Finance Committee on Jan. 24th, 2022

[Heath MacDonald, Liberal, Malpeque, PE]

Thank you.

Mr. Chair, I'm going to move to Mr. Moranis. In his preamble, he talked about the rate of construction declining. I'm just wondering what caused the rate of construction to decline over the past number of years.

[Stephen Moranis]

Mr. MacDonald, I'm going to defer to my colleague, Professor Haider, to answer that.

[Heath MacDonald, Liberal, Malpeque, PE]

Certainly.

[Murtaza Haider, Professor, Ryerson University and Columnist, Haider-Moranis Bulletin]

Thank you.

If you look at the rate at which Canada was constructing homes in the 1970s, we were building about 12,000 new dwellings per million population. The rate since then has come down to about 5,000 to 6,000 new dwellings per million population. Not only that, even in absolute terms our construction numbers have been down. That's the primary reason we believe the imbalance between demand and supply is the primary cause of housing price inflation in Canada. It has not been for just five years or 10 years; it's fairly deep-rooted.

[The Chair, Liberal, Peter Fonseca]

Thank you.

Thank you, Mr. MacDonald. That is the time.

We just went over the halfway mark in this three-hour session. This is a good opportunity to suspend for five minutes so that witnesses can stretch their legs, take a bio break or whatever you like.

Be back in five minutes, everyone.

[The Chair, Liberal, Peter Fonseca]

Welcome back, everyone.

We're now moving into our third round. We'll start with the Conservatives.

Mr. Stewart, you're up for five minutes.

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

Thank you, Mr. Chair.

I have a couple of questions for a few different panellists. I think the answers will be just yes or no, for the most part.

I'll start with you, Mr. Perrault. Scotiabank recently released a report that among all G7 countries, Canada came in dead last in housing supply per capita. Is that correct?

[Jean-François Perrault]

Yes.

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

Thank you.

How many homes do we need to add to our market just to catch up with the rest of the G7?

[Jean-François Perrault]

About 1.8 million.

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

Thank you.

I'm not an economist like you, but it's safe to say that when the supply is low and the demand is so high, the price of a home will be higher. Would you agree with that statement?

[Jean-François Perrault]

Absolutely.

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

This is just a point of clarification about a comment you made earlier in the discussion. When you began, you said that this problem was “made in Canada”, but near the end, when you were questioned by another member, it seemed that your stance changed a little bit. It seemed more that, you know, the opinion of economists changed over the last year or year and a half, which I believe you said, and I believe that to be true. I'm just wondering about the ballooning housing crisis here in Canada. It seemed like you told another one of the members here that it was a global phenomenon, but in your introduction you said that it was a made-in-Canada problem.

Could you clarify just how much of this is actually a made-in-Canada problem?

[Jean-François Perrault]

My apologies if I led anybody to confusion. On the housing thing, I think this is a uniquely made-in-Canada issue. The point about it being broader than a Canadian issue was related to inflation and some inflationary dynamics. On housing, I suppose you could argue that the decline in long-term interest rates around the world, which occurred in the pandemic, contributed to the housing situation here, but fundamentally, not building enough homes is our problem.

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

I appreciate that. Thank you.

Professor Haider, in comparison with the 1970s, how many homes are built in Canada today?

[Murtaza Haider]

I think around that time—

[The Chair, Liberal, Peter Fonseca]

Mr. Haider, I apologize, but could you raise your mike a little bit? Your voice is a little low and we want to be able to hear you.

Thank you.

[Murtaza Haider]

Thank you very much. I hope you can hear me correctly.

Earlier, we were building something around 300,000 homes—and not just any homes; even in Ontario, there were 40,000 residential rental units being built. Those numbers have declined over the years.

Right now we are in the range of 275,000 to 300,000 homes built every year, but given that we have a very large population base compared with the one in the 1970s, in relative terms this becomes a very slow or small supply.

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

Would you say that we're building about half as many homes as we did?

[Murtaza Haider]

Not in absolute terms, but in terms of the number of homes built per capita, yes, the rate of construction is almost half.

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

Thank you.

As well, Mr. Haider, when Justin Trudeau took power, the typical home cost $434,500. Now it's $811,700. With over 85% inflation in six years under the Trudeau regime, last year alone home inflation hit 25%. Is it fair to say that we have a housing supply crisis right now in Canada?

[Murtaza Haider]

We do have a housing supply crisis in Canada.

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

Thank you, Mr. Haider.

Finally, sir, how have ultralow mortgage rates impacted home sale prices in this country?

[Murtaza Haider]

With ultralow mortgage rates, the fact is that the monthly mortgage payment becomes smaller. This means that the homeowners or prospective homebuyers are able to purchase larger-value homes, because their monthly mortgage payments are low. That is the reason they move or gravitate towards higher-priced homes. That contributes a little to housing price inflation.

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

Thank you. I appreciate your answer.

Mr. Chair, how much time do I have remaining?