Thank you very much, Mr. Chair.
I want to focus my statements on how the national housing strategy is impacted by inflation, and its companion, higher interest rates. These are forces that will compromise the goals of the national housing strategy unless the Government of Canada makes adjustments. These adjustments, in my view, will have to be made in the upcoming federal budget.
I'm speaking to you from the unceded territory of the Algonquin Anishinabe people. I'm grateful for the opportunity to live and work in this territory, which is also home to Inuit, Métis and first nations people from across the continent.
Since my comments focus on the national housing strategy, I also have to point out that the Government of Canada has yet to deliver on a non-distinctions-based urban indigenous housing strategy. The national housing strategy remains incomplete until that work is done. I and many others look forward to seeing a significant commitment on that in the upcoming federal budget.
I'm not a banker. I'm not an economist. I'm just a guy who has spent over two decades managing and building affordable non-profit housing. I'm currently the executive director of the Ottawa Community Land Trust. Most recently, I was executive director of a large non-profit housing company. I don't pretend to understand big finance and economic forces, but I do very much understand affordable rental housing. I know what it takes to create non-profit housing.
The programs under the national housing strategy were developed five years ago under historically low interest rates, and at a time when rates were stable or even declining. This has changed, and so the programs themselves must also change if we're to meet the goals of this strategy.
I have three specific recommendations.
First I want to begin by addressing affordability and inflation from a renter's perspective. Rents were already rising faster than wages before this period of rapid inflation: 40% of tenants across the country can't afford the rents they're paying now. When everyday costs are also rising, this leaves low-income renters in the position of having to choose between rent and groceries each month.
The national housing strategy created a national housing benefit, a modest allowance to help low-income households cover their rent. My first recommendation is that with rising inflation, this needs to be expanded to cover a greater number of households, and it needs to be strengthened to provide more assistance. It has to keep pace with the current need.
Secondly, when the national housing strategy returned CMHC to direct-lending, low-interest government loans to create new affordable housing, that was a big deal. These lending programs need to adjust to an environment of rising interest rates. Under the national housing co-investment fund, for example, a non-profit can lock in a 10-year interest rate at the time of its first advance, so after construction has started. Waiting as long as possible was an advantage when rates were stable or declining, but now that rates are rising, it transfers risk from the government to the little non-profits that are trying to create affordable housing. Government needs to commit and lock in borrowing rates much earlier, especially in the current context.
Higher interest rates and higher construction and operating costs are squeezing out affordability and limiting our ability to reduce rents. It now costs more to borrow the exact same amount of money as it did compared to two years ago, and it costs more to build at the same time. When the national housing co-investment fund was launched, government officials went through great efforts to stress it was primarily a loan program, even if modest grants were also available.
Well, when the cost to borrow rises and construction costs also rise, there's no cushion in affordable housing. Government will have to make up the gap with richer grants. My second recommendation is that lending programs need to be redesigned in reaction to the current climate of inflation and rising interest rates.
My third and final point is about a long-term strategy for countering rent inflation and about helping us transfer existing properties into non-profit ownership. In the Ottawa region, for every one new home built with assistance from the national housing strategy, we lose seven affordable homes in the private market. Creating new affordable housing is definitely important, but it doesn't help the majority of modest-income renters if the supply of affordable housing is dropping overall at the same time. If governments work with non-profits to purchase existing rental housing, which is already at modest rents, that allows us to stop the erosion of affordable housing in the marketplace.
Right now, CMHC lending programs aren't available for acquisitions, only for new construction, but acquisition is an effective and very efficient option that allows us to buy and preserve affordable housing in the marketplace right away. Ramping up inflation and interest rate increases are creating serious challenges for housing affordability.
I've made three recommendations focusing on the national housing strategy, all of which I hope can be included in upcoming budgets: one, expand the housing benefit program; two, rework CMHC direct lending to account for rising interest rates; and three, allow CMHC direct lending for non-profits to purchase existing affordable market housing.
Thank you very much for your time.