Finance Committee on Jan. 24th, 2022

[The Chair, Liberal, Peter Fonseca]

You have about 25 seconds.

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

Housing inflation is homegrown in Canada. Bloomberg reports that Canada has the second-most inflated housing bubble in the world. The average family must spend two-thirds of their gross income in places like Toronto and Vancouver, which rank as the fifth and second on planet earth.

I'd like to say again—and thank you to Mr. Perrault for also chiming in—that this ballooning housing in Canada is homegrown and caused by the Trudeau government.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Stewart.

Now we're moving to Ms. Dzerowicz for five minutes.

[Julie Dzerowicz, Liberal, Davenport, ON]

Thank you so much, Mr. Chair.

I'm going to start off with a couple of statements. There was an earlier comment about why we don't just deal with the demand side and slow down immigration. I want to make three comments on that.

Immigration, as we know, is key to Canada's economic growth. It always has been. It's key because we have huge demographic challenges, with a huge number of people retiring and a very low birth rate. Especially right now, we have a huge labour shortage issue across this country. We really do need to keep the demand side up. I want to make sure I address that.

There was a comment that was made about more targeted versus widespread support during this pandemic. Starting last summer—it wasn't at Bill C-2—we started targeting the support more specifically. We did it very deliberately. We have continued to target our support as we move along.

I want to point out that even after we introduced our fall economic statement, we continued to have our AAA credit rating internationally confirmed. To me, that shows some confidence in terms of how we're going about spending and how we're proposing to continue to support our economy coming out of this pandemic.

Mr. Perrault, I'm going to address my first question to you. The narrative here is that over the last two and a half years, the actions of the Trudeau government in trying to urgently address and support the Canadian economy have led to the housing problem, the housing crisis and the housing inflation that we have today.

Would you say that the housing inflation that we have now, and maybe the housing crisis that we have right now, has been a 30- to 40-year problem in the making? It's been a number of things, whether it's tax changes, lack of coordination or efforts along all three levels of government, or the different levels of government not supporting some sort of national housing strategy. Would you say that statement is true?

[Jean-François Perrault]

It's fair to say that the housing challenge in the country is not new. It's been, perhaps, turbocharged the last number of years because of population growth. It is certainly not a new phenomenon and it is not unique to any level of government in the country.

[Julie Dzerowicz, Liberal, Davenport, ON]

You mentioned population growth. Would you say that's over the last 10 to 20 years, or would you say it's more recent, like the last two to five years?

[Jean-François Perrault]

Since 2015, we've seen a tremendous increase in immigration, which I think is fantastic. I'm unreformed pro-immigration on that front. The challenge has been that the strength in immigration has led to very rapid population growth relative to what we've experienced in the last 20 years or so. That amplifies some of these stresses in the supply and the delivery of housing supply across the country.

[Julie Dzerowicz, Liberal, Davenport, ON]

To that comment, Mr. Perrault, I believe there has been a shortage of attention given to housing, to rental housing and to more housing, at all three levels. That needs to be put on the record as well. It's not just the population growth. There were different levels of government not really focused on ensuring that we had an adequate amount of housing supply as we were growing our population. Would you say that's true?

[Jean-François Perrault]

Yes. If you go back to 2016, which is too early in the population boom, our level of housing in Canada, if you compare it internationally, was very low relative to the population. It's worse now, but it wasn't great five or six years ago.

[Julie Dzerowicz, Liberal, Davenport, ON]

You mentioned that we may have to change the legislative structure because Nimbyism is definitely a problem. In your view, what are the main things that provinces and municipalities should do immediately to help overcome some of these Nimbyism problems and build some more housing?

[Jean-François Perrault]

That to me is a political question more than an economic question. I think the economics are pretty straightforward. It's in everybody's interest to make sure that we right-size housing and have proper densification and all that kind of stuff.

If there are financial constraints and considerations that are delaying that or making it more difficult in municipalities or provinces, I think those could be addressed, but I think at the heart of it is simply political challenges with how municipalities, and provinces to some extent, want to deal with the fact that populations are rising, thereby forcing some pretty difficult choices on the part of local politicians.

[The Chair, Liberal, Peter Fonseca]

Thank you, Ms. Dzerowicz. That is time.

We are moving to the Bloc with Monsieur Trudel for two and a half minutes.

[Denis Trudel, Bloc, Longueuil—Saint-Hubert, QC]

Thank you, Mr. Chair.

Ms. Laflamme, we established that the government was investing money. However, it wasn't enough to house the most vulnerable people.

We spoke about the rapid housing initiative, or RHI. That program actually revealed the magnitude of the problem, the magnitude of the housing crisis. In the first phase of the RHI, $1 billion in funding was available. However, the projects submitted totalled $4 billion. The Federation of Canadian Municipalities alone was requesting $7 billion from the program.

In my constituency of Longueuil—Saint‑Hubert, the organization Le Repas du Passant provides meals every day. This organization has an extraordinary social diversity project: 30 mental health components, 30 components for homeless people and components for seniors. It's an extraordinary project. The representatives of the elected officials' table in Longueuil asked me why this project hasn't moved forward. I told them that there wasn't enough money. Today, we established that the federal government invests most of the money to build affordable housing that isn't really affordable. It only makes the rich richer. We must take care of the most vulnerable people.

Ms. Laflamme, is there a way to send the money for so‑called affordable housing to the organizations on the ground? My point is that money should be sent to the organizations that know the needs. This could bring apartments out of the private market to ensure sustainability in terms of housing affordability.

[Véronique Laflamme]

That's right. This is part of the solution.

Today, we're talking about supply. In our opinion, we must be careful, because not all the supply can meet needs, especially the most urgent needs.

In Quebec, particularly in Montreal, the increase in rental housing construction is mainly driven by large real estate developers that sell very small and expensive apartments. These units are rarely suitable for large families. This hasn't resolved the issue. Some tenant households are still homeless despite the large supply of new housing.

There must be more investment in the rapid housing initiative, or RHI. More investment is needed in programs that fund housing outside the private market. The RHI showed the needs. It turns out there were too many projects given the funding available. This shows the importance of these types of programs. These programs help to quickly meet needs, by providing housing that will remain truly affordable.

In terms of social and community housing, the key is to fund housing that will remain truly affordable and that will have a structuring effect on communities. It's important not to respond to speculation, as is the case when you rely on the private market.

You asked a question about the acquisition by non‑profit organizations—

[The Chair, Liberal, Peter Fonseca]

Thank you, Ms. Laflamme and Mr. Trudel.

We're well over the time, but thank you.

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

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

Thank you.

We heard from CMHC the other day that in the decades leading up to the cancellation of the national housing policy in or around 1995 by the then Liberal government, CMHC was involved in delivering between 20,000 and 30,000 units of social housing every year. Even if you take the low number, 20,000, and multiply that by the last 25 years, that's about 500,000 units of social and affordable housing that didn't get built. That is in keeping with some estimates of the number of units we would need in order to get ourselves out of the housing crisis that we find ourselves in.

Mrs. Raza, I know that sometimes when people hear about the construction of social housing, they think, well, I'm not going to be in social housing, so that doesn't really make a difference to me, but when we look at the spectrum of housing and housing need, often serving one portion of the housing spectrum can have good effects for everyone on the housing spectrum.

Could you take my remaining time to talk about the housing spectrum and how investment in social housing can really help the overall housing market?

[Sahar Raza]

Yes, absolutely.

You raise a good issue. As I mentioned, compared to other OECD countries, which are similar to Canada, we have far less social housing. We're at about 4% of the total housing stock, whereas the average is 7%. Countries like the United Kingdom are at 17%. There's a huge gap there that obviously a lack of investment over the past few decades has resulted in.

You're correct. For example, there's a huge rental arrears issue happening right now. A lot of low-income folks are getting evicted and have nowhere to go. If we start targeting more programs toward folks and their specific needs, we'll have less competition for these generic units that everyone seems to be competing for in the hot housing market.

To speak more to addressing people's specific needs, that's something we are not adequately doing right now through the national housing strategy. Yes, there's the opportunity to invest more in social housing, but there are also all of our other programs that claim to be addressing priority groups, for example low-income folks, indigenous people or persons with disabilities. There is no collection of disaggregated data to see if we're meeting these people's needs. There's no monitoring. Even for the rapid housing initiative, we claim that we want to invest 25% of all housing funds toward women and girls, but only five to 10 points out of 120 for the rapid housing initiative are actually given toward projects that meet the needs of women and girls. That's not 25%.

Yes, there's definitely a gap here in terms of addressing specific priority populations.

I'm sorry. Are we over the time?

[The Chair, Liberal, Peter Fonseca]

Yes.

Thank you, Mrs. Raza and Mr. Blaikie.

Now we are moving to the Conservatives and Mr. Poilievre for five minutes.

[Pierre Poilievre, Conservative, Carleton, ON]

Thank you very much.

I have a question again for Mr. Philip Cross, who is Stats Canada's former chief economic analyst.

Do you think large deficit spending is contributing to inflation?

[Philip Cross]

There's no question in the current instance, especially because the Bank of Canada was monetizing that debt. Direct fiscal stimulus became monetary stimulus.

[Pierre Poilievre, Conservative, Carleton, ON]

By “monetizing”, do you mean they created more cash and increased the money supply?

[Philip Cross]

Yes. They bought government bonds.

[Pierre Poilievre, Conservative, Carleton, ON]

Right, and they buy those bonds in two ways. They either give the seller—the bank or the financial institution—a deposit at the central bank, or they convert it right into paper currency and literally print it. That means more dollars chasing fewer goods and raising prices.

The defenders of this money printing claim that there's nothing we can do about inflation. They say that everybody is suffering, but that is actually not true. There are many countries that are not experiencing inflation. I point, for example, to Switzerland. Switzerland is smack dab in the middle of Europe. It has the same supply chains, the same pandemic and the same geography, and yet I have the data here for Switzerland's inflation: it's 1.5%. Europe has inflation of 5%, which is three times higher.

Why is it that Switzerland has a third of the inflation of the surrounding countries? Do you think, Mr. Cross, that it could have anything to do with the fact that Switzerland's budget deficit is only one-third of the average eurozone budget deficit as a share of GDP?

[Philip Cross]

It's certainly a contributing factor. Another is.... I started the day today watching Bloomberg, as I always do, and they were talking about the sharp rise of the Swiss franc recently, compared to Europe. That obviously has helped keep prices down in Switzerland as well.

[Pierre Poilievre, Conservative, Carleton, ON]

When you have a more powerful currency, you can outbid foreign countries in internationally priced commodities like energy, foodstuff, fertilizer and other things. Even things that are priced internationally are, again, repriced based on the power of one's currency. If you're printing lots of cash, your currency is less valuable than it would be.

I also note that supply chain-dependent countries—like the island of Singapore, Italy, South Korea, Australia, France, Indonesia, China, Switzerland, Saudi Arabia and Japan—all have lower inflation than Canada. Most of them have run smaller deficits and have printed less money as a share of their economy.

Finally, in the early fall, there proved to be a nearly one-for-one correlation between money supply growth in the G20 and inflation among G20 countries. Those that were printing more money to fund their deficits had higher inflation; those that were printing less money, because they had small deficits, had much less inflation.

Isn't it basic economics, Mr. Cross, that if your money supply is outgrowing your economy, you're going to have higher prices?