Evidence of meeting #115 for Human Resources, Skills and Social Development and the Status of Persons with Disabilities in the 44th Parliament, 1st session. (The original version is on Parliament’s site, as are the minutes.) The winning word was need.
A recording is available from Parliament.
Assistant Chief Economist, Royal Bank of Canada
This is exactly why we're talking about a housing crisis here. These home ownership costs as well as rental costs have gone through the roof and are putting tremendous pressure on many Canadians, including all the way up to the middle class.
This is why you're having this committee study right now, I'm assuming, as well as looking for solutions across the board, across all levels of policy-makers here.
Conservative
Philip Lawrence Conservative Northumberland—Peterborough South, ON
From there, perhaps we'll talk a little bit about some solutions that you propose in here.
One thing you say is, “Lower interest rates will help” maybe a little bit, but not a lot. You do have also an excellent chart—so you don't have to go searching for it, it's on page 11—that shows the number of housing starts decline as interest rates increase. In fact, we've had testimony on this, as well.
If interest rates continue to stay high—and I will tell you that Tiff Macklem, Governor of the Bank of Canada, said that excessive government spending will lead to interest rates staying high—will that have a detrimental impact on housing affordability?
Assistant Chief Economist, Royal Bank of Canada
It will remove the chance of housing affordability improving in a material way.
The drop in interest rates that we're expecting over the next year or year and a half will help, but we'll have a mild.... Compared to the massive deterioration that we've seen in affordability, it would only restore a part of it.
Conservative
Philip Lawrence Conservative Northumberland—Peterborough South, ON
To solve the housing crisis, we've seen numbers either from the government or from the CMHC of between three million to five million additional houses or doors over the next 10 years.
Are your projections or forecasts showing that Canada will be anywhere near that over the next 10 years, if you have those projections?
Assistant Chief Economist, Royal Bank of Canada
The projections we have would come short. We'd need to [Technical difficulty—Editor] construction sector to deliver the number of units that will be needed over the next several years.
Conservative
Philip Lawrence Conservative Northumberland—Peterborough South, ON
Just to confirm, we've heard from multiple witnesses that the current Liberal plan will continue to have a deficit of housing supply, which will lead to continued unaffordability in the housing market.
Thank you.
Liberal
The Chair Liberal Bobby Morrissey
Thank you, Mr. Lawrence.
I believe we have Mr. Collins for five minutes.
Liberal
Chad Collins Liberal Hamilton East—Stoney Creek, ON
Thanks, Mr. Chair.
I'll start with Mr. Lee.
I've had a number of conversations since last fall, when we announced the GST removal on purpose-built rentals, with local construction firms as well as housing advocates about the benefit that flows through to those who are trying to reduce the cost of building affordable rentals.
Can you talk about what it means to those who you deal with in terms of the benefits that accrue to those in the industry?
Chief Executive Officer, Canadian Home Builders' Association
As we were saying earlier, I think that the removal of GST was an important part of making the business model viable for purpose-built rental, and more needs to be done. As I said, we need lower interest on loans, and that can come through CMHC as well. We need to be better able to access those loans with fewer hoops to jump through.
In the absence of doing that kind of thing and removing the GST on purpose-built rental, we've seen what the market has done, which is an inability to build. Unfortunately, right now we're seeing a big slowdown still because of the high interest rate environment and other issues, especially in the GTA. So we're going to need some more action to get more action in terms of construction moving forward.
Liberal
Chad Collins Liberal Hamilton East—Stoney Creek, ON
I asked that question because the government is being asked to remove the GST on purpose-built rentals through a private member's bill. Do you support removing it or is it...? How long do you think that incentive should remain in place?
Chief Executive Officer, Canadian Home Builders' Association
I'm sorry, you're saying they're being asked to retract the...? I think as long as you want more purpose-built rental built moving forward, you're going to need to not have GST on purpose-built rental or you're going to have to find some other way to make the business model more viable. The GST is part of it and, as I said, low-interest financing is part of it.
Municipalities and provinces have ways to also reduce the costs of building construction and need to play their part as well.
Liberal
Chad Collins Liberal Hamilton East—Stoney Creek, ON
Mr. Lyall, can I ask you the same question? You talked about GST incentives in your opening comments. You talked about it being one of many incentives that are required to close the gap on cost and lower the cost to those who are seeking to access that product.
Do you support keeping the GST waiver in place now, or would you suggest that we move on and look to other initiatives?
President, Residential Construction Council of Ontario
We need to shock the market. Right now, we're looking at.... I can tell you that in our circles down in this part of the world, which is really my core base, we're doing comparisons now to 1991, where the industry went down 85%.
We got to the point...and I don't want to assign blame here, and I'm not partisan, but we tax housing too much. Housing costs are too high. We can't build new housing that the middle class can afford. If that's not a problem, I don't know what it is.
Mr. Hogue might comment on this, but when I look at housing costs relative to who we have to compete with south of the border, we're about 50% higher, with an apples-to-apples comparison. It's never been that far apart. The data points are staggering. I was a construction worker. I paid my way through university. I had a car. I had an apartment. I was able to do all those things. Life was very good for me at that time. That's impossible today.
Then I worked in government. I worked in trade, industry policy, technology policy. I was in economic development. I've been doing this job for 30 years and I've never seen numbers like the numbers we're looking at right now. They are frightening. I don't mean to scaremonger, but it's bad. We've got to get our costs down. A big part of that is we have one of the most inefficient development and building approvals processes in the world. That's not a knock. There are some municipalities and so on, and there are people working really hard at this. We have the people. Also, our taxes are too high. I could tell you about a comparison with Dallas, Texas.
Liberal
Chad Collins Liberal Hamilton East—Stoney Creek, ON
No problem.
Mr. Lee, I think everyone mentioned it's an all-of-government approach in terms of getting us out of this housing crisis, and it's taken decades to get us to where we are today.
I find it interesting that provinces come to us oftentimes. I'll use the Province of Ontario as an example. They come to us and ask for transit resources, and when we ask them for something on the housing file, we receive little support in return. I can go through, as my friend and colleague Mr. Long did, and tell you all of the programs where we have to assist the industry and not-for-profit sector in terms of providing support. Then when I turn to the Province of Ontario, I'm not certain anyone on this call in this meeting could name one program the Province of Ontario has right now to incentivize new development.
What does the federal government do when we have reluctant partners like the Province of Ontario when it comes to building either affordable housing or getting them on board for policy issues or matching funding like we're going to ask them for on our encampment fund?
Do you have any suggestions in that regard?
It looks like I'm out of time. The chair is going to jump in, but if you have something to provide in writing, I'll take it.
Liberal
Chief Executive Officer, Canadian Home Builders' Association
We need all levels of government working together. Finding that alignment and having those discussions are paramount because if we don't, we're going to just spiral the way we are right now, so we definitely need everybody working together.
Liberal
The Chair Liberal Bobby Morrissey
Thank you, Mr. Collins.
I offered the last question to Madam Chabot and Mr. Boulerice, but they were okay.
With that, we will conclude the first hour and 15 minutes of today's committee meeting. Again, thank you to the witnesses for appearing and providing their testimony. It's most appreciated.
I will suspend for a few moments while we transition to in camera to begin going over version one of the committee's latest report.
[Proceedings continue in camera]