Finance Committee on May 30th, 2024

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Okay. I'll first talk about the CMB program.

We are putting in an increase in the limit on the CMB program. Can you explain in broad strokes what the CMB program supports, for folks out there?

[Matthew Boldt]

Sure, I can talk about that.

The measure in the bill is to amend the National Housing Act to increase the enforced limits for both guarantees issued by the Canada Mortgage and Housing Corporation and mortgage default insurance provided by the Canada Mortgage and Housing Corporation. It's proposing to increase each of those two limits from the current temporary limits of $750 billion to permanent limits of $800 billion.

The purpose of these amendments is to ensure that CMHC can continue to support multi-unit rental housing construction, in particular.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

In our goal to continue to ramp up the whole continuum of housing construction, multi-unit rental construction is very important. The CMB program, from my days many years ago, is a low-cost securitization vehicle used by the building industry, obviously via investors purchasing those bonds. My understanding is that they are backed by these residential buildings.

Is that correct?

[Matthew Boldt]

Yes, that's correct.

The government announced in September 2023 that it was increasing the Canada mortgage bond issuance limit by $20 billion annually—from $40 billion to $60 billion per year. The intention of that change is to unlock additional low-cost financing for multi-unit rental housing construction.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

I think it's to unlock not only the low-cost financing aspect that it certainly provides but also literally tens of thousands of extra units of rental construction that would take place because of it.

I'll switch now.

[Matthew Boldt]

I can say that we've talked to CMHC. Their estimate is that the additional financing that can be unlocked here can facilitate the construction of up to 30,000 new rental units annually in communities across Canada. That estimate is based on past Canada mortgage bond funding activity to support multi-unit housing.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

Thank you.

I'll move to the alternative minimum tax and the changes that have been brought in. Again, this is in broad strokes. I know my time is going to be limited.

Stefania, can you explain to me—it's hard to ask for your opinion, because I know you're an official—the importance of such a measure in terms of ensuring the effective tax rate paid by an individual in a higher tax bracket is not pushed down to what I would call the lowest common denominator, or what they can do now? Rather, it ensures that when deductions occur, a minimum tax rate is paid.

[Stefania Bartucci]

You spelled it out very clearly yourself, Mr. Sorbara.

What I can say is that we've had an alternative minimum tax in Canada since 1986. It had not been significantly reformed since then until budget 2023, which announced a number of changes, including a higher rate, a higher exemption threshold and a broader base. Budget 2024 announced a couple of other changes as well.

As you stated, the objective of the alternative minimum tax is to ensure that individuals who have a number of deductions, credits or income exemptions cannot decrease their tax liability below a certain minimum.

[Francesco Sorbara, Liberal, Vaughan—Woodbridge, ON]

I would add the opinion that the changes we brought in add to the progressivity of the Canadian tax system. I'm not sure if you can opine on that. Really, it's a progressive change to the tax system.

[Stefania Bartucci]

I can't really speak specifically to the effects on progressivity, but the idea is that there is that minimum amount of tax paid. The individual calculates their regular tax liability and their alternative minimum tax, and they pay whichever one's higher. That ensures that everyone is paying a certain minimum level of tax.

[The Chair, Liberal, Peter Fonseca]

MP Sorbara, that's the time.

[Adam Chambers, Conservative, Simcoe North, ON]

Mr. Chair, may I speak for 10 seconds?

[The Chair, Liberal, Peter Fonseca]

Speak quickly.

[Adam Chambers, Conservative, Simcoe North, ON]

Because everything's going to happen very fast, I just wanted to take the opportunity to let you know there will be an amendment coming to the clean economy tax credit section, to expand that to disclose all tax credits applied.

I just want to give that to officials in advance, in case they want to think about that.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Chambers.

We want to thank the officials for coming before the finance committee on Bill C-69. Thank you for the hard work you do on behalf of the government every single day. We really appreciate you answering the questions from the members today.

Thank you.

Members, we are going to suspend now as we transition to our second panel.

[The Chair, Liberal, Peter Fonseca]

This is our second panel, members.

We have before us today, from Fresh Roots Urban Farm Society, executive director Sherry Stevenson.

Welcome.

From OneClose, we have the chief executive officer, Kevin Murphy.

From the Convenience Industry Council of Canada, we have the president and CEO, Anne Kothawala.

Ms. Kothawala does not have the proper headset and will not be able to participate in our discussion today.

With that, I'm going to ask Sherry Stevenson, from Fresh Roots Urban Farm Society, to please start with her opening statement.

[Sherry Stevenson, Executive Director, Fresh Roots Urban Farm Society]

Good morning.

On behalf of Fresh Roots Urban Farm Society, and as a member of the Coalition for Healthy School Food, I want to thank you, Mr. Chair and the committee, for inviting me to speak on the budget implementation act.

I'm joining you today from Vancouver, which is on the ancestral and unceded homelands of the Musqueam, Squamish and Tsleil-Waututh Coast Salish peoples, where Fresh Roots has the privilege to work.

Here at Fresh Roots, we cultivate educational schoolyard farms and leadership programs where youth develop healthy relationships with food, the land and community through growing and sharing food that nourishes them, their communities and the planet.

Fresh Roots practises not only sustainable, community-centred farming but place-based experiential learning and youth empowerment. We provide youth with the space to explore what they are capable of while building deep relationships with food, the land and each other. Through our award-winning leadership pathways program, we provide meaningful mentorship and employment experiences for the young adults we hire as farmers and food educators, as well as prepare youth in our programs to step up into leadership positions.

In collaboration with our partners at Growing Chefs, we developed LunchLAB, an innovative school meal program that serves students barrier-free, nourishing and culturally relevant lunches prepared by students with the mentorship of a team of chefs-in-residence. LunchLAB empowers youth to cook food for themselves and their peers, and it provides opportunities for children to find dignity and belonging in their interactions with food.

Not only are children being provided with a healthy meal, but they are also delving deeper to connect to the land and to learn about where their food comes from and how it's grown, and about cooking, nutrition and trying different foods from around the world. School food programming has been shown to improve academic performance, support positive health outcomes and health equity, and foster connections with culture and traditional food systems, all of which have positive, lifelong impacts.

Working to create a sustainable food system, Fresh Roots is also part of an interconnected network of food growers, educators and community members, including the Coalition for Healthy School Food. The coalition is made up of more than 300 non-profit member organizations from all the provinces and territories.

The coalition has been advocating for federal funding for a cost-shared national school food program, and we are very pleased with its inclusion in the budget. This federal funding will make a huge difference to the programs across the country and is needed as soon as possible. It will help existing programs improve the quality and quantity of the food they serve, as well as allowing new programs and infrastructure to be developed for many more students to participate in school food programs.

The Coalition for Healthy School Food has also been advocating for federal funding to be transferred to the provinces and territories, because each one already has an existing system in place to flow funding to school food providers, along with a mechanism for public accountability. All provinces and territories also have food and nutrition policies that strive to ensure that the food served is as healthy as possible.

Therefore, for the health and well-being of children, youth and families across the country, I urge you to support the budget implementation act so that the national school food program will have the resources it needs to be successful, and initiate these important partnerships between the federal, provincial and territorial governments as soon as possible. Your support will enable the Minister of Families, Children and Social Development to sign bilateral agreements with and transfer funding to the provinces and territories to support national school food programming, starting in the 2024-25 school year.

This investment will help school food programs stabilize, expand and implement best practices while allowing us to work together to increase access to school meals for many more children. It will support youth to be well-nourished and ready to learn and to have an equal opportunity to succeed. It will help families by reducing grocery bills and by supporting farmers, food systems, jobs and economic growth. This is a generational investment in the future of our children and communities.

Here at Fresh Roots, we look forward to working in collaboration with all levels of government on the national school food program. We look forward to continuing to grow our schoolyard farms, increasing the availability of fresh, local produce and creating inclusive spaces in which children can learn about the food systems we all depend on.

Imagine how wonderful it will be when all children, from coast to coast to coast, can see and taste the food grown on the land outside their classroom window included in their healthy school lunch program. Investing in the national school food program is investing in healthy and resilient students, families, farmers and communities across the country.

Thank you.

[The Chair, Liberal, Peter Fonseca]

Thank you, Ms. Stevenson. I'm sure members will have many questions.

Now we'll hear from OneClose and Mr. Kevin Murphy, please.

[Kevin Murphy, Chief Executive Officer, OneClose]

Thank you, Chair, and good morning, everyone.

Thank you for the invitation to join you today. My name is Kevin Murphy, and I'll be representing OneClose, a pioneering organization committed to making home ownership more accessible and less costly for Canadians.

For context, prior to founding OneClose over five years ago, I was with RBC for 23 years, where I was head of the real estate financing group, supporting all things real estate, including financing for land development, home building and high-rise condominium and apartment construction.

Today, I want to talk to you about a significant issue affecting homebuyers across the country: the interim occupancy challenge and how we can address it to unlock home ownership for many Canadians.

Unlike many of the measures announced in the most recent budget, which have longer-term runways to get implemented and become impactful, what I'm going to talk to you about today does not cost the fiscal framework a single penny and will have a material and immediate impact on housing affordability and supply. Our solution especially benefits those eager to enter the market, including the younger cohort and new Canadians representing first-time homebuyers.

As every committee member knows, the surging cost of housing is a top concern for Canadians. Recent public opinion polls show that nine out of 10 people are worried about overall affordability. Higher home prices and interest rates have made mortgages and rents more expensive, straining the financing of many families.

The core of the problem lies in the fact that Canada simply does not have enough homes. Despite a rapidly growing population, we are not building new homes quickly enough to meet demand. In her fall economic statement, Minister Freeland emphasized that building the homes Canada needs will require a great national effort.

While the federal government has made considerable strides, such as removing HST from new rental housing, much more needs to be done. One of the principal impediments to achieving the housing supply challenges before us is access to capital.

One significant but often overlooked issue is the legal hurdle known as the “interim occupancy” period. In Ontario, for instance, homebuyers often find that their condominium unit is ready for occupancy before the entire building is fully completed. During the interim period, buyers are required to move into their units but cannot obtain title, meaning that they cannot secure a mortgage. Instead, they must pay occupancy fees—including interim occupancy interest—on the residual balance owing to the builder, all of which does not contribute toward their mortgage.

Interim occupancy interest is based upon the prevailing Bank of Canada's one-year benchmark mortgage rate, which currently stands around 8%. Consider this for an example. A buyer places a 20% deposit on a $700,000 condominium unit, amounting to $140,000. They then will face $45,000 a year in interim occupancy interest payments to the builder, which they will never recover.

Over the next 24 months in Ontario alone, nearly 60,000 units, representing more than $60 billion in capital, will be stuck in this interim state. For builders, this period means they cannot complete the sale of the condo building or receive full payment for the units, leading to additional interest charges on their construction financing. It's a bottleneck that prevents them from moving on to new projects, further stalling the creation of much-needed new housing supply.

To address this, we propose a straightforward and cost-neutral solution: a minor amendment to the Protection of Residential Mortgages or Hypothecary Insurance Act. By changing the definition of “eligible mortgage loan”, we can allow mortgage financing during the interim occupancy period, backed by title insurance and deposit protection insurance covering 100% of the unit's purchase price. Our proposal enables buyers to obtain mortgage financing during the interim period, allowing them to start building equity immediately.

The risk is entirely mitigated through a title insurance and deposit protection insurance policy underwritten by reputable investment-grade insurers, providing coverage against potential losses incurred by the lender and/or purchaser.

This amendment would benefit not only buyers but also builders, banks and the government. It would free up capital for developers, allowing them to reinvest it in new projects, and materially increase the housing supply. Importantly, it would also do so without any cost to the federal fiscal framework and could potentially save individual home builders an estimated $6.5 billion over the next four years.

This proposal aligns perfectly with the Government of Canada's commitment to implement housing solutions that make more housing available to Canadians, especially young and first-time homebuyers.

As David Wilkes, President and CEO of the Building Industry and Land Development Association, aptly said, “Such a step would represent a significant advancement in our shared goal of making housing more affordable and accessible for Canadians.”

As housing affordability hits its worst levels in four decades, it is time for smart, practical solutions to our most pressing problems. As agreed to by all, these critical concerns require a rethinking of our collective approach. Creating a way out of interim occupancy limbo for tens of thousands of new, young condo owners is a creative and necessary start. By addressing this critical issue, we can take a significant step towards alleviating the housing crisis in Canada.

I thank you, and I'd be pleased to answer any questions that you may have.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Murphy.

I'm sure members will have many questions, and that's where we're going right now, so we're going to start with our first round of questions.

MP Chambers will be starting for the first six minutes.

[Adam Chambers, Conservative, Simcoe North, ON]

Thank you very much, Mr. Chair.

Mr. Murphy, I appreciate your appearance here today, as well as a focus on a measure that doesn't cost the government any money, so I'd like to just learn a little more about the proposal.

My understanding is that this issue is mostly related to the Ontario market. Is that right?

[Kevin Murphy]

You're correct. Currently, that's correct.

[Adam Chambers, Conservative, Simcoe North, ON]

Right, but to give a sense of the scale, you said that there are 60,000 units being completed. Was that for this year, in 2024?

[Kevin Murphy]

That is for the next 24 months.

[Adam Chambers, Conservative, Simcoe North, ON]

Okay, so in the next two years, 60,000 units will come online, and during that time, as I understand it, a purchaser can move into the building, but they don't actually own, and they're effectively paying rent for that time of the interim occupancy period, because the current legislation basically doesn't allow title insurance and effectively just doesn't allow the building to close and the title to be transferred.