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.