Human Resources Committee on June 6th, 2024

[The Chair (Mr. Robert Morrissey (Egmont, Lib.)), Liberal, Bobby Morrissey]

Good morning, everyone.

The clerk has advised me that we have a quorum.

Those appearing virtually have been sound tested except for one witness who we still haven't been able to contact.

With that, I will call to order meeting number 118 of the House of Commons Standing Committee on Human Resources, Skills and Social Development and the Status of Persons with Disabilities.

Before we begin, I will remind all those participating in the room to ensure that, when you are not using your earpiece, you put it face down on the assigned location. Please try to avoid touching the microphone boom while it is live in order to prevent any hearing damage to our interpreters, whom we need to conduct the meeting.

Our committee meeting today is taking place again in a hybrid format pursuant to House of Commons orders. Members are appearing in the room and virtually.

I will remind you all that you have the option to speak in the official language of your choice. In the room, interpretation is available through the microphone and the earpiece. You can select the official language of your choice. For those appearing virtually, you can click on the globe icon at the bottom of your screen and choose the official language of your choice.

If at any time during the meeting there is a loss of translation, please get my attention by using the “raise hand” icon if you're appearing virtually. For those in the room, simply raise your hand to get my attention. We will suspend while it is being corrected.

I will remind you all to please direct all questions and comments through me, the chair. Wait until I recognize you by name as we proceed.

We will begin with the first round. As I indicated, we are still missing one witness, but we will proceed. We will connect with that witness when we can.

Appearing virtually are Tony Irwin, interim president, Canadian Federation of Apartment Associations, and Parisa Mahboubi, senior policy analyst, C.D. Howe Institute.

Our third witness, who we still have not connected with, is Carolyn Hughes, director, Royal Canadian Legion.

We'll begin with Mr. Irwin.

Mr. Irwin, you have five minutes for your opening statement, please.

[Tony Irwin, Interim President, Canadian Federation of Apartment Associations]

Good morning, Mr. Chair.

I am pleased to have the opportunity to address the Standing Committee on Human Resources, Skills and Social Development and the Status of Persons with Disabilities as you continue your study on federal housing investments. My name is Tony Irwin, and I'm the interim president of the Canadian Federation of Apartment Associations.

The CFAA has been a leading voice of the rental housing industry in Canada for nearly 30 years. We represent owners and managers of almost a million residential rental homes through both direct members and 13 member associations across Canada.

Purpose-built rental housing plays a critical role in Canada's housing continuum, with more than 10 million Canadians living in private-market rental homes. The CFAA supports the right to adequate housing in Canada, and we believe in the importance of housing assistance that upholds the right to choose and move freely. We all know that the CMHC estimates that we will need an additional 3.5 million homes by 2030, and at least 30% of that will need to be purpose-built rental housing.

From the early 1960s to the early 1980s, Canada's rental housing industry built hundreds of thousands of rental homes during a time when the economics made sense, aided by government support. For several decades that followed, the climate to build rental housing was decidedly unfavourable, which that meant very little purpose-built rental housing was built. As a result, the vast majority of our remaining rental housing stock was built before 1980 and is in need of extensive modernizations that require significant capital investment.

On the new-construction side, lengthy approvals, inadequate zoning, skyrocketing increases in government fees and charges, and construction costs also severely impair rental project viability. Reducing the cost to build rental housing in Canada is an urgent priority. The operating environment for purpose-built rental housing has never been as challenging as it is today. Rising interest rates and inflationary pressures, including double-digit increases in insurance, property taxes, utilities and maintenance costs far exceed what rental housing providers are able to recoup in rents, causing many smaller operators to sell their rental properties and leave the business at a time when we need them most.

We support strong resident protections, but we are concerned that some provisions in the proposed renters' bill of rights will add another cost and administrative burden on top of everything else I have just mentioned. The HUMA committee report from October 2023 recommended “tax measures to incentivize private sector and non-profit investment in the construction of affordable rental housing”, the development of “an acquisition fund [for] non-profit and cooperative housing organizations”, increased capital funding for non-profit and public housing providers and an assessment of “the current suite of federal benefits supporting low-income renters to ensure they have the income supports they need, including through the Canada Housing Benefit”. We support these recommendations.

The announcement by the federal government to eliminate the GST for new purpose-built rental construction is a positive step. Provinces that charge a provincial tax need to follow suit. Increased funding to the apartment construction loan program and the expanded capital cost allowance for purpose-built rental housing are also steps in the right direction.

The CFAA has expressed concerns regarding the proposed increase to the capital gains inclusion rate, and we would encourage a deferral on the condition that any gains are reinvested in rental housing.

The current housing affordability challenge in both rental and ownership is fundamentally a supply problem. The solution is to build enough housing, including purpose-built rentals, to keep up with demand. Canada is in desperate need of decisive leadership from our elected representatives who recognize that housing is not a partisan issue. Housing is a human issue.

We have before us many policy proposals that have the potential to make a meaningful contribution to our housing supply gap. However, if we are to have any chance of success, we need to act quickly and with a sense of urgency. We need to say yes to more housing, including purpose-built rental housing, and push back on those who say no. There will always be more time to debate and study, but the time to act is now. Future generations are counting on us, and for the sakes of my five kids, I don't want to let them down.

Thank you for your time, and I look forward to your questions.

[The Chair, Liberal, Bobby Morrissey]

Thank you, Mr. Irwin.

We'll now move to Ms. Mahboubi for five minutes.

[Dr. Parisa Mahboubi, Senior Policy Analyst, C.D. Howe Institute]

Thank you.

Good morning, Mr. Chairman and honourable committee members. I'm very pleased to have this opportunity to speak with you today.

Canada faces significant challenges in providing adequate and affordable housing for its residents. The C.D. Howe Institute's research has identified that spikes in housing prices are mainly due to the lack of housing supply, largely driven by municipal governments slowing down approvals. Rapid population growth fuelled by immigration has also led to a greater imbalance between supply and demand, particularly in regions where immigrants are more likely to settle, such as Ontario.

The federal government has implemented various initiatives to address the shortages of affordable housing over time. However, federal efforts have often focused on influencing demand, while the core issue remains the insufficient housing supply. Although housing is mainly a provincial responsibility, there is a proper role for the federal government to address the urgent need for increasing the housing stock. Federal investments are crucial to support the construction of various housing types and units. However, evidence suggests that, before 2020, federal investments were insufficient and needed better allocation, considering provincial variations in the number of people in need and the cost of building new residential units.

For example, the federal government introduced the investment in affordable housing initiative in 2011, committing $1.4 billion over three years. This program, which was cost-shared with provinces and territories, continued until 2019, with additional extensions and funding increases in subsequent years, reaching more than $1.9 billion over eight years. Between 2011 and 2019, this initiative addressed the housing needs of more than 400,000 households.

However, provincial allocations show that, although Ontario—the most populated province—received about 34% of the funding, only 8% of households were in this province, likely due to the high cost of addressing housing needs. Conversely, about 66% of the households were in Quebec, which received 24% of the funding allocation. According to Statistics Canada's Canadian housing survey, more than 1.5 million households had core housing needs in 2018, of which about 45% resided in Ontario compared with 16% in Quebec. These statistics show the significant funding gap and allocation misalignments with provincial needs.

Furthermore, the C.D. Howe Institute's research highlights that the federal government should focus on areas it controls, such as taxes and immigration. For example, exempting rental construction from GST was a good start, but more is needed. Updating GST thresholds for homes and doubling GST rebates to match inflation are additional steps. Ottawa should also consider tax tools, such as creating a rental housing investment tax credit.

However, the main challenge is municipal delays. Federal grants should be tied to housing-growth targets set with provinces, encouraging cities to streamline permit processes. Federal involvement should focus on outcomes, not micromanaging, in order to prevent delays and ensure that adequate housing supply increases nationwide.

When examining unaffordability, it is essential to consider debt-servicing ratios, which represent the percentage of disposable income allocated towards mortgages. While house prices relative to incomes have risen significantly over the last 35 years, the increase in mortgage debt servicing has been less pronounced. It increased from 6.5% in the first quarter of 1990 to 8.2% in the fourth quarter of 2023, much of it occurring postpandemic. Interestingly, non-mortgage debt servicing has remained flat postpandemic. Consequently, total debt servicing currently stands at only its COVID peak, despite record interest rate hikes.

These statistics emphasize that the real issue of affordability doesn't solely revolve around monthly mortgage payments. It also centres on the upfront cost of accumulating a down payment. Low interest rates led to soaring house prices, making it increasingly difficult for potential homebuyers to save up for more substantial down payments.

Unfortunately, Statistics Canada does not provide debt servicing breakdowns by city or province, which means missing out on valuable insights into specific market variations. This significant oversight demands attention.

In conclusion, I just think the housing crisis requires a coordinated effort between federal, provincial and municipal governments to create effective policies and investments that align with regional needs and streamline housing development processes.

Thank you.

[The Chair, Liberal, Bobby Morrissey]

Thank you, Ms. Mahboubi.

I apologize to witnesses and committee members. We'll need to suspend for a moment. Our third witness is online, but we have to do a sound test.

Thank you, Ms. Hughes.

We're back in committee session.

Ms. Hughes, the two witnesses who are joining you today have already given their opening statements. You have five minutes to give your opening statement.

[Carolyn Hughes, Director, Veterans Services, Royal Canadian Legion]

Thank you.

Honourable chairman and members of the parliamentary standing committee, on behalf of our dominion president, Comrade Bruce Julian, and our more than 250,000 members, thank you for inviting the Royal Canadian Legion to address you today.

I am the director of veterans services at our national headquarters, and I'm also a veteran. I speak to you today specifically in regard to veterans and the homelessness crisis, as well as our still-serving members who are finding it increasingly difficult to find and pay for housing.

For a bit of context, the Legion has been helping veterans since 1926. We have over 1,300 branches, each with volunteer service officers, who are our boots on the ground. We also have 35 professional command service officers and assistant service officers, who assist veterans every day with disability applications to VAC, appeals to the Veterans Review and Appeal Board, access to other VAC benefits and programs, and financial assistance through our poppy fund.

When I mention veterans today, it includes those still serving in the military and the RCMP, those who have retired and their families.

Military service is not just a job. It's a unique profession in which one can be called upon to put their life in danger to serve and protect Canada and our international interests. Reflecting today on the 80th anniversary of D-Day, we remember those who liberated France and other European countries and who made the ultimate sacrifice by giving their lives. We owe those who serve and those who have served in Canada and on missions around the world the utmost respect and gratitude by insuring their well-being.

Across the country there is a shortage in the supply of affordable homes to rent or purchase. Mortgage rates have escalated in recent years, causing a great strain on all Canadians and making it impossible for some, whether in uniform or not, to find adequate shelter for their families.

First, military members and their families are required to move to various locations across Canada as a result of career progression, to fulfill positions that are vacant because of retirements or for various other reasons. We hear often about how some members are experiencing great difficulty in finding adequate housing due to the lack of affordable housing.

Military housing, called private married quarters, or PMQs, may be provided for service members and their families. They consist of apartments, townhouses, duplexes or detached homes, but there are a limited number of them. They are convenient and economical for military members, who move frequently, especially those with lower pay in the junior ranks. When a member releases, though, they must leave the PMQ and seek housing of their own.

Second, many leave service with mental or physical health conditions, some with severe and complex disabilities. Some disabilities may not be fully recognized while a member is still in uniform, and that can cause problems later on. It can create greater instability, and many experience housing and financial difficulties given the state of the economy and the high cost of housing, food, fuel, etc.

Service officers help veterans across the country every day, quite a few of whom are homeless or at risk of homelessness. Our national “Leave the Streets Behind” initiative and our partnership with the military veterans wellness program are spreading across the country. It involves every level of the Legion, various law enforcement agencies and shelters. As we expand we continue to find homeless veterans in every area of the country. There is no accurate number for how many there are in Canada. Some couch surf at family's or friends' houses or sleep in their cars.

The Legion provides a connection to Veterans Affairs Canada and much financial support when a veteran is identified. This can include first and last months' rent, apartment kits with the essentials and connections to services.

Last, even when housing is secured, we are receiving an increase in the number of requests for poppy trust fund assistance for veterans. With the generous donations from across the country and abroad during the weeks leading up to Remembrance Day, we provide grants for food, heating, clothing, prescription medication, medical appliances and equipment, essential home repairs and emergency shelter or assistance all year long. These are meant to help veterans in distress to get back on their feet, but they cannot be used for ongoing support. There must be a sustainable long-term solution.

We don't have all the answers to solve the problem of homelessness or the lack of affordable housing, but we do advocate that it is important that all Canadians have access to affordable housing. For those most at risk with mental and physical disabilities, this is essential, and it does save lives. It takes co-operation and collaboration from all levels of government, and the time for action is now.

Chairman, we thank you for the opportunity to make this presentation, and I await your questions.

[The Chair, Liberal, Bobby Morrissey]

Thank you, Ms. Hughes.

We will now begin with the first round of questions, beginning with Mr. Aitchison for six minutes.

Mr. Aitchison, you have the floor for six minutes.

[Scott Aitchison, Conservative, Parry Sound—Muskoka, ON]

Thanks, Mr. Chair.

Thank you to all the witnesses who have presented this morning. I'm going to start with Mr. Irwin.

Mr. Irwin, you indicated that one of the lines you used was that the housing crisis today is fundamentally a supply problem. Is that correct?

[Tony Irwin]

That's correct.

[Scott Aitchison, Conservative, Parry Sound—Muskoka, ON]

Is part of the reason we have a supply problem because of the cost of building?

[Tony Irwin]

There's no question about it. Costs have become quite unmanageable for the industry to be able to build the rental housing that is needed.

[Scott Aitchison, Conservative, Parry Sound—Muskoka, ON]

Those costs are related to not just the cost of building.

Can you speak a little bit about what those costs are and what rental landlords are facing?

[Tony Irwin]

On the cost to build, we've talked about government fees and charges, which can be as much as 30% of the cost of an apartment. For context, the cost to build a single apartment unit in Toronto right now could be as much as $900,000. It could be $600,000 to do that in Ottawa. That's a significant amount. Of that, 30% on average would be government fees and charges.

There are all the inflationary pressures that we know. Obviously yesterday's announcement from the Bank of Canada is welcome. We'll need to see more than one reduction for it to have a meaningful difference in terms of reducing overall costs. Construction costs have skyrocketed. That certainly started happening through the pandemic. While there's been some relief there, we still experience that today.

Because of the cost of land, we talk a lot about ways we can utilize existing sites to build more towers on them if the land is already owned. That's a huge cost that can be taken away. That is still difficult to do when you have to wait four or five years to get approval.

There are a number of issues, but certainly there are a lot of cost pressures that make the environment very challenging.

[Scott Aitchison, Conservative, Parry Sound—Muskoka, ON]

I want to go back to a point you've just made. On a $900,000 unit to be constructed, say in Toronto for example, you're suggesting that up to $270,000 of that cost is related to government fees and charges.

[Tony Irwin]

That's correct.

[Scott Aitchison, Conservative, Parry Sound—Muskoka, ON]

How much do you have to charge in rent to make the numbers work on a rental unit that costs $900,000 to build?

[Tony Irwin]

What that says is that to build rental housing in Toronto under that sort of pro forma, you are looking at very high rents. Unless there's a way to bring that down, if it involves a partnership where maybe you're getting land for free, for example, or property tax abatement for 20 years or other sorts of incentives, you're going to be charging rents that are not going to be affordable. I would be the first to admit that.

It's because the numbers are what they are. It makes it very difficult unless there are other commitment supports and partnerships between various groups to bring rents down.

[Scott Aitchison, Conservative, Parry Sound—Muskoka, ON]

Of the millions of housing units the CMHC says we need to build over the next 10 years, how many need to be purpose-built rentals in your estimation?

[Tony Irwin]

We need over a million.

[Scott Aitchison, Conservative, Parry Sound—Muskoka, ON]

Over a million units...?

[Tony Irwin]

Yes, if the number from CMHC is 3.5 million, 30% of that needs to be rental, because the percentage of Canadians who rent is about that number. We can do the math on 3.5 million to get to your 30%. You're talking about over a million rental units.

[Scott Aitchison, Conservative, Parry Sound—Muskoka, ON]

Do you think it's even remotely possible to get to that number unless we get the cost of building these units down?

[Tony Irwin]

We do not.

[Scott Aitchison, Conservative, Parry Sound—Muskoka, ON]

Do you think it makes sense for the federal government to send money to cities that are increasing the costs to build?

[Tony Irwin]

I think that's a difficult situation, no doubt. I think we need to really have an honest conversation about growth, paying for growth, what that means and how development charges are structured. When we're telling you how it's impacting our ability to build, clearly something's not working. We really have to tackle this in a grown-up way to say that there must be a better way forward to address this.

We understand that there's an obligation for developers to pay for certain things around growth, and we don't argue with that. However, when you see the costs rising by several hundred per cent in places like Toronto, Mississauga and elsewhere, something isn't working. There needs to be a better approach to how we can address these costs, who pays for them and how they're paid for, so that we can get shovels in the ground and start building the rental housing that so many Canadians desperately need.