Evidence of meeting #31 for Finance in the 45th Parliament, 1st session. (The original version is on Parliament’s site, as are the minutes.) The winning word was credit.
A video is available from Parliament.
Liberal
The Chair Liberal Karina Gould
I'm sorry. We're going to have to end it there, but someone might want to pick it up again.
Mr. Garon, you have six minutes.
Bloc
Jean-Denis Garon Bloc Mirabel, QC
Thank you, Madam Chair.
I want to say good morning to my colleagues and thank the representatives from the Department of Finance for being here with us today.
In economics, we recognize that there can be overinvestment in the residential real estate sector in some circumstances. At one point, there were concerns that, with the mortgage interest deductibility in the United States, too much capital was being channelled into residential property and not enough was being channelled into other sectors. I am not necessarily talking about more productive sectors, but rather industrial, commercial and other sectors.
Since Canadians want to become homeowners and that is important to them, they are continuing to buy houses, albeit increasingly expensive ones, and their residential property now accounts for a growing proportion of their assets.
Is the Department of Finance concerned that this trend will result in Canadians investing less and less of their savings in other productive assets at a time when we need investments in the commercial and industrial sectors more than ever?
Senior Director, Economic Analysis and Forecasting, Department of Finance
Thank you for the question.
I would say that this is something that our private sector economists, whom we rely on for surveys that inform the forecast for the department, have flagged in the past. Devoting this much capital to residential investment—and certainly, as you said, this has been noted in the United States as well—could potentially be drawing capital away from more productive uses. I think this is in line with the efforts that the government is currently making to effect a rebalancing of the housing market, where you have excessive price increases over the past decade or more that have resulted in this distortion in markets.
As we start to see—
Bloc
Jean-Denis Garon Bloc Mirabel, QC
I would like to come back to what you just said because it is very interesting.
Right now, we have a government that wants to focus on increasing the housing supply, which is likely the right way to go. However, in recent years, the government has allowed longer mortgage terms and it created the first home savings account, or FHSA, which basically gives people more money through the tax system to overbid on homes, thereby overinflating the real estate market and stimulating demand.
We are seeing a fairly drastic policy shift that is heading in the right direction. However, don't you think that the measures we have seen in recent years, such as longer mortgage terms and the FHSA, have exacerbated the problem of rising housing prices and channelled too much investment into residential real estate, which could be harmful to our growth in the longer term?
Acting Senior Director, Housing Finance, Department of Finance
Thank you for the question.
I can start by saying that I think the honourable member is referring to.... There are demand-side policies that the government can take to support access to the housing market, and there are supply-side policies that the government can take. If you look at budget 2025, which the government introduced, it was focused on supply-side policies to support housing affordability, including—
Bloc
Jean-Denis Garon Bloc Mirabel, QC
You are repeating my question. My question is this: Does the shift from policies that stimulate demand to policies that stimulate supply not amount to an acknowledgement that the government, and the Trudeau government in particular, has been taking the wrong approach for several years now?
When an economist becomes Prime Minister and makes drastic changes to this policy, does it not indicate that the government has been taking the wrong approach for years?
Acting Senior Director, Housing Finance, Department of Finance
I think the government has been focused on supply-side policies for housing supply previously as well. The honourable member mentioned previously the measure to increase amortizations or to permit 30-year amortizations. That was a targeted measure to first-time homebuyers and to buyers of new builds. There was an intention there to help reduce payments for homebuyers, which is a demand-side measure, but there was also a supply-side component to it to focus on new builds.
Bloc
Jean-Denis Garon Bloc Mirabel, QC
I have only 50 seconds left, so I will ask one last quick question.
We know that in order to cope with unforeseen circumstances, households sometimes have to go into debt, by using a line of credit, for example. Not everyone has savings to fall back on when unexpected events, such as a job loss, occur. Does the fact that households hold an increasing amount of non-liquid assets, such as residential real estate, not in and of itself pose a risk to economic stability?
Senior Director, Economic Analysis and Forecasting, Department of Finance
I don't think it's fair to say.... Although the increase in the share of housing assets in the household sector's total portfolio has risen, it still represents only about 40% of the sector's assets. They have considerable liquid assets and considerable retirement assets that can be levered as well.
Bloc
Jean-Denis Garon Bloc Mirabel, QC
Madam Chair, I have a rather delicate matter to raise with you. As you can see, I am the only person so far who has been asking the witnesses questions in French. During my speaking time, I calculated that there was a lag of one minute and 25 seconds for the interpretation. I am participating in the meeting remotely. From the time when I ask my question and the time when the question is translated by the interpreters, there is sometimes a lag of 20 to 25 seconds. You can check. Essentially 20% of my speaking time is being taken up by interpretation lags.
I understand and we are happy to have interpreters. Sometimes the witness waits for the interpretation and then answers me in French. However, I find it unfair that I am losing 20% of my speaking time to the interpretation lag because I am speaking French. The witnesses all need to hear the English interpretation to understand what I am saying. It seems to me that the lag is longer than usual.
Bloc
Jean-Denis Garon Bloc Mirabel, QC
If you would agree, I would be very pleased. Let's say we add one minute. Usually, this isn't a problem.
I would suggest seeking consent to give me a little more time on my next turn.
Liberal
The Chair Liberal Karina Gould
Do I have the consent of the committee to grant Mr. Garon a little more time?
Liberal
The Chair Liberal Karina Gould
I think we will see how things go with the interpretation. I understand that it is important to respect that.
Do I have the committee's consent to give the member more time during the next round?
The committee agrees, Mr. Garon. We will give you a little more time on your next turn.
Bloc
Liberal
Conservative
Sandra Cobena Conservative Newmarket—Aurora, ON
The Canadian Human Rights Commission, on Canada's 7th periodic review, stated:
As an alarming number of people in Canada face food insecurity, as well as increasing levels of poverty and homelessness, the fundamental human right to an adequate standard of living is at risk. For people in Canada who were already facing long-standing and intersecting barriers to equity, the cost-of-living crisis has compounded those barriers.
Mr. Torgunrud, given that you are the senior director of economic analysis and forecasting, do you have forecasts that expect this economic trend to continue? Can you also share what key assumptions you're using for your forecasts?
Senior Director, Economic Analysis and Forecasting, Department of Finance
To be clear, do you mean the trend of disparity in income?
Conservative
Sandra Cobena Conservative Newmarket—Aurora, ON
We're talking about food insecurity, increasing levels of poverty, homelessness, etc.
Senior Director, Economic Analysis and Forecasting, Department of Finance
Although we are not responsible for these measures, nor can we face or answer questions on them, there have been a number of measures the government announced that are particularly pointed at these questions. Housing measures, in particular, are aimed to not only balance the market entirely but to also help out those who are more stressed. The key thing I would point out is that the Canada groceries and essentials benefit that was recently announced—
Conservative
Sandra Cobena Conservative Newmarket—Aurora, ON
I'm sorry, but I know about the government's announcements. I'm asking about your forecast. We have this review, which states that Canadians are facing food insecurity, poverty and homelessness, and that the standard of living is at risk, so I don't need you to dictate the government's announcements. I'm asking about your analysis and your forecast. Do you expect this trend to continue, yes or no, and what are the assumptions that you're using for your forecast?
