Finance Committee on Oct. 8th, 2025

[Sandra Cobena, Conservative, Newmarket—Aurora, ON]

Thank you, Madam Chair.

Mr. Lee, I am particularly interested in your background. Of course, as a former lender myself, we share that experience, but also, just in reviewing your biography, I see that you were the first western professor to teach in a post-communist country. What an experience of a lifetime. I'm very interested to hear your experience, and I have some questions on that, if I may.

Would you agree that when governments centralize housing decisions, the results are slower builds, structural inefficiencies and less fiscal transparency?

[Ian Lee]

Yes. The first time I went was in March 1991. I went to Warsaw because the Government of Canada provided for it. Joe Clark was the minister, and Prime Minister Mulroney announced a program of support for Hungary and Poland, for just those two countries. We got a grant from external affairs to set up a business school in Warsaw.

I had never been to a non-western country—I had been to the Caribbean, like many Canadians—but I went there with unbelievable naivety, and I was just unbelievably shocked. The quality of the housing was unbelievably bad. The idea that they treated the environment better in the centrally planned economies.... I saw them pour chemicals on the ground in those countries. I didn't just go to Poland. I taught in Ukraine many times. I taught in Romania many times. I taught in Russia. It was common across those countries that the housing stock was lousy, terrible. As for the water and the infrastructure, one day you would get up, and there would be no hot water. There would be no water in the shower.

It was very poor, and of course, there was no transparency. Even though I went right after the collapse, it was still de facto a centrally planned communist country for another two to five years until they transitioned. The transition wasn't overnight. The housing stock was the shocker for me, because I was sleeping in private homes. I wasn't staying in a hotel. We were renting from local people. This was my first experience living in a non-western country, and it was a shock. It was a real culture shock for me. I had travelled all over western Europe before that. It was quite the experience going to a non-western country.

[Sandra Cobena, Conservative, Newmarket—Aurora, ON]

Thank you.

Talking about Canada, when the federal government declares itself a builder now—it wants to centralize building—do you think that creating another bureaucracy would be the right answer to alleviate the serious housing crisis that we have right now?

[Ian Lee]

I want to nuance my answer. I am not talking about non-profit housing or social housing. That's not my domain. That's the domain of my distinguished colleague beside me. I don't study non-profit housing or social housing. I don't study it. I'm just talking about private for-profit housing, which is the vast majority of the housing units in our country. If you want to look at the housing stock, CMHC—shout-out to CMHC—produces some of the most fantastic stats I've ever seen anywhere. It's really good data from their chief economist and their assistant economist.

To your point, I don't mean this to sound ideological. I have an enormous respect for the Government of Canada. My father was 42 years in the government, and my partner was in it for 35 years. I have relatives in the Government of Canada. I am not anti public servant. I am a public servant as a public professor in a public university, but I don't believe it's the government's role to build houses. They're the referee of the hockey game. Their job is not to tell Sidney Crosby when to shoot the puck. Their role is not to own the hockey team. Their role is to make sure they call penalties when somebody is cheating in the hockey game. The private sector just does a better job of building houses, or building cars, or building hamburgers.

[Sandra Cobena, Conservative, Newmarket—Aurora, ON]

Thank you for that.

Would you also agree then that the private sector in a market-oriented model—not federal agencies—are better equipped to determine the types of homes and where they are needed?

[Ian Lee]

You're touching on something I ran out of time to talk about. By the way, young people.... I have 250 students a year in five courses with 50 students per class. All I deal with are young people, and oh boy, they are angry at us. They are really, really angry at us.

To your point, I want to get these stats out very quickly that—it's either StatsCan, Immigration or Canada Border Services—75% of all of the immigrants to Canada locate in five cities. Whether it's a million a year or half a million a year, I'm not going to get into that debate. Where I am going with this is that the people I'm criticizing at the municipal level are really pro densification. Okay, that's fine, but we're talking about putting three-quarters of all of the immigrants into five cities, in the urban cores. This doesn't make sense. When you look at the polling data, it's across the board. It doesn't matter what your ideology or your political partisanship is. The vast majority of Canadians want to have their houses in the burbs. They want their place in the sunshine out in the burbs.

[The Chair, Liberal, Karina Gould]

Thank you, Mr. Lee. I'm going to have to stop you there. We have to move on to the next round.

Thank you, Ms. Cobena.

Mr. Sawatzky.

[Jake Sawatzky, Liberal, New Westminster—Burnaby—Maillardville, BC]

Thank you, Chair, and thank you to all of the witnesses.

Dr. Whitzman, I appreciate your being here and your leadership in pushing forward this evidence-based housing policy.

To come back to your introduction, you mentioned some measures that might increase affordability. I just want to make sure that you finished that train of thought. Are there any other points you wanted to make on that front?

[Carolyn Whitzman]

In terms of tax measures, it might be worth looking at the capital gains tax in relation to REITs, with the proviso that now is the perfect time to be buying private-sector housing that's at risk of losing affordability. We lost about 500,000 affordable, purpose-built rental units between 2011 and 2021 in the private sector.

Right now, REITs do have preferential tax treatment. There has been some discussion of taxing REITs at corporate tax rates. I think it might be worthwhile to look at ways to give REITs a break if they sell some of their older stock, which they very much want to do. If you look at B.C.'s rental protection fund, half of the apartments sold last year in B.C. were bought by the rental protection fund for operation by non-markets, which are much more likely to keep rents affordable in the long term while undertaking necessary repairs and are much less likely to evict tenants on the grounds of renovation or demolition. It would be possible to come up with a favourable tax treatment of REITs that sold some of their older stock, especially if they were to use the proceeds to develop new purpose-built rentals. That would be a very good tax treatment way of dealing with things.

Thank you for your comments, Mr. Sawatzky. You have to know that, if you want, you could really have a duelling prof situation in the next few minutes, because I have some slightly different takes from Professor Lee's.

[Jake Sawatzky, Liberal, New Westminster—Burnaby—Maillardville, BC]

Maybe we'll get there if we have enough time.

We have two things on the go here. There is the change of the fall budget cycle. This was meant to sync some major funding decisions with the construction season. Then we have Bill C-4, which is affordability tools and putting those on the table.

I want to get your take on the timing and predictability for converting policy into housing starts with regard to the change to the fall budget cycle.

[Carolyn Whitzman]

That's a really tough question, and I'm not sure that I'm best suited to answer it.

I think there are so many things happening so quickly right now at the federal level. I do spend a lot of time talking to bureaucrats. I was a bureaucrat for a while. Right after the fall budget, they're going into the spring 2026 budget. There is currently planning for the national housing strategy 2.0. Federal-provincial agreements end in 2027, as does most of the national housing strategy. It's everything all at once when it comes to timing.

To get to your point, I would say that any developer, whether they be a non-market developer or a market developer, thrives on certainty. They thrive on quick answers. I would 100% agree with Professor Lee that approval times and a great deal of uncertainty over zoning are a powerful brake on housing starts right now.

[Jake Sawatzky, Liberal, New Westminster—Burnaby—Maillardville, BC]

Thank you.

The curiosity is really getting to me, so maybe I'll see if we have enough time for this duelling prof situation. Maybe you could give your thoughts on that.

[Carolyn Whitzman]

I would agree with Professor Lee that development charges are a huge problem. Development charges come out of a huge infrastructure deficit, which comes out of about 50 or 60 years of us not using infrastructure wisely. By using infrastructure wisely, I mean sprawl. I mean that the affordability that he talks about was purchased at the expense of a lot of highways, a lot of water lines and a lot sewer lines that are not being used efficiently, not to mention public transit lines that are not being used efficiently.

[The Chair, Liberal, Karina Gould]

Professor Whitzman, can you wrap up in 10 seconds?

[Carolyn Whitzman]

I would be happy to wrap up right now.

We need to use our infrastructure much more efficiently, so I don't think that just continuing to build on the periphery or asking people to drive until they find a cheap place is a good direction to go in.

[The Chair, Liberal, Karina Gould]

Thank you, Dr. Whitzman.

Thank you, Mr. Sawatzky.

Mr. Garon for two and a half minutes.

[Jean-Denis Garon, Bloc, Mirabel, QC]

Thank you, Madam Chair.

I always find it funny when the Liberals repeat the minister's message telling us they're changing the entire budget cycle to bring certainty to the construction industry. Yet, they didn't table a budget before or after the election. Instead, they introduced a ways and means motion and proposed measures in Bill C‑4 to help people buy property. However, since the budget hasn't been tabled yet, people simply don't have the money.

We're still debating this issue in October, but the Liberals must follow the construction industry's cycle. Winter's coming. So I commend them for repeating the minister's message. However, nothing about this makes sense, it's basic logic.

Ms. MacKenzie, the issue of the disability tax credit goes far beyond the disability tax credit itself. Government officials said so here last Wednesday, and they're right: All refundable tax credits are calculated in the same way. The tax rate is multiplied by a maximum limit. If the tax rate goes down, the value of the tax credit goes down. That's generally how the calculation is done. It's not an error, it's an unintended consequence. Many other tax credits are calculated in the same way. Their value will be affected by the reduction in personal income tax.

Do you think we should review the way refundable tax credits are calculated in general? Would this ensure that this type of consequence disappears when personal income tax is changed?

[Amanda MacKenzie]

Yes, I very much think we should. I'll note that the disability tax credit and the medical expenses tax credit are non-refundable, so folks are not receiving any additional funds. They're just having their tax bill lowered. There is discussion around how, for the community and the financial security of people with disabilities, the disability tax credit should be refundable.

We need to have a formula. I'm not a technical expert on this, but it's common sense to me to have a formula that ensures a tax reduction results in a real tax reduction for everybody who is eligible for other federal benefits and credits that are available in the tax system.

[The Chair, Liberal, Karina Gould]

Thank you, Ms. MacKenzie.

Merci, Monsieur Garon.

For the final round of questioning, I believe we are going to both Mr. McLean and Mr. Stevenson for five minutes.

[William Stevenson, Conservative, Yellowhead, AB]

Thank you to the witnesses. I will try to be succinct with my questions.

As a CPA in public practice for the last 26 years, I've spent a lot of time with the tax system. It is self-reporting, so for a lot of it, the government is relying on the taxpayer to give out certain information, but sometimes that information is not always available to them.

I'll start by looking at affordability. You have both spit out a lot of information and statistics, but I'll start with Dr. Whitzman.

Do you know how many first-time homebuyers are buying a new home? Do you have a number?

[Carolyn Whitzman]

That is a really good question. I do not have that statistic on hand.

[Ian Lee]

I don't have it. I'm sorry.

[William Stevenson, Conservative, Yellowhead, AB]

The reason I'm asking is that, as most of us in here should know, GST does not apply to a used home; it applies only to new builds. If we have GST applying only to brand new homes for first-time homebuyers, I would submit that it applies to less than 5% of the actual buyers, if that. That might even be high. Looking at this as a program that is not applicable to 95% of the population, it's not really there. We don't have the numbers, so I can't ask about that.

Mrs. MacKenzie, I know you guys like to make sure that they don't lose the non-refundable tax credit. Was there any discussion about changing it to an actual deduction or a refundable tax credit, instead of it being a reduction in income at that end of it?

My personal thought is that those people who receive it are not paying that much tax anyway, so it doesn't really matter where on the tax return we're going to give it to them. I'm just wondering if you've looked at the other options.

That's probably the rest of my time, so I'll leave it there and cede the floor.

[Amanda MacKenzie]

First of all, Mrs. MacKenzie was my mom.

In terms of folks who are benefiting from the disability tax credit, there is the actual taxation issue. For us, it's more about how this is yet another barrier if people think it's not as worthwhile as it's purported to be, even if they are not paying a lot of tax. It turns out, by the by, that the Library of Parliament, in its analysis, found that the most impacted are people who are earning on the low end.

[William Stevenson, Conservative, Yellowhead, AB]

That's good. I was just wondering if you had asked that question about a different method of doing it instead. That's all.