Human Resources Committee on Nov. 5th, 2009

[Michael Shapcott]

I will confess to you, Mr. Kennedy, as a long-time housing advocate, that I've often thought that violence sometimes might be necessary, but of course you can't put a gun to people's heads. This bill, although it doesn't put a gun to people's heads, adopts basically a naming-and-shaming strategy, which is the mechanism that's often used when you can't physically coerce. What it says is that the minister has 180 days to convene a process and to report back, and that provides some political accountability, some naming and shaming.

I mentioned that the federal, provincial, and territorial housing ministers used to have a practice of meeting on an almost annual basis. Certainly after they signed the historic agreement in 2001, they did meet on an annual basis. They stopped meeting in 2005. The federal government was invited to meet in February of 2008, but the federal government decided not to attend; “declined to participate”, I think, was the wording.

In August of this year, the provincial and territorial ministers met again in St. John's. The federal minister again declined to participate in the meeting, so clearly the provinces' asking the minister to come and meet with them is not enough to get the federal government. This bill will ratchet it up a bit more. It will say to the minister that she has to report back to Parliament. Then, when the minister reports back, it will be up to you and other members of Parliament to judge whether the minister has discharged her responsibilities.

[Gerard Kennedy, Liberal, Parkdale—High Park, ON]

To the folks at FCM, just to be clear, you have a specific strategy that you call a national strategy. A lot of what has happened in the last number of years has been the devolving of housing responsibilities to municipalities—in certain provinces, at least—but your strategy really does call on the federal and provincial governments to pay for it. Is that correct?

It is a balanced plan, and I think there's a lot to be learned and gained from it, but just to be clear, it is saying to the other levels or orders of government: here's what we'd like you to do. Is that correct?

[Michael Buda, Director, Policy and Research, Federation of Canadian Municipalities]

It's certainly recognized that municipalities are going to play a key role, especially as enablers and implementers. But there's no question that our position is that the property tax is not really the most efficient or effective way of raising revenue for services to people, especially redistributive services like housing. So yes, it is asking for provincial and federal engagement in such a strategy.

What it's really saying—and I think Mr. Shapcott made the case very well, and so did Mr. Lyman—is that billions and billions of federal and provincial dollars are already being spent. The problem is that the commitments are made over short-term periods and there's not always coordination between the federal and provincial commitments. So really, what our national action plan is saying, which is why I think we can be here in support of this bill, is that we need some coordination between those two. We need to move towards a long-term footing. But most importantly, we need the four orders of government and also the other key actors on this issue to come together and look at this problem, partner together, and agree on a solution that is going to include very clear targets.

I think that is going to address some of your previous questions to Mr. Shapcott around accountability. You're right that political accountability is a tricky one to harness, but setting some clear targets is going to help with that.

So our strategy isn't saying that the federal and provincial governments have to just come up with the money. It's more like, hey, you're spending a lot of what we need, and we just need to figure out how to spend it more efficiently.

[Gerard Kennedy, Liberal, Parkdale—High Park, ON]

Have any of the groups who are here—and Mr. Lyman might be able to comment on this—looked at the play of market conditions versus government programs? For example, for a period of time in Ontario—and the Federation of Apartment Associations might see it differently—the cost of rent went up by double the rate of inflation. That was when rent controls were lifted, for example.

There are other times when there have been or have not been speculation taxes. There has been overheated real estate and sometimes it has soaked up affordable housing as people have bought out cheaper housing. Is there anybody in the country who looks at it that way? Otherwise, in any national strategy that just looks at rent subsidies, or direct build, or even co-op, you're still backfilling something where different levels of government can make decisions—for example, in zoning and so on. Then you end up picking up the pieces at another level of government. I think a real strategy would have to take some of those market conditions into account.

Who has looked at that? Has anyone?

[Michael Shapcott]

If I may take a first stab at that, we had a housing economist here in Canada, Duncan Maclennan, who actually worked for the federal government for a short time but left in frustration. He's now back in Scotland. He has done detailed work along the lines you are talking about in regard to the interconnection of the various forces and looking at housing as a serious economic issue. He has done that work for the Australian government. He has done it for the U.K. government and the Scottish parliament and so on, but was never asked to do that for Canada. I think we're behind the ball on that.

In the United States, there are a lot of economists who spend a lot of time looking at that. If I may say so, Mr. Kennedy, since the recession came on, which was of course triggered by the subprime mortgage crisis and rooted in the failed housing policy of the Bush administration and the idea in the administration that everyone could become a homeowner, even people with no income and no assets.... They devised an instrument to make that work. It seemed to be good to be true and, in fact, it was too good to be true.

So a lot of work has been done by economists before and after the burst of the bubble in the United States, but we're a bit behind here in Canada. I think yours is an important question. If I understand your question properly, part of what you're asking about is how many people can comfortably be accommodated within the private ownership and rental markets and, therefore, how many we don't need to worry about, in the sense that they'll get the good housing they need. And then, what group may not be able to be accommodated within the private ownership and rental markets without some sort of support or assistance?

I'll make this final comment—and perhaps others might want to jump in—that one of the early housing experts in Canada, Humphrey Carver, from the University of Toronto, suggested in 1948 that he could see no scenario in which everyone could be accommodated within private ownership and rental markets without some form of assistance from the government. I think his observations in 1948 are certainly true today.

So part of the question is this: what does that piece look like that will deal with the people who are not able to afford either ownership or private rental housing?

[The Chair, Conservative, Dean Allison]

Thank you.

That's all the time we have.

[Gerard Kennedy, Liberal, Parkdale—High Park, ON]

Chair, could I have 30 seconds of your indulgence, just for the benefit of our follow-on? I also wanted to find out about intelligent regulation as part of a strategy. I'll just leave that with people and if they have something on it, they can forward it to me or the members of committee.

Thank you, Mr. Chair.

[The Chair, Conservative, Dean Allison]

Thank you.

Also, if it's all right with the committee, I'll see if we can get an extra round in afterwards, but it's going to depend on what people's schedules are like. We're not having any votes, so if the guests are okay with it, maybe we can go for an extra round.

Mr. Lessard, the floor is yours, sir, for seven minutes.

[Yves Lessard, Bloc, Chambly—Borduas, QC]

Thank you, Mr. Chair.

Thank you for being here today, gentlemen, to provide information and tell us about your experience.

To begin with, I will say to Mr. Shapcott that I tend to agree with him. To establish a housing development strategy, groups like community groups and private sector organizations, which are often the project managers, have to be able to take part in the consultation forums. They all come together. I don't remember the name exactly. It is an office for coordinating social development and social housing.

We have two programs, the provincial program and the federal program. The purpose of the federal program is to bring together proportionate amounts for cost-sharing, and it's called "Affordable Housing". In Quebec, it's called "AccèsLogis".

That coordinating office includes the municipalities. For some time, I was the representative of the Union of Quebec Municipalities. There are also private organizations, the large cities like Montreal, Quebec, Sherbrooke, Valleyfield and so on, and community groups, like FRAPRU, a very well-known group.

Where I want to get to is that at the point when we decide on a plan, based on the resources available to us, and there are also technical resource groups established in the various regions that help us, there are two major problems that sometimes arise. The biggest problem is being able to interest the private sector in developing affordable housing. In Quebec, that is the big challenge.

I would like to know the Federation's opinion when it comes to the private real estate sector. What is needed if we are to get the private sector to be more involved? I will then have a question for the Federation of Canadian Municipalities.

[David Lyman]

The role in affordable housing is really dual. Often people look towards the private sector in terms of asking how do we get involved with the building of new housing, but the private sector is also heavily involved with current housing. Given the whole element of filtering where people are, the aging housing stock, and the fact that people are moving from different areas and different ages or types of housing, it's crucial for the private sector to be involved. And frankly, they're interested because they own the hard assets of the housing.

For instance, when discussions come forward on Canada's aging population, there will be a shift in the desire for types of housing. Certainly the private sector is fully involved, needs to be involved, and can't avoid being involved in movements towards conversion of housing from single-family dwellings to different or mixed housing and towards keeping seniors in place and all of those items. The vast majority of Canadians are living in private housing and we're involved in that sense.

Regarding how to maintain the private sector, it's certainly important to share the information and to be receptive to discussions with the private sector. As was mentioned in the presentation, the private sector is best able to provide the shelter component of housing, and a number of municipalities are moving forward, in that how do we have government assist with the supportive elements of the broader sense of housing so as to use the private stock?

Again, to answer the question more directly of how the private sector gets involved, well, it's by making it profitable for the private sector, by demonstrating to the private sector the benefits of being involved, and frankly, because a gigantic portion of the cost of housing is borne by government, by tax policies in addition to income support policies. So we need to work with the private sector on lowering those costs so that we can provide housing that is more affordable, especially on the moderate—

[Yves Lessard, Bloc, Chambly—Borduas, QC]

Excuse me, Mr. Lyman. I understand the reasoning, why the public sector is involved, and so on, but for them, it has to be profitable. There may need to be more thinking put into the question of the true role to be played by the private sector in a strategy to build affordable housing; let me explain. It isn't just the preserve of the private sector. I'm thinking of the municipalities, for example. In Quebec, in the cities, the municipal housing office handles this. So the municipalities also build housing. There are also community groups that take the initiative, and they become cooperatives.

It seems that the most dynamic players in this field at present, in Quebec, are mainly the municipalities and community groups that organize housing cooperatives.

I would like to hear from the Federation of Canadian Municipalities on that point. I don't know whether it's the same everywhere, in the other provinces, but in Quebec, without that contribution from the municipalities, it would be very difficult to get new builds.

I would like to hear your thoughts on that point.

As well, do the municipalities all have the necessary resources to carry out this mandate properly?

[Michael Buda]

Our action plan certainly supports the active participation of the private, non-profit, and co-op sectors, because we recognize, as you do, that they're going to play critical roles. We believe that some of the most significant value the municipal sector can bring to this issue is to engage and coordinate all those local actors. Municipalities certainly have that ability.

What's sometimes missing is ensuring that federal and provincial regulations, including tax regulations, aren't acting as a disincentive to private or non-profit or co-operative investments in housing, and in fact that there are some incentives. There are a number of these in our action plan; obviously they fall well outside the mandate of this particular bill.

Municipalities can act as a coordinating body locally, but there is a need for federal and provincial governments to look at some of the tax incentives.

[The Chair, Conservative, Dean Allison]

Thank you very much.

We're now going to move to Ms. Leslie. You have seven minutes.

[Megan Leslie, NDP, Halifax, NS]

Thank you, Mr. Chair.

Thank you very much for your presentations. I've enjoyed them quite a bit.

I will pick up along the lines of Monsieur Lessard's questioning. This will be for FCM. We know a lot about the downloading of services to municipalities, so of course we understand why FCM would want a national housing strategy, why you're invested in having action on housing. But why is it imperative that municipalities be included? What if this were written so that it didn't actually specify that municipalities are to be a part of this framework-making process?

[Michael Buda]

I will try to say this delicately, obviously. Municipal governments have a key role as enablers, facilitators, and implementers. There's no question that a range of national policy frameworks have been developed without the participation of municipal governments. We believe the development of frameworks like the one that's being proposed in this bill will be much more effective if you draw on the expertise and the networks that local governments can bring.

Not being explicitly included and explicitly involved doesn't mean that we still couldn't get there, but we believe this will be that much more efficient and effective if we are. I tend to believe that if municipalities aren't explicitly included, the natural tendency of federal-provincial negotiations would probably not include municipal governments simply because that's the way things are normally done. We understand why. We certainly respect provincial jurisdiction in these areas. That's the first principle of anything we do.

It's not a necessity, but we think it will make the end product better. It doesn't mean we couldn't get there. I think if we're not included, the status quo will likely continue. But our point is that, you know what, it's time for a change. One of these changes is the role that cities and communities play. A range of national objectives can lead this country more effectively to positive solutions.

[Megan Leslie, NDP, Halifax, NS]

Thank you.

Mr. Shapcott, you presented what the federal government is currently doing on housing and you asked what the goals, objectives, and targets are and where is the accountability for results.

I have a question for you, since you do so much research in housing. Where has this worked? Where have we seen frameworks with accountability? Where have housing strategies or other types of strategies—poverty reduction strategies would be similar—worked and shown results? Where have we seen results?

[Michael Shapcott]

We have a number of examples in various parts of the world. To take some jurisdictions that are perhaps closer to Canada, Wales and Scotland, which are both quasi- or sub-national jurisdictions of the British Parliament but with some independence, have both adopted very comprehensive sets of measures around housing and homelessness. Finland is another country that has done very extensive work in housing and homelessness.

Many countries around the world have not simply ratified international treaties as Canada has done. Not just the international covenant but at least a dozen other major international treaties all recognize the right to housing that Canada has signed on to. Many other countries have actually incorporated it into their domestic laws, which Canada has failed to do, and which this legislation seeks to do, and then they've put in place programs and so on.

I point you to Alberta. It's still a work in progress, because it was only announced in the spring of this year, but Alberta has set out a plan that sets very specific targets. They're proposing 11,000 homes, which will be built over a 10-year period. They've put a specific cost to it, the provincial share of which is $3.3 billion. They've already put in $1 billion, this year and next year, as a down payment on it. That is a work in progress.

Finally, I would point you to Quebec. As Mr. Lessard pointed out in his questions, there's quite a well-developed structure. It's perhaps not as well resourced these days as it should be, but there's a well-developed structure at the municipal level, with technical groups that help in the development and a variety of organizations that provide oversight and advocacy, and all of this works together much more effectively.

[Megan Leslie, NDP, Halifax, NS]

Thanks.

I have one more quick question for you. What is your take on rent supplements or rent allowances?

[Michael Shapcott]

They've been used quite effectively in some situations. I could point you to situations in Toronto in which, for instance, homeless people have been taken literally from the street and put into vacant private rental housing. Literally overnight, they've moved from being homeless to being housed. In the case of one pilot project, 98% of them or something along that line—I may be wrong on the exact number—remained housed three years afterwards. So this actually works.

One of the questions from a public policy perspective is that when you look at it over the long term, the dollars could begin to add up. Studies have been done comparing rent supplements over a 10- or a 20-year period, let's say. Of course, by their nature, rent supplements increase because rents go up, so rent supplements typically tend to go up. Studies show that over a period of time they cost more than, for instance, investment in bricks-and-mortar social housing.

There's the other issue that has been identified in the United States, which relies very heavily on a particular kind of rent supplement called a section 8 subsidy. There have been economic studies on this. One of the main studies, which I'd be happy to share with the committee, looked at 93 cities in the United States and found that in fact these rent supplements inflated the rents not just of the units for which the landlord was receiving the supplement, but for all the units. In fact, when you added up the overall increase in rents and then subtracted the amount of subsidy, tenants were still paying more money. They in fact had a negative impact on rents.

We have to look at a number of those issues to make sure when we're designing rent supplements that they don't actually have the perverse effect of inflating rents for everybody and making the situation worse for all tenants. But those are issues that can be addressed in very specific ways through looking at the various kinds of mechanisms and not expecting that rent supplements can be a long-term solution. They aren't; they're a short-term solution.

They certainly won't work in communities in Canada where there's a low vacancy rate. In the city of Toronto, there are about 5,000 vacant units; if I remember correctly, Statistics Canada reports that. If we were to provide enough rent supplements to fill every one of those vacant units, that would still just barely empty the shelters, let alone deal with the other 67,000 households on the waiting list in Toronto.

So clearly, rent supplements are not a single solution that's going to solve every problem, but they have their role as part of a comprehensive plan.

[Megan Leslie, NDP, Halifax, NS]

Thank you.

[The Chair, Conservative, Dean Allison]

Thanks.

We're going to now move over to Mr. Vellacott for seven minutes.

[Maurice Vellacott, Conservative, Saskatoon—Wanuskewin, SK]

Thank you, Mr. Chair.

Off the top here, just before I get to a couple of significant areas I wanted to address that haven't been touched on per se--and at least one of them hasn't been touched on at all--and just so we don't entirely reinvent the wheel, I'll say that I know the good witnesses at our table today are probably aware of all the stuff that has been done and that has been attempted over time.

I'm going to read something from Geoff Gillard of the Canadian Housing and Renewal Association. Back in the spring of this year, Geoff said: The recent 5-year renewal of the three key federal housing and homelessness programs ended more than a decade of short-term...housing funding announcements. This was a welcome shift....

Maybe it's not a 40-year plan, but I dare say that in this area most of us might agree that's a little far out the other side. We don't know what the demographics are--the birth rates and all those kinds of things. Projections could be made, but if we plan too far out then we have problems.

Maybe five years isn't quite long enough, but it's better than a couple of years or a few years at a time and that kind of thing. This gentleman, among others, was at least pleased at the recent five-year renewal.

I don't like to duplicate and overlap a lot of things, as sometimes there's a waste of efficiency that way, too, so the other thing I'd comment on here with respect to the bill is that as it's coming into force it would require the minister to “convene a conference” with provincial ministers, representatives of municipalities, and aboriginal communities in order to establish the national housing strategy.

I think it's been inferred, and maybe it's the elephant in the room here, but it's a reality that provinces and territories might be unlikely to participate in a conference with other parties. We don't know that for sure, but we know that a definite jurisdictional struggle of some sort might go on.

I'll give you an example in regard to my own riding of Saskatoon--Wanuskewin. I've just come from a huge funding announcement event there last weekend. It was significant. Several hundreds of thousands of dollars went into this. It's among Mennonite churches, for example. If you know Mennonite people, you know these folks know how to lever the dollars. They brought dollars in from their own provincial...and man, they got value for the dollar there.

In respect to what more needs to be done for the senior population, we've already had discussions with those fine people, and they are running into an issue. I am from Saskatchewan, so I'm not slighting the Saskatchewan government, but the present reality in being able to work it out in terms of advancing some of those unique housing modes that they want to do while still retaining some control of significant dollars from their contributing donor churches and so on..... They don't have that option, so we have a real rub there in terms of moving it ahead. In that situation, federal moneys won't come in until the province agrees, obviously, yet we have the provincial jurisdictional issue in which they say, “No, we will then take total control of who comes into those housing situations, even though significant moneys from you folks have come in”.

You may want to comment later. That was just to highlight or point out the very huge problem in terms of the jurisdictional struggle as we're trying to help those people resolve this thing. It's not in my court or my purview; I'd like to see it taken care of, but it's for the province to deal with, and I hope it does.

As you know, there is already an established federal-provincial-territorial process in place, with rotating chairs. In addition to that, the Canada Mortgage and Housing Corporation and Human Resources and Skills Development Canada are presently conducting consultations with provinces, territories, municipalities, and stakeholders--including the private sector and aboriginal organizations, as mentioned here--in order to seek their views on how current approaches to housing could be improved to better meet the needs of Canadians.

That input goes back to the government from the established federal-provincial-territorial process. I say that simply because maybe some adjustments need to be made there. Maybe there are merits to certain aspects of the bill, but we don't need to necessarily entirely reinvent the wheel, either, when we have a process in place that the provinces, territories, and federal governments accept and when we have the input of CMHC and HRSDC as well. That's the backdrop for it.

I do want to ask something significant. I don't know if any of you at the table have backgrounds in economics or accounting or banking. That might be the way to put it. This bill says, in subclause 3(2), “The national housing strategy shall provide financial assistance, including financing and credit without discrimination, for those who are otherwise unable to afford rental housing”.

My question is to all, or to as many as we have time to hear. Is it really a good idea to provide financing and credit to individuals who would otherwise not be eligible for such financing, particularly in respect of the good remarks that Michael made on the bubble that burst in the United States? Is this a good recipe? Is this a good thing to be entrenching right in the bill?

If this became law, the provision of credit without discrimination to all Canadians would introduce a significant financial risk to the Government of Canada. The Government of Canada, the federal government, would be liable for those defaulted loans, as I guess the U.S. was as well in that scenario, to some degree. The Government of Canada, then, being the guarantor, would either have to change conditions for our banks and lenders or provide the backup guarantee. This bill doesn't provide any threshold or test to determine how to assess whether an individual cannot otherwise afford rental housing.

I guess that's my basic question. Is it a good idea to provide financing and credit to individuals who would otherwise not be eligible for financing, with the very considerable risk involved in credit without discrimination? Where does it lead us?

[Michael Shapcott]

I'd be happy to take a stab at that.

You make some very interesting comments to frame your question. Of course, you spoke about the reality we face in Canada, which is that almost everything falls into the jurisdictional quagmire because, sadly, when the British government gave us the British North America Act of 1867, a lot of things were pretty fuzzy. Housing, in fact, is not mentioned in the BNA Act. Property is mentioned, but housing is of course more than just property.

We're not alone in this. Australia has also a federal government; however, they have come up with a mechanism to get beyond the jurisdictional struggle. They have what's called the Commonwealth-State Housing Agreement, which is a five-year agreement that provides funding.

It sets the roles of their states, which are equivalent to our provinces, and of the national government. They've been able to get beyond some of the curse of federalism that I know all of you struggle with because it's part of the reality of where Canada is. So I think there are some models that we can actually look to and say that if they can do it in Australia, then perhaps we can here in Canada.

To your question, as I read that clause I didn't see it as saying that we want to bring subprime mortgages to Canada—the NINJA mortgages, which means no income and no job or assets. I read it as speaking directly to the issue you mentioned in terms of the Mennonites.

I work with a group of Mennonites in the Kitchener area who are very actively developing homes. They find that with the patchwork of funding available from the feds, the provinces, the municipalities, and so on, they can get anywhere from 25% or 30%--sometimes 40%--of the actual construction cost, which means that for the rest of the cost they have to fund-raise or try to get private financing.

When they have gone to the banks, strangely enough, even though some banks have demonstrated in the past year a pretty bad record in terms of risk, the banks have often refused to give money to organizations that are developing non-profit housing because it doesn't fit within their business model. As I read this clause, it's not saying that we want to write a bunch of dodgy loans to people who we know aren't going to be able to pay them. That was the problem in the United States; we don't want to do that. It's saying that organizations that are providing housing should be given access to credit and that the federal government should play a role.

A friend of mine who is an economist, Hugh Mackenzie, of the Canadian Centre for Policy Alternatives, has noted that since the recession started it's increasingly hard for private sector and non-profit groups to get access to credit, but governments still can.

[Maurice Vellacott, Conservative, Saskatoon—Wanuskewin, SK]

Michael, I'm sorry, but I have to cut you off, because I want other quick responses here. I appreciate your response to me.

[The Chair, Conservative, Dean Allison]

As a matter of fact, I'm cutting you off.

Do you want to finish your thought?