Evidence of meeting #34 for Finance in the 44th Parliament, 1st session. (The original version is on Parliament’s site, as are the minutes.) The winning word was inflation.
A video is available from Parliament.
Partner, Markee Developments
Government is absolutely required. The market has created this problem.
Liberal
The Chair Liberal Peter Fonseca
Thank you.
I think that's all for Mr. Blaikie.
We're moving now to the Conservatives and Mr. Chambers, for five minutes.
Conservative
Adam Chambers Conservative Simcoe North, ON
Thank you very much, Mr. Chair.
Welcome to our witnesses. It's been a fantastic discussion. We often wish we had more time with all of you, to explore. I have a few questions.
I'll start with Mr. MacBeth. When was the last large market housing correction in Canada?
Author and Investment Advisor, As an Individual
The last time the housing market corrected substantially in Canada was in the early 1990s. Interest rates went up to 13% and there was an overall correction. I don't know the exact percentage, but I think it was in the 20% to 30% range.
One of the notable, iconic events was the collapse of the large conglomerate, Olympia and York. It had an enormous amount of debt.
Conservative
Adam Chambers Conservative Simcoe North, ON
How long did it take for the market to recover from that correction? Was it five years or 10 years? When did prices get back to where they had been?
Author and Investment Advisor, As an Individual
I think the prices in 1999 were similar to the prices in 1990. It was a long period of lower to flat prices. This new bubble started to form shortly after 2000.
Conservative
Adam Chambers Conservative Simcoe North, ON
We've had more than two decades of price appreciation. In fact, we've had some very significant price appreciation during a couple of periods of time within these two decades, without any real meaningful or large-scale correction for a longer period of time.
Is that right?
Author and Investment Advisor, As an Individual
That's right.
Both Canada and Australia escaped the corrections that happened in 2008-09. Those two countries have the most extended housing bubbles and house prices at this time. It was considered lucky at the time, but I would say maybe it was unlucky that we didn't have a healthy correction in 2008-09.
Conservative
Adam Chambers Conservative Simcoe North, ON
Have you ever seen debt-to-income ratios as high as they are in Canada?
Author and Investment Advisor, As an Individual
The simple answer is no.
The measure I prefer is debt to GDP. A few developed countries in the world are in the same category as Canada, but Canada is right at the very top of the list in terms of private sector debt.
I'm sure most of the discussion about debt in this committee and elsewhere has been about government debt, but government debt is not nearly as dangerous as private sector debt. Private sector participants go bankrupt or get foreclosed, whereas governments somehow manage to carry on, even if they're overly indebted.
Conservative
Adam Chambers Conservative Simcoe North, ON
Thank you very much. I'll turn to the Canadian Real Estate Association briefly.
What's happened to development charges? Have you tracked development charges across the country or in particular markets over the last 10 or 20 years?
Chief Executive Officer, Canadian Real Estate Association
We don't follow them that closely. That would be more the home builders who would do that.
Conservative
Adam Chambers Conservative Simcoe North, ON
Okay.
Do you know how much the land transfer tax is in Toronto today for a million-dollar home?
Chief Executive Officer, Canadian Real Estate Association
Again, we don't really track those metrics, except that we know they haven't gone down.
Ms. Keesmaat would be able to answer that better than I can.
Conservative
Partner, Markee Developments
I don't actually know that off the top of my head, but I can speak to the development charges. Land transfer tax is similar.
Because municipal governments have been reticent to raise property taxes, they've been increasing the development charges to create a user-pay model. That means the development charges on a unit can be upwards of $20,000 to $40,000, depending on the scale and size of the unit. It has pretty much doubled over the course of the past 10 years.
Conservative
Adam Chambers Conservative Simcoe North, ON
Thank you very much.
Land transfer tax in Toronto is about $33,000 on a $1,000,000 property. That's double everywhere else in Ontario. Property taxes in Toronto are much lower, by any measure you look at, than in municipalities other than Toronto. The city is actually subsidizing low property tax rates with an astronomical land transfer tax. That hurts first-time purchasers. They have first-time buyer incentives, but it still brings it down only to about $25,000.
Ms. McIsaac, I want to give you an opportunity here, in a very quick period of time. Where do these people who are housing-insecure go if they are pushed out of a home?
President, Maytree
When people are pushed out of their homes, depending on their own circumstances.... There's not one, single answer to that. People go to friends and family. They have their social safety net, which is social capital. Increasingly, we are seeing people who are now making use of shelters. As you get to the lower end, people may try to get something lower in the market, but that is getting harder and harder to find. In a city like Toronto, a one-bedroom is impossible to find under $1,500.
Conservative
Adam Chambers Conservative Simcoe North, ON
Thank you very much. I'll just say that in my riding they go to motels, and that's become an issue.
Thank you, Mr. Chair.
Liberal
The Chair Liberal Peter Fonseca
Thank you, Mr. Chambers.
We are moving to the Liberals, and Ms. Chatel, for five minutes, please.
Liberal
Sophie Chatel Liberal Pontiac, QC
Thank you very much, Mr. Chair.
My first question will be for Mr. Bourque. We've talked a lot about housing, and increasing the supply, but it seems that this conversation has been focused mainly on urban areas.
What can you tell us about the challenges that many rural communities are experiencing? Especially during the pandemic and post-pandemic period, we are seeing an increase in the number of people going into smaller regions in order to telework. However, even prior to the pandemic, there was already a big increase in the price of housing, and rents, especially, are very low in rural communities.
What can you tell us about the solution for rural communities?
Chief Executive Officer, Canadian Real Estate Association
That's a good question.
The fact is that a great many people have moved—migrated—within Canada. Over 350,000 Canadians moved to different provinces last year, which was a significant record. When you think back to the energy price collapse, a lot of people moved out of Alberta. However, that's the only time we've seen as much migration to different provinces. I think it's evidence that people are moving because they want affordable housing, and there was affordable housing available in those communities.
Initially, that may have been seen as a good thing for many communities, because you would have young people returning to their roots. That can add some vibrancy to small communities that may have been lacking population. However, at a certain point, that pressure, and especially the buying power they have, puts pressure on the local community, so that individual renters get priced out of the market and the prices go up overall.
We've seen that across the country. From a policy standpoint, it's a good thing for people to move across the country, to move where there are jobs or where the conditions for living are better, but it also shows that the supply constraints that exist in big cities have also existed in other places where, for whatever reason, it is very difficult to build and the housing supply response is slow to trigger in.
Liberal
Sophie Chatel Liberal Pontiac, QC
Mr. Bourque, on that, do you think there will be new technologies that will facilitate the building of new housing in rural communities? The labour shortage creates an extra layer of difficulties. People, experts or builders, are not travelling to rural communities to do big housing projects. It's very difficult to build in rural areas. With any of the new technologies, is there any hope there?
Chief Executive Officer, Canadian Real Estate Association
One of the recommendations we're making is that there really needs to be a lot more innovation. I always like to say that a carpenter could come out of a time machine from the fifties, go right into a housing project, start swinging a hammer and probably not feel out of place.
The fact is that we need to start building a lot more components in factories. We need to upgrade standards so that a factory-built home can go into any community and meet the standard, so that it doesn't slow down the construction. This is something the federal government could be investing in. If we were a lot better at building homes using modern technology, we'd not only help solve our own problem but we'd have an exportable product.