Human Resources Committee on May 28th, 2015

[Evan Siddall]

The investment in affordable housing program was first introduced in the economic action plan or 2008-09 and then renewed again and extended in 2013, as I recall. In addition to that, CMHC continues to provide research and support for assisted housing providers through our affordable housing centre as it prepares to transition from the end of some of those operating agreements that you refer to.

[Libby Davies, NDP, Vancouver East, BC]

Do you think it's important to have long-term, sustainable housing affordability coming from CMHC through government funds to ensure that continuity and the seed money that's needed for the provinces and so on?

[Evan Siddall]

We continue to provide policy advice to the government and ideas on additional programs and current programs, and as I said, we do help these housing providers transition to an era when those operating agreements expire.

[The Chair, Conservative, Phil McColeman]

Thank you. That's over the five minutes and the end of that round.

Now we move to Mr. Butt.

[Brad Butt, Conservative, Mississauga—Streetsville, ON]

Mr. Chair, I'm going to continue to follow on the housing theme. I appreciate Mr. Siddall being here on behalf of CMHC and sharing some time with the committee this afternoon.

Is it not correct that in the case of most, if not all, of the operating agreements with federal co-operative housing that the operating subsidy expires at the same time the mortgage on the property is paid off? I know two co-ops in my riding are actually going to be net ahead of the game, because their mortgage is actually more than the subsidy they're getting from CMHC. Is that not correct: is that not how these agreements are structured, that when the mortgage is done, the subsidy ends?

[Evan Siddall]

That is exactly how most of those agreements are structured; that's right.

[Brad Butt, Conservative, Mississauga—Streetsville, ON]

So it is a fair statement to say that there are many co-ops across the country where their monthly mortgage payments to CMHC are higher than the actual subsidy they're getting to subsidize some of the affordable housing units within the complex.

[Evan Siddall]

If their mortgage....

Could you repeat the question, if you don't mind?

[Brad Butt, Conservative, Mississauga—Streetsville, ON]

If they're paying a 35-year mortgage of $10,000 a month on the property—most of them were 35-year mortgages, as I understand it—but maybe getting only a $6,000 a month subsidy to help subsidize the operation of the property and provide some of the units, they're actually $4,000 a month ahead when the agreement ends.

[Evan Siddall]

I don't know if that's true, and in how many cases it's true.

I may have an answer here....

The answer is, yes, that is true.

Thank you to my colleagues.

[Brad Butt, Conservative, Mississauga—Streetsville, ON]

I'm not saying that's the case for all of them.

[Evan Siddall]

No, no.

[Brad Butt, Conservative, Mississauga—Streetsville, ON]

Some of them will be net, and some of them may have some issues, but as I understand it, most of them will at least net out even at the end of the operating agreements.

[Evan Siddall]

That's right.

[Brad Butt, Conservative, Mississauga—Streetsville, ON]

Right. The subsidy and the mortgage are essentially the same.

[Evan Siddall]

That's right, in most cases.

[Brad Butt, Conservative, Mississauga—Streetsville, ON]

They're now mortgage free.

Perhaps you could give us some comments on the housing market in general, what you're sensing, or what CMHC is sort of sensing. We get comments all the time: there's a bubble that's going to burst, and people are buying houses they can't afford. Could you share a bit of your expertise and knowledge on that?

As a supplementary question to that, what is the solvency and status of the mortgage insurance business that you are doing? Are you still feeling fairly bullish about how it's working? I certainly know from the investment property side, where many apartment buildings are being bought and sold and CMHC mortgage insurance is backing up those mortgages, that industry is very pleased with that program. They give me excellent feedback all the time.

Perhaps you could take a few minutes to give us your sense on a couple of those things. Again, I appreciate your being here today.

Thank you.

[Evan Siddall]

Sure. It's my pleasure to be here.

Mr. Chair, that was a two-part question. The first was on the status of the housing market, and the second was on the solvency of our mortgage loan insurance business.

With respect to the housing market, we endorse comments that in general Canadian housing markets are modestly overvalued. We're not dispirited by that. Markets go up and markets go down. Sometimes they're a little overvalued and sometimes they're a little undervalued. Our assessment in general is that markets are a touch overvalued.

Last year we published for the first time, and republished last week, as we will do quarterly, something called our house price analysis and assessment framework. It uses, based on economic background—I won't get into the technicalities of it because it will bore me and you even more, I'm sure—different measures of the market, the performance of the market and status of individual housing markets in 12 different cities in the country. In general, after that work, which was quite extensive, we pronounced a robust housing market that we think will evolve naturally.

As I said, markets are a little overvalued and they're a little undervalued. There were a couple we picked up as being of higher risk. Those were Regina, Winnipeg, Montreal.... Regina and Winnipeg we thought were at high risk primarily because of overbuilding and oversupply in those markets, and Montreal and Quebec City at modest risk in part because of their price levels and some overbuilding as well, in particular in the condo sector, which is also a challenge in Toronto. In general, we believe the markets will evolve naturally, as markets do from time to time, and that's what we project for the future year.

We project a moderation in house prices. We do expect a potential decline in house prices in Alberta as a result of the oil price adjustment and in particular the unemployment that would result from that.

I'll just add briefly that with respect to the solvency of our business on the mortgage loan insurance side, CMHC returned $2.6 billion of profit to the government in the past year. It's a very profitable business. That's all of our business, but the majority of that is our mortgage loan insurance business. We retained $16.5 billion worth of capital in that business, which is almost double the regulatory minimum we think is needed from a solvency point of view.

[The Chair, Conservative, Phil McColeman]

We're out of time on that round of questioning.

Committee members, we have to deal with voting on the estimates that we've been dealing with today. It's part of the business of dealing with the estimates, as we have today. I know there is a desire for perhaps one quick question in the next round.

Mr. Davies, if you have one quick question, I'll allow it. After two minutes I'll call it, and then I'll go back to Mr. Mayes.

[Don Davies, NDP, Vancouver Kingsway, BC]

Thank you, Mr. Chairman.

I have two questions to ask, so I'll have to make a decision. I guess I'll come back to this one. In total, $40 million in the estimates was not spent for youth; 31% was underspent for adult literacy; and 25% was underspent for people with disabilities. I think the minister mentioned that the reason for this was the Magna Carta. That doesn't seem right to me.

I'm going to put it to you that the real reason this money wasn't spent was that there was an order from the minister to the department to balance the budget whatever the cost, even if that meant not spending moneys that had been authorized by Parliament to be spent on these targets. Is that the reason the money wasn't spent?

[The Chair, Conservative, Phil McColeman]

I'll just remind the committee, as usual, that when we have government officials, there are some questions that are obviously bound to be answered because they deal directly with the subject matter, but if it is something they feel is outside their mandate, they are not obligated to answer.

[Ian Shugart]

We do not work, Mr. Chair, on the basis of overall funding approaches to grants and contribution programs. These programs are administered program by program on that basis alone. There are, in fact, many reasons, particularly when you look at the span of four or five fiscal years, as I think some of those numbers do, that account for variations year to year in spending, including underspending.

The minister referred to the results that are looked for. There is nothing actually automatic about the applications of these programs. They are assessed. There have been from time to time administrative difficulties, which our work on modernizing the administrating of grants and contributions, we believe, will help and facilitate. But these are done on an individual program basis and the decision-making is based on a number of factors, including the particular policy objectives that are sought for each of those programs. Some are subject to changes in terms and conditions and policies, which will on occasion affect the level of take-up by the community.

It's very difficult to give a comprehensive answer, but I can tell the honourable member, through you Chair, that we administer these on the basis of each individual program and not under any particular fiscal objective.

[The Chair, Conservative, Phil McColeman]

Thank you very much.

Now, Mr. Mayes.

[Colin Mayes, Conservative, Okanagan—Shuswap, BC]

Thank you, Mr. Chair.

I have a quick question. I noticed with regard to the loan default for student loans, it says that the department will review policies and legislation to reduce student loan defaults and increase recoveries for loans. Is that an ongoing thing, because that was one of the things that was actually printed regarding loan defaults on student loans in the National Post. My son read it and he kind of ragged on me a little bit because he paid his way through, while you're letting people get student loans and then they're not repaying them.

I'm wondering. I know it's only 13%, but still, is there anything you have in the works to try to get better accountability from those students who get loans?

[Ian Shugart]

Chair, this is an entirely legitimate preoccupation of members of Parliament and of the department. When these loans are entered into, they are obligations upon the student who has taken the loan and we treat them as such.

That said, members will understand there is a wide variety of circumstances. There is the provision and acknowledgement of that through the repayment assistance program, where the status of the loan is rehabilitated and there are provisions made to facilitate that. There are also, as the chief financial officer could regale us with, write-offs in any given fiscal year. We take no pleasure from those write-offs. We're answerable for them, and we have measures under way with Canada Revenue Agency to work together to try to reduce those outstanding loans. We will continue with those efforts in the days and years ahead.

Chair, I wonder if I could, in the absence of Mr. Cuzner, make a small correction. There were a lot of numbers that we've heard and have given today. Reference was made to the number of hires in the call centres. My colleague has just confirmed that that was 101, not 138 as we had indicated. I would like the record to show that.