratios.

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

Thank you.

[The Chair, Liberal, Peter Fonseca]

Thank you. That's your time, Monsieur Ste-Marie.

We're moving to the NDP and Mr. Blaikie for two and a half minutes.

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

Thank you.

I want to follow up with Ms. Bowers.

Earlier, you said that up to about 1995, CMHC participated in and played an active role in producing about 20,000 to 30,000 units of social housing per year, and that it is significantly less now. What do you think it would take to get CMHC to the point where it would be actively involved in the annual creation of 20,000 to 30,000 units of social housing again?

[Romy Bowers]

That's a difficult question to answer. First of all, I can tell you that when we look at our housing programs across the country, the cost to create one unit of housing varies according to location. With our programs, it ranges anywhere from $300,000 to $500,000 per unit. Do the math: If the government were to finance that level of construction, that would be the amount of support the government would have to be able to finance.

I'd like to note that housing is a shared responsibility. There are many orders of government involved in it. Part of what I like about the national housing strategy is that it has given CMHC an opportunity to align the work of the federal government with others to support housing development for those in need of affordable housing.

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

I think it's fair to say that when CMHC was producing a lot of social housing, it was doing that in collaboration with provincial governments, co-operatives and other non-profit groups. It didn't ever really do it alone. It always had to work in partnership with others. Yet we're at a place where CMHC is involved in delivering much less social housing annually than it used to under that program from the seventies until the mid-nineties.

[Romy Bowers]

I agree with that. I think I would also highlight that the fiscal environment now is very different from 30 years ago. There's been a dramatic change in the cost of housing and the cost of land in our cities. Those are things that really affect housing costs and really make it difficult for any level of government to participate actively in this space.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Blaikie. That is your time.

We're moving now to the Conservatives.

Mr. Stewart, you're up. You have five minutes.

[Jake Stewart, Conservative, Miramichi—Grand Lake, NB]

Thank you, Mr. Chair.

Ms. Bowers, thanks for being here today.

From some of my research, I read that you said your team shared a single goal: “By 2030, everyone in Canada will have a home that they can afford and that meets their needs.” Can you tell me how many dwellings would actually have to be accomplished between now and 2030? I don't mind if you round it up.

[Romy Bowers]

The reason I can't give you the number of dwellings is that it's not just a matter of building houses. Housing is complex, and affordability can be met certainly by building houses, which is very important, but there is also a need to think about how much people are paying for their housing and their income level. It's quite complex to land on an exact number. Just to give you a little sense of it, currently.... According to the 2016 census, 1.7 million Canadians were in core housing need, meaning that 1.7 million Canadian households were spending more than 30% of their income on house-related expenses.

The magnitude of the challenge is quite significant. CMHC used 2030 because that's aligned with the UN's SD goals. It's a bit of a moon shot aspiration for us, and we like to have that as our moon shot, because it really helps galvanize the organization to help serve Canadians better.

[Jake Stewart, Conservative, Miramichi—Grand Lake, NB]

Are you basically saying that the goal is more aspirational than something that's measured with certain targets each year? Would you say that it's more of an aspirational goal?

[Romy Bowers]

It's an aspirational goal, but if you look at our annual reports, there are targets established according to different programs we have that we feel are moving us towards that goal.

[Jake Stewart, Conservative, Miramichi—Grand Lake, NB]

Have you taken into account that Canada each year...? I don't know the exact number, so this is just an estimation, but I think around at least 300,000 people migrate to Canada every year. When we get new Canadians, obviously they need homes too. Is that factored into this goal?

[Romy Bowers]

When you're thinking about the housing needs of Canadians, you absolutely need to take into consideration our immigration targets. I think we all share the belief that immigrants are good for our country and really provide support to our economic development. As we think about the housing challenges we face in this country, we need to think about the needs of immigrant families and the kinds of housing units we need to create to serve their needs.

[Jake Stewart, Conservative, Miramichi—Grand Lake, NB]

Okay. I appreciate that.

Ms. Bowers, I've heard from countless provincial stakeholders and private developers about the CMHC. This is the voice of the developer; it's not so much from me. It's not a direct criticism, but I need to explain to you what developers tell me so that you can answer it. They say that the CMHC process is long and complex. It frustrates developers. The time it takes to get projects under way is really dragged out, which impacts the cost.

As we know, right now alone, we have over 85% inflation in just six years. Last year home inflation hit 25%. Bloomberg reports that Canada has the second-most-inflated housing bubble in the world. If private developers believe CMHC is actually jeopardizing projects, at the very least delaying them, so that the developers have to start all over again and sometimes re-establish financing again, can you explain to me where that type of irritation is setting in for the private developers? Could you just speak to that?

[Romy Bowers]

I'm very sorry that you're getting this feedback from the development community.

CMHC has been quite busy delivering on the national housing strategy. There has been huge demand for some of our mortgage insurance products, especially from the development community, and we've been working very hard to improve our turnaround times. We can always improve, and I'd be very happy to talk to any of the specific developers Mr. Stewart may have been speaking to and to make sure that we take their feedback into account so that we can become a better organization serving Canadians.