Evidence of meeting #14 for Finance in the 44th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was inflation.
A video is available from Parliament.
3:10 p.m.
Liberal
The Chair Liberal Peter Fonseca
Thank you.
That's your time, Mr. Poilievre.
We are moving to the Liberals and Mr. Baker for six minutes.
January 24th, 2022 / 3:10 p.m.
Liberal
Yvan Baker Liberal Etobicoke Centre, ON
Thanks very much, Mr. Chair.
Thank you to all our witnesses for being here today. I won't have enough time to ask questions of all of you, and I hope you'll understand, but I do appreciate all of your contributions to today's hearing.
I'd like like to start with Monsieur Perrault.
First of all, Monsieur Perrault, it's good to see you. Once upon a time, I was a Scotiabanker, and it's good to see another Scotiabanker here offering his perspective in helping us to resolve these important issues. In your testimony, you spoke to some of these issues that I'm going to ask about, but I would just like to make sure they're clear, for my sake and for members of the committee.
Is the current rate of inflation experienced in Canada unique to Canada, or is this a global problem?
3:10 p.m.
Senior Vice-President and Chief Economist, Scotiabank
For the moment, a lot of it is global. You're dealing with supply chain pressures and commodity price pressures. A lot of that is coming from the strength we're seeing in the global economy. It's not exclusively that, but certainly much of it, as we see now, is global. As we go forward, we think more of that will become Canada-specific and less of it will be global.
3:10 p.m.
Liberal
Yvan Baker Liberal Etobicoke Centre, ON
Could you speak to how Canada's inflation rate right now compares to other peer countries?
3:10 p.m.
Senior Vice-President and Chief Economist, Scotiabank
For reasons that Mr. Cross indicated, it's a little bit of a mug's game, because you're comparing different things. For instance, our inflation is way lower in Canada than it is in the U.S., but that's because we don't have used car inflation in our inflation calculations. We are generally in the ballpark of a lot of these other countries, but there is a big definitional issue, which complicates things. For sure, inflation is well outside the Bank of Canada's inflation control range. There is absolutely no question about that.
3:10 p.m.
Liberal
Yvan Baker Liberal Etobicoke Centre, ON
Yes. I think that's fair. One of the reasons why we're studying this is that Canadians are facing the hardships that come with high inflation rates. There's no question that it's higher, but what I would love for you to speak specifically to is....
Let me take a step back. I have heard your testimony and the testimony from the others today about inflation, but also, I have a background as a management consultant at BCG and have spent a lot of time in business school economics classes and working with clients on such matters. From what I've read, there are a number of factors that people have cited—and you cited some of these in your testimony—that drive the current high inflation rate we're seeing today, things like supply chain bottlenecks and shortages of key materials. You spoke about labour shortages in your testimony. Others have written about gas prices and energy prices as a factor.
There's some discussion about increased consumer demand driven in part by the pandemic, because after economies reopened, we saw a bump in consumer demand, and there may be a little bit of a shift in the nature of the demand as well. I think some of the speakers today have spoken to that. Do you agree that these are the major drivers of the high rate of inflation we're seeing today?
3:15 p.m.
Senior Vice-President and Chief Economist, Scotiabank
Generally speaking, yes. The bottom line is that we think—and again, our assessment has changed over the year—that the majority of the strength we're seeing in inflation now—apart from weather-related effects that affected some crops and that are, of course, temporary by nature—whether in Canada, the U.S. or elsewhere, is simply the result of the fact that there is a tremendously strong appetite for goods globally right now, and firms haven't been able to produce enough of those to meet demand, so prices have been creeping up.
3:15 p.m.
Liberal
Yvan Baker Liberal Etobicoke Centre, ON
That's helpful. I appreciate that.
I'd also just like to point out that Mr. Poilievre said in his questioning that some people in Canada are calling the inflation we're seeing now “Justinflation”. To my knowledge, I haven't heard any of the folks speaking here today refer to it that way. To my knowledge, the only folks calling it that are members of the Conservative caucus. I don't hear that coming from anywhere else. I just want to point that out.
Mr. Perrault, I want to switch gears a little bit and speak to some of our economic indicators, if I could, or ask you to do that. During the pandemic, the Government of Canada took a number of measures to help people survive the pandemic, put food on the table, pay their rent, etc. The most notable examples of that were the CERB and the wage subsidy, but there were a number of other programs to support both businesses and individuals. Could you speak to what the result would have been for our economy had that not happened?
3:15 p.m.
Senior Vice-President and Chief Economist, Scotiabank
The counterfactual is always very difficult. Certainly we can say that the dramatic supports being provided to households and businesses in Canada and other parts of the world are one reason the global demand is as strong as it is now. It stands to reason that had those supports not been as generous, the economic consequences of the pandemic would have been much worse for a broad range of Canadian firms and households.
Would the recession have been more prolonged or deeper? I can conjecture and say yes, but the question, to my mind, is more whether something needed to be done. Something was done. Was the right amount or the right thing done, given our understanding of the situation now, relative to the understanding of the situation at the time? Of course, those aren't necessarily the same thing.
3:15 p.m.
Liberal
Yvan Baker Liberal Etobicoke Centre, ON
What I hear you saying is that those supports helped to protect a lot of people from significantly deeper hardship. Is that fair to say?
3:15 p.m.
Senior Vice-President and Chief Economist, Scotiabank
There's no question about that. If you look at StatsCan data on labour income, you'll see this very strange development, from a historical perspective, which was that as the pandemic hit there was a dramatic increase in the unemployment rate. The transfer from the government to households was so large, so generous, that you actually saw an increase in the labour income even though you had this jump in the number of unemployed people. Very clearly, those supports helped prevent a significant amount of hardship, no question about it.
3:15 p.m.
Liberal
The Chair Liberal Peter Fonseca
Thank you. That is your time, Mr. Baker.
We are moving now to the Bloc. Usually we have Monsieur Ste-Marie, but we have Monsieur Trudel with us.
Welcome.
3:15 p.m.
Bloc
Denis Trudel Bloc Longueuil—Saint-Hubert, QC
Thank you, Mr. Chair.
I want to thank the members of the committee; I am very pleased that the Standing Committee on Finance is addressing the terrible housing crisis. Right now, in Canada and around the world, there is a health crisis and a very serious climate crisis. In Quebec, there is a language crisis and a very serious housing crisis. A lot of numbers have been thrown around left and right. We're going to talk about it again, and that's a good thing.
My first question is for Ms. Laflamme, the FRAPRU representative. I know her quite well, since I've been talking to her for two years, as the Bloc Québécois housing critic. A lot of figures have been provided, and it is good to talk about them. Some people call my office to talk about the housing problem in Longueuil. We also have the figures for Montreal.
Longueuil is the fifth largest urban centre in Quebec. In Longueuil alone, 2,000 people are waiting for low-cost housing, known as HLMs. In Montreal, there are 23,000 people on the waiting list. At the moment, in Quebec, there are between 40,000 and 50,000 people waiting for an HLM, a low-cost housing unit. The housing crisis is very serious. I have quoted the figures, but we must not forget the people behind these figures.
Ms. Laflamme, as we know, FRAPRU is very close to various organizations located all over the territory. I would like to go beyond the numbers. Can you talk briefly about the impact of rising rents and the scarcity of rental units, particularly in recent years?
3:20 p.m.
Organizer and Spokesperson, Front d'action populaire en réaménagement urbain
Certainly.
First of all, you are quite correct to say, Mr. Trudel, that behind the numbers there are human consequences. They are disastrous. Every day and every week, we hear from tenants all over Quebec who are experiencing the consequences of this housing crisis and who are unable to find housing that they can afford. Earlier, I gave some figures on the number of tenant households who, even before the recent increases, were spending more than half their income on housing.
People have to resort to food banks and cut back on basic needs such as clothing, food and clothing for children. They have to cut back on electricity consumption during severe cold weather such as we are currently experiencing. This has significant consequences and there is distress among tenant households.
It must be said that the housing crisis and rising rent prices also have extreme consequences. In Quebec, July 1 is moving day, because most leases end on that date. This allows us to see the effects of the housing crisis in concrete terms. This year, the day after July 1, more than 500 renter households in Quebec had not been able to sign a new lease. A significant proportion of these households had lost their homes, not by choice, but because they had been subjected to “renovictions” or other fraudulent evictions.
Currently, we see schemes being used to raise rents, often by new landlords, including more and more investment companies. We are now seeing multinationals, such as Akelius, which is known to have contributed to the explosion of rental costs in several European cities and is now buying up housing in Canada. Stratagems are used to get rid of tenant households that were still paying affordable rent. The law is therefore circumvented and fraudulent evictions are carried out under various pretexts, including “renovictions”. These households who had no problems are now facing problems because they cannot find housing they can afford.
As I said earlier, vacancy rates are very low. But even in Montreal, where vacancy rates increased during the pandemic because of the drop in tourism and immigration, among other things, the number of renter households that were unable to find housing was extremely high. In mid-July, there were 200 such tenant households. At the moment, not all of these households have been rehoused and some of them are being housed by the city. Let me therefore point out that the effects of the crisis are very concrete. We are talking about human distress, but also about an increase in homelessness, visible or hidden. This has very important consequences. It creates social costs, but also financial costs that are much higher than they would be if we chose to invest in social housing.
3:20 p.m.
Bloc
Denis Trudel Bloc Longueuil—Saint-Hubert, QC
That is very interesting.
The government says it's doing something, because in 2017 it launched the National Housing Strategy in which it is investing $72 billion over 10 years. Still, there is confusion. Ministers are quick to say, in Ottawa and in the newspapers, that they are setting up programs to provide affordable housing. That is the goal of the strategy that the government has launched. But we know that when the strategy was launched in 2017, the government had stopped investing in this area 30 years ago.
FRAPRU has done a study that shows that, if the government had continued to invest as it did in the 1960s, 1970s and 1980s, 80,000 social housing units could have been built.
In addition, there is confusion between the terms “affordable” and “social”. Among other things, the government claims that it provides affordable housing through co‑investment programs and the rental housing initiative.
The government spends millions of dollars and says it is providing affordable housing, housing people at a lower cost, but that is not what is actually happening.
Could you tell us about it?
3:25 p.m.
Organizer and Spokesperson, Front d'action populaire en réaménagement urbain
That's an excellent question.
First I'll talk about the definitions of “affordable” and “social” housing, because that's crucial.
I would like to emphasize that, indeed, the federal government's withdrawal from funding social housing has contributed to this shortage of social housing, which is seen not only in Quebec, but throughout Canada.
In fact, the most recent report of the United Nations Committee on Economic, Social and Cultural Rights found a shortage of social housing in Canada. That contributes to this crisis, because there is no alternative for households that can no longer afford the cost of rent in the private market. If you don't pay your rent, you get evicted, and you have nowhere else to go, because the available housing is even more expensive. It's a spiral. The lack of social housing contributes to this housing crisis, which in turn fuels the homelessness crisis.
With respect to affordable housing, we have always deplored this approach, which unfortunately came from Ottawa, not only under this government, but also following its withdrawal from funding social housing. When Ottawa started talking about affordable housing in its programs, it always created confusion because, in some cases, the programs allowed for the funding of social housing, but also, in other cases, allowed for the funding of private market housing.
In theory, affordability can be assessed in terms of households' ability to pay...
3:25 p.m.
Liberal
The Chair Liberal Peter Fonseca
Thank you, Ms. Laflamme.
That's your time. Thank you, Monsieur Trudel.
We are now moving to the NDP and Mr. Blaikie for six minutes.
3:25 p.m.
NDP
Daniel Blaikie NDP Elmwood—Transcona, MB
Thank you very much.
I actually want to follow up on that point with Ms. Raza, in respect of the money that the federal government spends on trying to create housing. I believe she mentioned in her testimony that part of the issue right now is that, given the definition of “affordable”, it's not actually helping if the limited amount of federal money that's being spent is being spent to build units that are still out of reach for many of the Canadians who are in housing crisis.
Could you speak to that, including what you think the fix is? What would the government have to do in order to ensure that the money it's pumping into the national housing strategy is building social housing, ideally with rent secured to income, as opposed to units that meet a definition of “affordable” that is still out of reach for far too many people?
3:25 p.m.
Project Manager, National Right to Housing Network
Thank you, Mr. Chair and Mr. Blaikie.
Yes, that's a great point. If we dig into the affordability criteria of the capital funds in the national housing strategy—for example the RCFI, which I mentioned—only 20% of units are priced at 30% of the median family income—not individual income—and only for 10 years. That's not permanent affordability. We know that this far exceeds what is affordable for most low-income individuals, even mid-income individuals, and it's not a large percentage of units either. Just to expand on that, the national housing co-investment fund has very similar criteria.
These are the biggest, most expensive programs in the national housing strategy. If we want it to genuinely address the housing shortage in Canada, it would require more aggressive, permanent affordability guidelines, far exceeding 10 years, and it would require some funds earmarked for social housing so that this funding is not going back to real estate investment trusts and very expensive buildings that are really only affordable for about 10% of the population in some cases.
I think that answers your question.
3:25 p.m.
NDP
Daniel Blaikie NDP Elmwood—Transcona, MB
Some of the upward cost pressure that is driven by the demand side of the problem, of course, makes it harder to meet the supply problem, because land and buildings become more expensive. I know you talked a little bit about this in some of your opening remarks, but I wonder if you could give the committee a sense of some of the things we should be recommending to government to try to cool down the market from the demand side of the equation, as opposed to simply supply.
3:25 p.m.
Project Manager, National Right to Housing Network
Yes, the demand side would be, I think, simply ensuring that we are implementing some speculation and vacancy taxes. I think that kind of measure would ensure that under-utilized housing is actually meeting the needs of people who are seeking housing. I think that incremental taxes on investment properties are, again, a very human rights-based solution to ensure that we're actually leaving some properties on the table for first-time homebuyers. I can speak as a millennial. It is very difficult to get into this housing market, simply because I was born too late, so that kind of tax would address those issues.
We actually have a full research report—100 pages, very long—on exactly how we can address these issues through the national housing strategy, so I would really love to share that with the clerk afterwards.
3:30 p.m.
NDP
Daniel Blaikie NDP Elmwood—Transcona, MB
Thank you very much.
I know that the current government has proposed a foreign buyers tax. I'm just wondering if your organization has taken a look at that and if you have an opinion on how effective that might be in terms of helping with pricing, or whether it may not actually provide that much help at all.
Could you give the committee some feedback on that?
3:30 p.m.
Project Manager, National Right to Housing Network
Across the board, civil society folks have agreed that this foreign investor tax is not going to be effective. First of all, when we're dealing with these corporate investors, we're dealing with global capital. It's very easy for them to establish a domestic corporation, and then suddenly that's a Canadian corporation, so the foreign investor tax will no longer apply.
I think we often use this shadowy “foreign investor” as a kind of shield to absorb widespread anger about Canada's housing market, when, as I demonstrated in my opening remarks, there are many things we can do right now to utilize the supply that we have and to just fix the programs that we already have in place, and not even spend a dime. Just by taxing people fairly and adequately, according to the human rights guidelines and obligations that we have agreed to in law, we can address a lot of these housing affordability and supply issues.
3:30 p.m.
NDP
Daniel Blaikie NDP Elmwood—Transcona, MB
Thank you very much.
Ms. Laflamme, can you briefly tell us what your recommendations are for the federal government's affordability policies?