Finance Committee on March 24th, 2022

[Sophie Chatel, Liberal, Pontiac, QC]

Thanks very much. That's very interesting.

Mr. Desjardins, When you mentioned core transportation, you also discussed the importance of green infrastructure and public transit in planning new housing.

Do you have any specific examples for us?

[Jessy Desjardins]

Yes, definitely.

The planning of green infrastructure and major core transportation projects is an enormous incentive for real estate promoters and builders in Canada. It provides assurance of future mobility of our investments and also helps us make major cuts to construction costs because we aren't required to provide as many underground stations, the costs of which are enormous, ranging from $30,000 to $50,000, and sometimes even more in areas where there are restrictions. We see this in a very meaningful way in our projects, where we can reduce rents for one-bedroom units by $400, sometimes even more. So we can do big things when we combine our projects with core transportation projects.

[Sophie Chatel, Liberal, Pontiac, QC]

We talked about municipalities, but what's the federal government's role in that regard?

[Jessy Desjardins]

If we can reduce investment in motor vehicle infrastructure and enable Canadian builders to redirect that energy and manpower into the housing sector, that will reduce labour-related pressures. The federal government's role is to enable Canada to be the Canada of tomorrow, a mobile and sustainable Canada.

[The Chair, Liberal, Peter Fonseca]

Thank you, Ms. Chatel.

We'll move to the Bloc, and Monsieur Ste-Marie, for two and a half minutes, please.

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

I'll go back to Ms. De Bellefeuille and Mr. Plourde from Option consommateurs.

Our understanding is that you're proposing, in particular, that we provide better support for the most vulnerable, that we ensure markets are competitive and that we ensure there's greater transparency on prices, that consumer goods have an adequate lifespan and that there's no planned obsolescence.

I would also note that you suggested in your prebudget recommendations that we should provide better support for social housing and promote access to ownership initiatives, in particular through collective ownership arrangements such as cooperatives.

I'd like to change direction here, but there will be a connection with your remarks, in which you ultimately showed how important it is to defend the rights of consumers, especially the most vulnerable. That requires a balance between industry and consumers. When you look at what's being done in Europe, there's good support and it's guaranteed. However, I want to discuss a case in which there's been no inflation at all in the past 20 years, and that's the support that the Canadian government provides for consumer associations. In 20 years, there hasn't been a one cent increase in Innovation, Science and Economic Development Canada's contributions program for non-profit consumer and voluntary organizations.

So I'd like to hear what you have to say about the importance of better funding for organizations such as yours to ensure a balance between industry and the rights of consumers, particularly the most disadvantaged.

[Alexandre Plourde]

Thank you for the opportunity to discuss that issue, which is a major concern.

Consumers are currently very poorly represented in Canada. Industries can well afford to pay representatives to promote their interests. That's particularly true of the industries in the federal fold, such as the telecommunications industry and the banks, and as we saw during the pandemic, that was also the case of the airline industry. These are federal industries that generate large profits and can afford to lobby to defend their interests.

On the other hand, Canadian consumer groups are often underfunded. They receive little money from the federal government. For years now, we've requested increased funding from Innovation, Science and Economic Development Canada, which is intended for consumer research and which has supported consumer associations for years. We're requesting an increase in that funding to provide some assistance to consumer associations in doing their work.

You have to understand that it's increasingly difficult to defend consumers these days, in 2022. Consumption is changing, the problems…

[The Chair, Liberal, Peter Fonseca]

We're running short on time, but thank you very much for your answer.

We'll move to the NDP and MP Blaikie for two and a half minutes.

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

Thank you, Mr. Chair.

Mr. Macdonald, I just want to come back to you to talk a little about housing. You mentioned earlier the role that escalating the required down payment might play in tempering the investment culture in the housing market.

I'm wondering if you've given some thought to whether CMHC mortgage insurance premiums might be different for people buying a residence as opposed to people buying an investment property. Also, do you have any suggestions for the committee on what public policy might be able to do to help combat inflation in rental prices?

[David Macdonald]

To start with your last question first, inflation and rental prices are, in many cases, directly governed by provincial governments, so what they say goes, in terms of the increases that are allowed in those markets.... In that sense, caps already exist in those areas insofar as the provincial policy says so and says whether or not there are new units—and there is a variety of exceptions to that. This doesn't help you in the sense that this is provincial government policy, not federal government policy, but it is one area where governments do have a direct influence over the consumer price index.

The purchase of housing is another one, and things like tuition and child care fees are other areas where governments fairly directly set prices that consumers pay, and those are part of the consumer price index.

When it comes to other levers that could be pulled to discourage investors but continue to allow the market to be open to homeowners, changing the premiums on CMHC insurance is another way.

I would encourage members to consider tamping down on investors in particular, in that what you're attempting to do is to get speculation, or some of the speculation, out of the markets in the hopes that this moderates or even reduces prices. It will not directly impact homeowners in the same way that an overnight rate of 3% would as the Bank of Canada increases its rates. The overnight rate affects everybody, and without keeping inflation under control with measures that the federal government can take, what's going to happen is that the Bank of Canada will act and drive interest rates for everybody—homeowners and investors alike.

[The Chair, Liberal, Peter Fonseca]

Thank you.

Thank you, MP Blaikie. That's the time.

We're moving to the Conservatives, and I have MP Albas for five minutes.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Thank you, Mr. Chair.

Thank you to all of our witnesses.

I'm going to be sharing my time with MP Stewart, so I'll be very quick.

Mr. Punwasi, first of all, it's said that, when the Bank of Canada makes a change to its overnight lending rate, it can take about 18 months before that is fully factored into the economy. I'm sure that unconventional monetary policy like QE has a very similar result.

Despite the Bank of Canada's having given forward guidance and saying it's going to be switching to quantitative tightening, what in your opinion should we expect in that space?

[Stephen Punwasi]

On the impact of quantitative easing, I guess the capital markets need to settle and all of the consumption. As this extra money is injected into the market, it will still have that impact that will take 18 to 24 months to trickle to the market.

By doing quantitative tightening, they're sending it higher but, at the same time, trying to pull it back down. It's a pretty dangerous game for them to play. You'd rather do this over a long time when you have the situation and these circumstances. Now they're gambling whether or not they need to and are risking over-tightening or doing too many movements at the same time.

Instead of looking where they're going, they're just looking at their skates and trying to control where they go after that.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

If there were a recession in the next, let's say, six to 24 months, would that make it even more difficult? Lower interest rates would be the natural alternative, and they've never been lower than they are right now.

[Stephen Punwasi]

Yes, it would be a disaster if we ended up in a recessionary environment in which we had high inflation. That would be similar to the situation in the 1970s or the early 1980s, which would not be great for anyone.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

Lastly, the government has said that it wants to do a lot of things: end blind auctions, enshrine the right to home inspection, ban new foreign ownership and implement anti-flipping taxes. Do you think those things will be effective, given your view of the market?

[Stephen Punwasi]

Bubbles tend to involve emotional impact, and regulatory movements like those may not have a direct impact but they temper the expectations of people in the market.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

I'll hand my time over to MP Stewart.

[Jake Stewart, Conservative, Miramichi—Grand Lake, NB]

Thank you.

My first question is for Mr. Rabidoux.

Mr. Rabidoux, do you think the current state of Canada's housing market is a healthy one? Why do you or don't you?

[Ben Rabidoux]

It's certainly not a healthy state by any means. It comes back to what I said. We have tremendous demand that is well in excess of any underlying demographics or any reasonable fundamentals, partially due to increased speculation from domestic investors and international investors. There's also an element of truth to the statement that we have not built enough, particularly as relates to single families, so it's a confluence of factors.

[Jake Stewart, Conservative, Miramichi—Grand Lake, NB]

Thank you for the answer.

As the committee knows, we are a pro-immigration party. Immigration's key to having a thriving and diverse economy in Canada. That being said, do you have concerns that the government is working in silos? Do you think the government is looking at the big picture with respect to housing as it relates to population growth?

[Ben Rabidoux]

That is a big concern of mine, and I'm concerned that when the federal government is setting permanent immigration targets, it's perhaps not considering the impact of non-permanent residents, such as foreign students, who still require rental accommodations in many cases. That tightens the rental market and pushes some people out of the rental market into the ownership market, so there is a net effect of tightening the overall market balance.

We can't accommodate 600,000 people in one year, so we need to be much more thoughtful about how we do immigration policy.

[Jake Stewart, Conservative, Miramichi—Grand Lake, NB]

Thank you, Mr. Rabidoux.

I have just one final question. I'd just like some final remarks or any ideas you might have on policies or solutions. I will turn the floor over to you for the last few seconds to see if you have any additional comments.

[Ben Rabidoux]

I would echo what Mr. Macdonald said with regard to tightening underwriting for investors. I think it's a completely sensible policy. I also think we've absolutely been asleep at the wheel as relates to international money laundering and that we have the most porous border when it comes to all sorts of illicit capital. That just needs to end. We need to get a backbone on that and we need to absolutely tighten down on that sort of excess demand.

In a normally functioning market it's not as big a deal, but when we're in such a supply-constrained market, that incremental demand has a big effect on prices and so we just need to tamp it down. There's sensible thinking. I'll leave it there.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Rabidoux.

Thank you, MP Albas and MP Stewart.

We're moving to the Liberals. MP MacDonald, please go ahead for up to five minutes.