Finance Committee on June 11th, 2024

[Julie Dzerowicz, Liberal, Davenport, ON]

Thank you so much, Mr. Chair.

I will be asking one question, and then passing the baton for the rest of my time to Ms. Thompson.

First, I want to start off by saying thanks to all the economists who've presented today. I'm very sad Mr. Hogue wasn't able to present to us, but we'll move forward.

I want to state very clearly that we have heard a number of testimonies at a number of different meetings that, for over 30 years, it was the lack of investment of all three levels of government, who didn't do enough to continue to build homes in Canada, that has led to the current housing crisis. I'm very proud our federal government has released a very comprehensive housing plan. It's a plan that's going to be building more single homes, it's going to be building more rental homes and it's going to be putting in far more investments to ensure there is deeply affordable housing that is created.

However, it's going to take more than just all three levels of government investing, so my question is for Ms. Young.

What role do you see banks have in potential solutions to the housing crisis?

[The Chair, Liberal, Peter Fonseca]

Before Ms. Young goes, I'll stop the time because we have Mr. Hogue. We're just going to test really quickly to see if it's possible.

Could you just start speaking?

[Robert Hogue]

Hopefully this time you can hear me okay without any noise in my microphone.

[The Chair, Liberal, Peter Fonseca]

I'll look to the interpreters.

Could you raise the boom on your headset.

[Robert Hogue]

How's that? Is that a little better now?

[The Chair, Liberal, Peter Fonseca]

Okay. That's perfect.

Mr. Hogue is also available.

You got the question from MP Dzerowicz, but it was for—

[Julie Dzerowicz, Liberal, Davenport, ON]

It was for Ms. Young.

[Rebekah Young]

Thank you very much.

First, I would separate two separate issues from the.... Obviously, banks provide capital. They provide capital to individuals to buy homes and also capital to developers to produce homes. Right now you also have to think of demand. What we heard from earlier testimony was around the rules and regulations. For example, chartered banks are subject to the risk-adjusted provision of capital for these activities versus the demand that's out there. Obviously, the banks we represent have a very big role through both of these channels, in both helping Canadians purchase homes and helping project developers build them.

What we've seen, including from the economics department, is that we have taken more of an advocacy role in the policy space as well, weighing into looking at some of these issues, some of the numbers, in terms of that longer-term trajectory that we're on and looking for policy solutions that benefit all Canadians, because a thriving economy is good for Canadians and it's good for banks.

[Julie Dzerowicz, Liberal, Davenport, ON]

Thank you, Ms. Young.

[Joanne Thompson, Liberal, St. John's East, NL]

Let's see how many questions I can get in within my time.

I thank my colleague for sharing her time.

Mr. Hogue, I have to go to you. I'm delighted we were able to solve the technical issues.

Could you speak to the committee and, certainly, Canadians about your perspective on what led to the housing crisis and the different elements we need to address in order to move through this predicament? In this specific lens of the elements is also the all-of-government approach, one part being the focus on labour force and really expanding skill sets in the housing construction sector.

Thank you.

[Robert Hogue]

This housing crisis has been—I would argue—decades in the making in some parts of the country. Before the pandemic, there was already tremendous stress in the Toronto and Vancouver areas, for example. What happened during the pandemic was that the stress spread out across Canada. Now you can arguably say that what we have is a national housing crisis. It's no longer a localized one.

Fundamentally, as was said before, it is an imbalance between demand and supply. The supply side has been unable to adjust or respond quickly enough to the very strong demand we've had over the last many years.

Our view is that the policy side should continue to focus on.... We're happy to see that all levels of government, now, are talking about the supply side, but we need to grow the housing stock in Canada to accommodate all that demand. When I say, “housing stock” here, I mean the entire spectrum. This is not just on the ownership side. This is also on the rental side. This is also on the social housing side.

We need to address this nationwide issue now with a big push to grow that housing stock to accommodate that demand.

[Joanne Thompson, Liberal, St. John's East, NL]

Thank you. I appreciate the language around it being a spectrum.

Ms. Young, you also spoke about housing on a continuum. It's about being mindful of the need for social housing, as well as market and everything in between.

I'm going to ask this of you both, quickly.

Could you speak about the cultural changes needed to ensure we do everything we can to address the housing challenge—what these look like in urban areas, how we live in places, how we look at shared space and how we look at the way we live within our space?

I know I'm running out of time, but I'd like a quick answer from both of you around what we need to look at culturally, as well, to ensure every Canadian has the right to dignified spaces to live in.

[Robert Hogue]

Do I go first on this one?

I think, especially in the urban areas, we're talking about denser housing. That means more housing in terms of footprint and addressing the missing middle. It's mid-size housing, so space will be more limited. This is where I think Canadians, especially in urban areas, will have to adjust their housing expectations.

[Joanne Thompson, Liberal, St. John's East, NL]

Ms. Young.

[Rebekah Young]

I'd like to very briefly pick up on that.

First of all, use the footprint we have already. That builds on the densification but also the infrastructure that is out there.

Also, we are a very decentralized country, so we have to figure out how to make that work. A lot of the needs are going to be local and on the ground. That's why either local governments or local non-profits will be able to best identify their specific and culturally appropriate needs.

Those would be two quick thoughts.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Thompson.

Now we're going to MP Trudel.

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

Thank you, Mr. Chair.

My first question is for you, Mr. Kavcic. I arrived shortly after you began speaking, taking over from my colleague from the Bloc Québécois, but I heard something that intrigues me: You think we have reached our maximum construction capacity in Canada. That is a problem nonetheless. In 2023 in Quebec, only 39,000 housing units were built, compared to 67,000 in 2021. So that is a decrease from the record in 2021.

How can we improve house-building capacity in Canada in general?

[Robert Kavcic]

Thank you for the question.

I agree that when you look at the Quebec numbers or the Canadian numbers broadly, we have seen, counterintuitively, new construction activity actually fall over the last two years, despite our push to continually build more. Part of that is the reality that we just have broad macroeconomic conditions that ultimately dictate what the market does.

When you have a very aggressive tightening cycle that triggers a decline in housing activity and a pullback in investment activity, you're naturally going to see a market response where construction falls. It's very difficult to push home builders to, first of all, build in an environment that's not favourable for them or that perhaps offers them a lot of risk going forward. It's also very difficult, when you have an industry that is already at capacity, to push further beyond those constraints.

In terms of a policy response, I fully agree with my colleagues that any kind of measure that can improve the elasticity or the responsiveness of supply or the productivity with which we build housing is absolutely a positive for this country and for housing supply going forward, because it can make this market dynamic play out faster.

Keep in mind that home builders take time to bring projects to market and to bring units to completion. If we have an acute demand shock on the ground today, it might be two, three or four years before we actually complete units to satiate that demand and bring rents back down to a more appropriate level.

I think that any measures on the supply side, in that context, are very important avenues to keep pushing on.

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

Thank you very much.

Mr. Sondhi, according to a study you conducted, 3.8 million housing units have to be built to restore some degree of affordability.

It's as though there are two housing crises right now. First, access to housing is a problem. The second issue is housing affordability, meaning it is hard for people to find housing they can afford.

On a housing tour in Quebec, I kept hearing that federal programs focus primarily on affordability right now. In other words, money is being lent to builders to build housing at 80% of market value. That means however that taxpayers’ dollars raised from government taxes are being used to build one-bedroom units in Longueuil going for $1,300 per month—which I find absolutely unacceptable—and two-bedroom units in Montreal for $2,000. Through our taxes and income tax, we are all paying part of the construction costs for housing for the rich.

Building housing is not enough; we absolutely need to build reasonably priced housing, something people can afford. We need housing at $600, $700 or $800 per month, social housing.

How can this problem be solved, Mr. Sondhi?

[Rishi Sondhi]

With respect to overall housing affordability, I would share some of the views of Mr. Kavcic on that.

I would say that a relatively quick way whereby we could handle that would be to work on the demand side. We could slow population growth. In the past few years, population growth has been quite strong. We could implement measures to slow population growth and bring it more in line with fundamental demand.

One factor I'll touch on as well is construction productivity. Productivity in the construction industry, according Statistics Canada, lags that of other industries. It's my belief that this is not a very well-studied phenomenon. I would dedicate some resources toward studying that. If we can improve construction sector productivity, we can boost housing supply without having to bring in more individuals.

Of course, another pillar to address our labour supply would be, in fact, bringing in more individuals. That would help in that respect.

Those are the levers I would pull to help with respect to housing affordability. I think those would bear fruit.

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

I have a related question.

The countries in Europe that are dealing with the housing crisis most effectively include Holland, France and Austria. Compared to Canada, those countries have a larger share of off-market or public housing. I am referring to non-profit housing organizations, true social housing and co‑operatives, for example.

In France, more than 20% of all rental housing is off-market housing. In Canada, it is just 5%. So we are really a long way off.

I know that the Minister of Housing, Infrastructure and Communities, with whom I have spoken, has a target of about 8%. I don't know if he will reach that next year, but I don't think that is very ambitious.

Do you think we could learn from those countries and work toward a larger share of off-market units in our rental market?

[Rishi Sondhi]

I think that's a fair point, given the affordability challenges we see in the current environment.

I will note that the latest federal budget earmarked some funds towards offering low-cost loans for prefabricated units and for student housing and the like, and some investments in the affordable housing fund, for example, so there is some movement in that respect.

I do think that the point you make is fair, but I will note that my expertise has more to do with other types of housing starts—detached, semi-detached, townhouses, row houses and the like—and not so much with the affordable housing space, unfortunately.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Trudel.

Now we'll go to MP Davies for six minutes.

[Don Davies, NDP, Vancouver Kingsway, BC]

Thank you.

Maybe I'll address this to Ms. Young, if I can.

In September 2022, the office of the federal housing advocate released a series of research reports that explore the growing trend of financial firms using housing as a commodity to grow wealth for their investors. The reports confirmed that this phenomenon, known as the financialization of housing, is contributing to unaffordable rent increases, worsening conditions and a rise in evictions. They note that the greatest impact of this is on disadvantaged groups, such as seniors, low-income tenants, people with disabilities, recent immigrants and lone-parent families. They estimate that about one-third of all seniors' housing in Canada has been financialized, along with 20% to 30% of purpose-built rental buildings.

First of all, do you agree with that? Are you concerned by it? What policy responses, if any, do you think the federal government should take towards organizations like REITs and others that are financializing residential housing?

[Rebekah Young]

I published a report early last year in which we did say that the government should set a target for social housing. We did see that there is a real issue, particularly for Canadians with fixed incomes, who aren't on market incomes, for whom housing affordability is going to be elusive, regardless of what policies are taken on the market side. We do think that we need to double the stock.

When we use the term “social housing”, it still requires all parties. It requires the private sector. It requires non-profits. It requires government. However, it becomes a different mix of what roles...and there are distinct roles between providing the financing, if it's construction or renovation, versus operations and managing at the individual level.

If we look at the social housing space, for example, one very positive development has been in British Columbia, and now the federal government is moving in this direction. It's basically the acquisition fund idea. We do have a lot of aging stock that, if it is going to be upgraded and renovated at market rates, is likely going to be higher value, higher rent—