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.
4:30 p.m.
Assistant Chief Economist, Royal Bank of Canada
That's why we're calling this a crisis right now. Even middle‑class people are struggling to become homeowners. As a result, this issue must be urgently addressed.
4:30 p.m.
Liberal
The Chair Liberal Bobby Morrissey
Thank you, Madam Chabot.
Mr. Boulerice, you have the floor for six minutes.
4:30 p.m.
NDP
Alexandre Boulerice NDP Rosemont—La Petite-Patrie, QC
Thank you, Mr. Chair.
I want to thank the witnesses here today for this key study of a crisis that affects so many people in all our constituencies.
Mr. Hogue, in your recent study on the affordability of the real estate market, you emphasized that high interest rates were affecting home ownership and sometimes even retention. We can't just look at individual cases. However, people we know in British Columbia have seen their mortgages increase by $2,600 a month, bringing their monthly payment to $6,000.
From a broader perspective that covers more than an individual, a household, a family or an area, I want you to tell the committee how the high interest rates are affecting Quebec and Canadian families.
4:30 p.m.
Assistant Chief Economist, Royal Bank of Canada
Yes, high interest rates have contributed to the current crisis. This is the most recent phase of skyrocketing housing costs, particularly for home ownership. Earlier in the pandemic, property prices increased dramatically. Since the Bank of Canada raised interest rates, also dramatically, ownership costs have increased exponentially.
We believe that, once the Bank of Canada starts lowering interest rates—which we think will happen soon—property costs should come down a bit. However, our expectations shouldn't be too high in this area. The pressures will remain for a long time.
4:30 p.m.
NDP
Alexandre Boulerice NDP Rosemont—La Petite-Patrie, QC
In a recent statement, the Canadian Labour Congress, or CLC, said that high interest rates are hurting families and that the Bank of Canada should be asked to lower interest rates. The CLC is concerned about a rise in unemployment and job losses. You talked earlier about a perfect storm. This storm could also put people out on the street and worsen the homelessness crisis.
Do you see things the same way that the CLC presented them to us?
4:30 p.m.
Assistant Chief Economist, Royal Bank of Canada
We need to step back and look at the Bank of Canada's core mandate, which is to maintain inflation at a stable level of around 2% over the medium and long term.
Inflation has soared. The cost of living has risen dramatically in recent years, which plays a role in this and contributes to the difficulties facing many Canadians today.
Now that we've seen the impact of high interest rates, cooled the economy and brought inflation down, we're getting closer to a victory in this area. We aren't there yet, but we're getting there. As a result, we're expecting the Bank of Canada to start lowering its policy interest rate soon and to ultimately set the rate at more neutral levels. The rate could be a few percentage points lower than its current level. This should ease the pressure on many households, such as those households in British Columbia and other places facing drastic mortgage rate hikes.
4:35 p.m.
NDP
Alexandre Boulerice NDP Rosemont—La Petite-Patrie, QC
You referred to the Bank of Canada's mandate. Obviously, the federal government can't tell the Governor of the Bank of Canada what to do and when to do it. However, the government or Parliament must determine the Bank of Canada's mandate.
In a number of countries around the world, this mandate is twofold. Here in Canada, we have a single mandate. Its sole objective is to control inflation. However, many other countries around the world may have two or three objectives, such as home ownership or keeping jobs in the country. Economists, including Senator Diane Bellemare, have been promoting this solution for years.
Do you think that this solution should also be considered?
4:35 p.m.
Assistant Chief Economist, Royal Bank of Canada
This issue will be debated. The Bank of Canada's mandate is reviewed every five years. I think that the next review will take place in about two years. I'm sure that this issue will be part of the discussion.
I don't know of any country with a central bank mandated to promote home ownership. However, we know that some countries, such as the United States, are mandated to maintain low and stable unemployment. Canadians and the central bank need to discuss this issue.
4:35 p.m.
NDP
Alexandre Boulerice NDP Rosemont—La Petite-Patrie, QC
Thank you, Mr. Hogue.
Lastly, I want to say that the committee asked the Governor of the Bank of Canada to testify, to come talk to us and to explain his work. However, he turned down our invitation. We in the NDP find this quite deplorable.
Mr. Hogue, I won't ask you what you think. I don't want to put you on the spot. We in the NDP think that it would be worthwhile for the people from the Bank of Canada to take part in this discussion on the housing crisis.
That wasn't a question. It was just a comment.
4:35 p.m.
Liberal
4:35 p.m.
Conservative
Tracy Gray Conservative Kelowna—Lake Country, BC
Thank you, Mr. Chair. Thank you to all the witnesses for being here.
My first questions are for Mr. Hogue from RBC.
Mr. Hogue, I'd like to quote some numbers from your recent RBC housing affordability report. It says that as of October 2023, a “household earning a median income needed to spend...63.5% of it to cover the costs of owning an average home”.
Can you please confirm what that same number was in 2015?
4:35 p.m.
Assistant Chief Economist, Royal Bank of Canada
I would have to look at what the numbers were. It was certainly much lower than that.
4:35 p.m.
Conservative
Tracy Gray Conservative Kelowna—Lake Country, BC
The number was 39.3%, which is lower than even the long-term average.
I'm sure you would agree that, comparatively, home ownership was far more achievable in 2015.
4:35 p.m.
Assistant Chief Economist, Royal Bank of Canada
Relative to today, that's what our statistics show.
4:35 p.m.
Conservative
Tracy Gray Conservative Kelowna—Lake Country, BC
Your report showed that in Toronto, a household would need to spend 84.8% of its income to cover the cost of owning a home. In Vancouver, you referred to a “full-blown crisis”, where it now takes 106.4% of median household income to own a home.
Your chart refers to 140% of household earning for a single detached home, which is where it has skyrocketed in the Vancouver area.
As well, we now hear that chronic homelessness is up 38%. The federal housing advocate referred to homeless encampments as “a physical manifestation of exactly how broken our housing and homelessness system is” across Canada.
Is this the worst housing affordability that Canada has ever seen?
4:35 p.m.
Assistant Chief Economist, Royal Bank of Canada
This is the highest level of home ownership cost as a share of household income that we've had, according to our RBC affordability measure.
4:35 p.m.
Conservative
Tracy Gray Conservative Kelowna—Lake Country, BC
Thank you.
My next questions are for you, Mr. Lyall.
CMHC states that housing starts are down and will continue to be for the foreseeable future. The Canadian Home Builders' Association issued a press release on April 30 of this year stating that 54% of builders expect fewer housing starts in 2024 compared to 2023, and 31% stated that they have cancelled projects.
Are those numbers and trends similar to what you're seeing where you are in Ontario?
4:35 p.m.
President, Residential Construction Council of Ontario
Yes. I would suggest that it's a little worse here, certainly in the GTA and the GTHA. We have some pockets where things are a little different, such as Kitchener-Waterloo, which is a tech centre. Of course, tech is a bit on fire right now, although we'll see what some tax changes might do to that.
Right now, yes, we're staring into a pit. What we're saying is that when cranes come down, they're not going back up. We're seeing purpose-built rentals that were condos. The changes to the purpose-built rental taxation situation is very helpful in keeping some projects going, but we're headed down in a big way. Our subtrades pipeline is dry. It's drying up.
4:40 p.m.
Conservative
Tracy Gray Conservative Kelowna—Lake Country, BC
Claims were made in Liberal budget 2024 that they will build 3.87 million homes by 2031, or about 550,000 homes per year. For every day of the year for the next seven years, that's completing 1,515 homes each day, or one home every 57 seconds.
Given what builders are saying, how realistic is this?
4:40 p.m.
Conservative
Tracy Gray Conservative Kelowna—Lake Country, BC
Well, that's pretty impactful. Are Canadian builders able to complete building 550,000 new housing units in 2024 or 2025, based on what you know?
4:40 p.m.
President, Residential Construction Council of Ontario
No. We were at full production before some of this stuff happened. Now we're slowing down. We have hundreds of framing crews sitting at home now. It's working its way through the process.
Now, this is Ontario, but there are different parts, such as Calgary. They're doing very well right now, but their prices are going up. That will probably hit a bit of a ceiling. Vancouver, well, that's another planet, and Quebec is different again. They're doing some things really well up there, but they have their own housing problems.
4:40 p.m.
Conservative
Tracy Gray Conservative Kelowna—Lake Country, BC
I have one last quick question.
Do you believe the Liberal promise is attainable, given the measures included in the Liberal housing plan?
