Finance Committee on June 11th, 2024

[Don Davies, NDP, Vancouver Kingsway, BC]

If I could, though, Ms. Young, I want to focus on the REITs. I'm going to go to social housing—you've anticipated where I want to go next—but I know that REITs, for instance, don't pay any corporate income tax. Is there a sound policy basis to try to curb this trend towards increasing the financialization of housing? That's really what my specific question is.

[Rebekah Young]

I think that we should be looking at how to leverage capital markets to build more housing supply across the spectrum. We also need to have a very focused, specific strategy at the social end because it isn't driven by market forces. I do see a role.... A number of these aging structures are with REIT companies, so I think there is a role to harness—

[Don Davies, NDP, Vancouver Kingsway, BC]

Okay.

Your quote was that “Market-priced housing will likely never be affordable for a serious share of households”. That was your quote in your 2023 report. Can you quantify that for me, please?

What's “a serious share of households”?

[Rebekah Young]

I'm sorry; I apologize.

[Don Davies, NDP, Vancouver Kingsway, BC]

I was just going to ask how many we are talking about.

[Rebekah Young]

In this report, what I looked at was the income quintile of the renters. The really acute situation right now is in renters because, in an economic cycle, normally what happens when home prices and interest rates are high is that we see more people renting, and renting is a more of a relief valve. It's a cheaper option. However, what is very unique about this cycle is that renting, because of that population influx, hasn't been that relief valve. Consequently, the real vulnerability and affordability crunches are in those renter Canadians.

I quantified it by looking at the bottom two income quintile renters. If you think one-third of Canadians are renters, it would be two-fifths of that, so those tend to be.... One-third of those is a material number of Canadians, and they are the ones who are not securely attached to the workforce, so that—

[Don Davies, NDP, Vancouver Kingsway, BC]

I probably should have continued your quote. You said, “and easily those in the lowest income quintile—based on current trajectories”.

You don't raise, maybe, the two lowest income quintiles. Are we talking about 40% of Canadians?

[Rebekah Young]

I'm sorry, but it's a third. I think 10% is a good number. That is a number that would be classified as core housing need, so 10% of Canadian households.

[Don Davies, NDP, Vancouver Kingsway, BC]

I wanted to move into social housing.

You also, in the same report, said, “Canada's current stock of social housing—defined as subsidized rental units—is among the lowest across OECD peers at just 3.5% of total dwellings”.

Can you situate us in terms of our OECD peers and maybe give us some context for that? If we're at 3.5%, what is an example of a good OECD-member peer who is doing better? What kind of percentage do they have?

[Rebekah Young]

At the very high end we have in the double digits, from 20% to 30%. We certainly have half of the OECD peers at the lower end.

I would say that the market constructs are quite different. We admit it's very simplistic to say we're very mediocre, if not poor, relative to OECD. We said double.... Again, there wasn't a lot of science behind that, other than we really have to do something here and market forces aren't going to work for these Canadians.

Doubling is pretty ambitious, but it's a start. It's not likely going to solve all of the problems, but we have to start thinking about it. We have to start thinking about this sector.

[Don Davies, NDP, Vancouver Kingsway, BC]

In that same report—

[The Chair, Liberal, Peter Fonseca]

MP Davies, we're over time.

We're transitioning, and we're going into our second round. It will be a truncated round.

Members, Mr. Hogue from the Royal Bank of Canada was not able to give his opening remarks as we had technical difficulties, and I think we'd want that on record.

If you're ready, Mr. Hogue, you could deliver those to the committee members.

[Robert Hogue]

All right. It's not so much whether I'm ready, but it's whether the microphone is ready.

It is clear by now that Canada is in a housing crisis. It is now a nationwide issue and no longer an issue that's localized in the expensive markets like in the GTA and Vancouver.

A lot happened in that. Essentially, a perfect storm occurred during the pandemic when you had housing needs that changed very quickly. The policy response to the health crisis provided tremendous firepower for lots of households to buy homes, at least in the initial part of it. The Bank of Canada cut interest rates.

All of this really started a fire for housing demand and caused home prices to spike. Home prices had increased more than 50% nationwide in the space of 24 months. Once inflation really flared up, the Bank of Canada hiked interest rates in a historic way. From a home ownership perspective, it now had this double whammy of higher prices and a higher interest rate that really hammered housing affordability.

Today, what we're dealing with is home ownership affordability that has now gotten away from many Canadians. Many of them now are pushed into the rental market. That's created tremendous pressure on rent, and vacancy rates have reached historical lows. We're dealing with a very broad-based issue that's very complicated, so we'll need a very concerted effort to address this issue from all levels of government.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Hogue.

Members, I'm looking at the time. We did have some interruptions. We'll go a bit over three to four minutes for each party.

We'll start with MP Lawrence.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Thank you, Mr. Chair. I will be splitting my time with Mr. Epp.

Ms. Young, I'd like to read a quote that you gave on a podcast not too long ago, and I wanted to make sure you agree with it. It's specifically with respect to the capital gains. You seemed unwilling to go into those waters, despite Mr. Morantz's questions. However, you did before, and I wanted to confirm that you feel the same way.

You're talking about capital gains, and you said, “And yet we have measures like this that are clearly punitive to an investment in Canada. So it is a big change. And, the signal probably doesn't sit well with a lot of folks in terms of what it means for the competitiveness and agility of Canada's landscape.”

Do you still agree with those comments?

[Rebekah Young]

Thank you for the question.

Yes, I still agree with those. I agree with the comments that my other colleagues made as well—first of all, situating in the bigger picture what is creating some of the headwinds and the uncertainty around it.

I'd also go back to my opening points about seeing housing as a system. This is one example where we do need to look overall at our tax structure and—

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Thank you.

My time is limited, especially since I'm splitting it with Mr. Epp.

Could I get just a brief answer to this? Do you believe, as I do, that capital gains taxation is unhelpful and that a capital gains increase is unhelpful?

[Rebekah Young]

I think certainly the signal is negative in that we need to look more broadly at our tax system to reorient it towards growth enhancements.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Thank you, Ms. Young.

I'll give the rest of my time to Mr. Epp.

[Dave Epp, Conservative, Chatham-Kent—Leamington, ON]

Thank you, Mr. Chair.

At this time I'd like to move the following motion:

That the committee order a fully redacted copy of the government's economic analysis on the impact of the federal fuel charge and the output-based pricing system, referenced as information request IR0776 in the Department of Environment and Climate Change Canada's letters to the Parliamentary Officer dated May 14, 2024, and given that this information is already produced, the committee order this file within 24 hours of this motion being adopted and report this finding to the House.

Thank you, Mr. Chair.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Epp.

I have MP Lawrence, and then MP Baker to speak to this.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Thank you.

I'm hoping this will be a relatively quick discussion and then we can move to a vote and carry forward with what I believe has been some excellent testimony.

Of course, we heard in discussion with Mr. Yves Giroux, the Parliamentary Budget Officer, that in fact there exists a report that, at least in accordance with Mr. Giroux's comments, would validate his findings that six out of 10 Canadians are paying more into the carbon tax than they are receiving.

I should point out that Liberals do say that it's eight out of 10, but they only tell half the story, as is often the case. That eight out of 10 is only with respect to financial or direct payment. When taking into account the economic or the indirect payments...and what do we mean by that? We mean the cost the carbon tax adds to trucking the food and adds to the farmers, and that will all funnel its way down eventually to the Canadian consumer. As Mr. Giroux said, the majority of Canadians will face a net loss.

Of course he did make a clarification on the 17th, and when asked by the parliamentary secretary for finance how he knew that his numbers were correct, he said that they were the same as theirs, which was quite telling.

Then Mr. Morantz, in an excellent round of questions, asked him to confirm that there was a report. He confirmed that there was a report, and further he went as far as to say that there was a gag order that restricted him from providing the full analysis.

I have—

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

A point of order, Mr. Chair.

I'm sorry to interrupt you, Mr. Lawrence.

Given the number of people who want to speak to the motion, I would like the committee's consent to let the witnesses leave.

[The Chair, Liberal, Peter Fonseca]

Members, I think that may be a good idea, because I do have MP Lawrence, MP Baker, MP Ste-Marie, MP Dzerowicz and then MP Morantz on my list.

On that, we do want to thank Mr. Hogue, Mr. Sondhi, Mr. Kavcic and Ms. Young. Thank you so much for coming before our committee on this housing study and for all the information that you've provided committee members. You are released. We wish you the best with the rest of your day.

Members, we will move to our speaking list.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

I'll conclude shortly, because I want to give the courtesy of allowing a response, and also, hopefully, we can get right to a vote.

I would just conclude by saying that transparency is the best disinfectant. If this report does exist, as Mr. Giroux, the Parliamentary Budget Officer, states it does, and it does validate Conservatives' conclusion that the carbon tax is causing Canadians to suffer a net loss, I would respectfully ask that we all vote yes and get this report to our committee.