Human Resources Committee on June 10th, 2024

Liberal

Michael Coteau Liberal Don Valley East, ON

Chair, did you say the meeting will be two hours?

Liberal

The Chair Liberal Bobby Morrissey

Yes. I'll advise those who may have other commitments to arrange for a replacement. I've been advised that we are approved for two hours from the time I called the meeting. That was roughly around five o'clock.

We will be proceeding. The first hour is the public meeting with the witnesses on housing. The last hour is committee business.

Those appearing virtually have been sound-tested and were fine.

Before I begin, I want to remind members again to keep your earpiece in the assigned place when you're not using it. Actually, if you unplug it, that would work best. Please avoid touching the microphone boom while it's live, in order to prevent hearing damage to the interpreters.

Today's meeting is taking place in a hybrid format according to the House of Commons rules that were adopted. Members and witnesses are appearing in person in the room and virtually.

I would like to remind all those appearing that you have the option to speak in the official language of your choice. In the room, use the headpiece and choose the official language of your choice. If you're appearing virtually, click on the globe icon at the bottom of your Surface device and choose the official language of your choice.

If there is an interruption in interpretation, please get my attention. We'll suspend while it's being corrected.

Pursuant to Standing Order 108(2) and the motion adopted by the committee on Monday, February 12, 2024, the committee is continuing its study of federal housing investments.

I would like to welcome the following witnesses.

We have, in the room, Steve Pomeroy, industry professor, Canadian Housing Evidence Collaborative; David Horwood, director, Effort Trust Company; and Tim Richter, president and chief executive officer, Canadian Alliance to End Homelessness.

We will begin with Mr. Pomeroy for five minutes or less.

Mr. Pomeroy, you have the floor.

Conservative

Tracy Gray Conservative Kelowna—Lake Country, BC

I have a point of order, Mr. Chair.

I want to note that we're hearing an echo. I noticed that we have virtual interpreters today, and we're having the same issue. I would like that to be on record.

Thank you.

Liberal

The Chair Liberal Bobby Morrissey

Thank you.

Mr. Pomeroy, go ahead for five minutes or less.

Steve Pomeroy Industry Professor, Canadian Housing Evidence Colloborative, McMaster University

Thank you, Mr. Chair.

Thank you to the committee for inviting me today.

I think the topic you are studying is important, not because we can change what we did in the past but because we can learn from the past to make sure that we don't repeat these errors in the future. The big error is the absolute lack of transparency in reporting out on what we have been doing with federal investments and the number of units that were created over the last two decades.

That data reveals that had we maintained the level of investment that we did between 1990 and 1994—before the termination of social housing programs, roughly 10% of completions in those years—we would have actually added another 330,000 units to our stock of non-market community housing in this country and gotten to a total of one million units.

I have shared with committee members a brief that has the bilingual data for these particular years. I'll come back to some specific recommendations about how I think we can improve transparency going forward.

Your committee asked three questions: How much federal investment did we make? How many non-market units of non-profit and co-op did we create? How many private sector rental units did we create? I have put together a detailed data piece that I've shared with you. This data was not easy to put together. I had to mine many sources, identifying areas where CMHC officials themselves didn't even know the data existed within their various files. I used to work there in the early 1980s and 1990s, so I knew where it was. It's not readily transparent, and it was a difficult task to put that together.

The bottom line is that, between 2001 and 2016, we created 41,000 new non-profit units, 10,596 co-operative housing units and just over 238,000 private rental units. That was done using a federal investment of $4.17 billion, much of which was actually through cost-shared programs. That was augmented by provincial cost-sharing in those programs as well. That money flowed directly to the non-profits and co-ops, not to private rental; that wasn't subsidized during that particular period.

In total, non-profit and co-op housing was about 2% of total completions, and the private rental sector was only 9% of the total completions of 2.7 million units over those years. Most of our housing was, in fact, directed to the home ownership sector. The fact that we undersupplied rental housing for those 20 years has had a significant impact in the current affordability crisis, where the lack of rental supply is now being exacerbated by high levels of immigration, with students and foreign workers who are renters contributing to the rental problem.

The funding sources for that $4.17 billion came from three places. A program called Investment in Affordable Housing, which started in 2001, provided about $125 million per year. That was augmented in the 2006 budget as a result of a negotiation between Paul Martin and Jack Layton, which created three affordable housing trusts totalling $1.4 billion that was flowed over the 2006 to 2008 period. Subsequently, during the economic recession or the global financial crisis recovery, Canada's economic action plan contributed $2 billion from 2009 to 2011, about $1 billion of which was directly to new supply. The $1 billion was for social housing retrofit. That's where those numbers actually come from.

As I mentioned, it was very difficult to put this data together. We just don't have good data sources. The CMHC used to produce—from 1955 to 2016—a very detailed statistical document that was of very much use to many researchers like myself to actually understand what was going on in terms of total housing starts, the mortgage market and insured lending, as well as public investment and social housing outcomes.

Since the programs were terminated in 1994—at the end of 1993—those tables have been diminished, and the publication has ceased completely. We really don't have good data going forward on this information—certainly not since 2016.

In terms of recommendations, in the old days—prior to 2002—as part of the CMHC's starts and completions survey, they had a box on the survey form that counted which units were funded under a National Housing Act program or affordable social housing. That stopped being collected, even though we continued to collect the data at every single start about whether it's rental, whether it's condo or whether it's home ownership. Simply adding a box back to what is now an iPad—that's where the enumerators collect that data—would allow us to have data on a monthly basis and be able to put it into our monthly housing statistics, along with information on rental and ownership housing.

As I mentioned, many of the programs in the past were funded under cost-shared programs with the provinces. Under the national housing strategy, that's also the case, but for a small part of the national housing strategy, only three particular programs—about 10% of total funding in the national housing strategy—are funded through bilateral agreements.

As part of this agreement, CMHC imposed a very onerous 12-sheet spreadsheet requirement for the provinces to report data for the purpose of claiming their cost-sharing amounts. There's an accountability framework around that, an action plan and a set of targets. That's 10% of the national housing strategy. CMHC does not apply that policy to itself. What's good for the goose is good for the gander. It would be great if this committee directed CMHC to produce the same level of data collecting and accountability for the unilateral federal programs that is done for the provinces.

My final point would simply be to make sure that data is published in the kind of tables we used to have, so it's available to researchers, parliamentarians and taxpayers.

Thank you very much.

5:05 p.m.

Liberal

The Chair Liberal Bobby Morrissey

Thank you.

Mr. Horwood, you have five minutes.

5:05 p.m.

David Horwood Director, Effort Trust Company

Good evening, Mr. Chair. I'm pleased to have the opportunity to address the standing committee as it continues its study of federal housing investments.

My name is David Horwood. I'm a principal at Effort Real Estate Corporation and the Effort Trust group of companies based in Hamilton, Ontario. Our group is active in the management and development of rental housing properties across Ontario. We are a third-generation family business that is proud to serve customers across the rental housing spectrum, and we take our responsibility as housing professionals and tenant advocates very seriously. We're active members of numerous industry associations that advocate for sensible housing policy at the municipal, provincial and federal levels.

As has been shared with this committee in the recent past, purpose-built rental housing plays a critical role in Canada's housing continuum, with more than 10 million Canadians living in private-market rental housing.

In the 1960s and 1970s, our business, like countless others across the country, was engaged in the development of rental buildings that served the demand among people who both chose and needed the flexibility that professionally managed rentals, as opposed to formal home or condominium ownership, could provide. However, due to a variety of factors—the most impactful being legislative changes federally and provincially that serve to impede, restrict, complicate or increase the cost of development—our business, like countless others, stopped building rental housing. Simply put, we could no longer advance projects for which we had no reasonable prospect of earning a modest return, let alone ones that justified the major risks inherent in projects of this financial and engineering complexity.

Although we have continued to manage and reinvest in our existing portfolio of rental properties, we avoided all new construction projects until very recently. The introduction and subsequent refinement of CMHC programs to foster new rental housing construction have been of critical importance in allowing us to return to the new-construction business. The program formerly known as RCFI—now called the apartment construction loan program—whereby federal funds are loaned to developers at below-market interest rates and subject to very strict qualifying criteria, has been one such vital initiative.

The MLI select program, another offering of CMHC, has been very useful for many developers—including us—trying to de-risk and reduce the cost of new rental construction projects.

The rebate of GST on new rental construction and the corresponding PST rebates in many provinces also serve to make new rental projects more viable by reducing a major cost item. I commend the current government for finally taking this step after years of deliberation. However, the regulations around this rebate remain incomplete. This will only delay new projects from starting, further delaying the vital increase in the supply it is intended and should create.

I strongly encourage you to consider a few simple adjustments to existing programs and further revisions to the legislation around rental housing.

Firstly, the apartment construction loan program was revised in April to require that applications be virtually ready to start, or be “shovel-ready”, as is said in the industry. Although I understand CMHC would like to consider projects that are ready for construction, I can tell you that, as a proponent of such applications, it is nearly impossible to commit to a final building design with all required supporting studies and reports until one has actually been approved for the program. It's a classic chicken-versus-egg problem: We won't finalize until we are approved, but we can't even apply until we are finalized. The process is serving as a major disincentive to new applications.

Secondly, just last week, changes to CMHC's MLI select program were introduced, and they have already been widely criticized by the development industry. One major change has the consequence of reducing the potential rental revenue that can be charged. The result is—clearly—a roadblock to projects being financially viable. The outcome will be dire. Far fewer buildings using this previously advantageous financing program will be contemplated.

Lastly, the HST rebate is planned to apply strictly to projects that started on September 14, 2023 or later—the date of the announcement. Developers who started rental projects earlier in 2023 or in 2022 that won't be finished until this year or next do not qualify for this critically important incentive.

I suggest that consideration be given to allow projects that started before this arbitrary date to qualify under the strict condition that any incentive be mandated to apply on an incremental, additional rental project.

What would happen? We will see experienced, proven builders be incentivized to build more buildings, resulting in more supply and more choice for rental households quickly.

I'm mindful of the time and would love to talk further about taxation of new projects and the MURB program that would lead to far more construction very quickly, but I will limit my remarks.

I thank you for the opportunity to share my comments. Like you, I'm eager to work together to achieve a measurable improvement in the housing market during what we would all agree is a period of crisis in affordability, in supply and in stability.

5:15 p.m.

Liberal

The Chair Liberal Bobby Morrissey

Thank you, Mr. Horwood.

We'll now go to Mr. Richter for five minutes.

5:15 p.m.

Tim Richter President and Chief Executive Officer, Canadian Alliance to End Homelessness

Good afternoon, and thank you for the opportunity to speak with you today. My name is Tim Richter. I lead the Canadian Alliance to End Homelessness. I'm happy to join you from Calgary.

Homelessness is a housing affordability problem. It's driven by high rent and low vacancy. It's not caused by mental illness or addiction. The surge in homelessness that we're seeing today, and the tent cities, as your study is discussing, are the result of the cost of living crisis. I'm going to discuss this with a bit of an analogy.

You know what I mean when I talk about musical chairs, right? In musical chairs, you get 10 kids around 10 chairs. Imagine that in this game, there's one little kid, a girl named Alice, who has a broken ankle. The music starts. They take a chair away, and the kids all sit down, except Alice. If you asked Alice, “Well, how come you're not in a chair?” She'd say, “Well, it's because I have a broken ankle, and I couldn't get to a chair fast enough.”

Is the issue that Alice is not in a chair because she has a broken ankle or because there aren't enough chairs? The fact is that there aren't enough chairs.

When we measure inflation using the consumer price index, unfortunately the CPI measures inflation based on a middle-income basket of goods. For low-income Canadians, 80% to 90% of their income goes to pay for food and housing costs, so for them the inflation rate isn't 2%, 3%, 4% or even 6%. It's tied to the cost of the two biggest ticket items that they have to pay for, food and housing. Now, depending where you live, we've been seeing food price increases of 10% a year and rent increases of over 20%. That's what low-income households are facing. That's their real inflation rate, and they have far less ability to absorb these increases.

Now imagine that you're struggling with a health issue. You don't have friends or family to rely on. You're in a low-income household. You don't have any spare income at the end of the month, or maybe you struggle with addiction or acute mental health concerns. When rents skyrocket and the availability of units decreases, low-income households or people with other needs end up forced out of their homes. Like Alice, they can't compete when there aren't enough affordable housing options or chairs.

I'm old enough to remember a day when mass homelessness like we see today didn't exist. The roots of our current homelessness crisis and the surge you see in tent cities, as you're talking about, are tied to the roots of our housing crisis. That began in 1980 with the federal withdrawal from incentives to support rental housing construction, followed by subsequent reductions in affordable social co-op housing investment through the 80s, and the elimination of federal affordable housing programs in 1995 and 1996.

As Steve could tell you in great detail about all of the housing programs between then and now, this is a problem that's over 40 years in the making. If we want to solve homelessness, we need to ensure that we have a healthy housing system, a system where there's affordability and choice from social housing to ownership. The whole system needs to be healthy. If the ownership system isn't working, isn't affordable, people stay in rentals. If the rental system isn't affordable, if there isn't a balanced market, the burden falls on the non-market, and people are pushed out the bottom.

To resolve these, we need a clear federal strategy to eliminate homelessness. Importantly, as the Auditor General has highlighted, we need to connect the housing strategy with the homelessness objective and the homelessness strategy. We need to have an approach that's grounded in cooperative federalism, and this is perhaps the greatest weakness in the federal government's approach today.

Solving homelessness requires a national strategy with an approach similar to a disaster response, where there's a plan and an agreement between the different levels of government on who does what within their different jurisdictions. If you imagine any natural disaster as it plays out, the local government leads; the community leads; and provincial and federal governments come in and support, right? That's key to the approach to ending homelessness.

The federal government's return to housing leadership with the national housing strategy and the new housing plan are welcome and long overdue. There's a lot in there that I think is really positive, and previous speakers have talked about it. It should be successful, I believe, if implemented well, in expanding rental and non-market housing construction, but that will take time.

In my mind, the Achilles heel of the housing plan and the housing strategy is the absence of federal-provincial-territorial coordination and collaboration. You could implement measures like the GST reduction or accelerated capital cost allowance, but if developmental charges eat up all of that freed-up space, you're no further ahead.

I'll leave you with three recommendations.

First, I would recommend a national strategy for the prevention and elimination of homelessness built in collaboration with the provinces and territories, with cities and experts as well, including people with lived experience, where municipal governments or community leaders lead the response to homelessness and other levels of government come in in their various areas of jurisdiction.

Just like when you're fixing your plumbing or your electricity, you need to turn off the water or electricity before you can fix the system, we really need a measure that's going to slow the flow of people into homelessness. The only way to do that in the short term is with a homelessness prevention and housing benefit, some form of income support in the short term to prevent people from becoming homeless.

Finally, create a true national housing accord with the provinces and territories that addresses the health of the whole housing system. It must include the creation of at least 655,000 units of social and affordable housing.

Thank you very much.

Liberal

The Chair Liberal Bobby Morrissey

Thank you, Mr. Richter.

We'll now begin with Mrs. Gray for six minutes.

Conservative

Tracy Gray Conservative Kelowna—Lake Country, BC

Thank you, Mr. Chair.

Thank you to all of the witnesses for being here today.

My questions are for Mr. Richter.

I would just like to confirm what you said in your opening statement, that the cost of living crisis is the biggest reason for the homelessness crisis.

President and Chief Executive Officer, Canadian Alliance to End Homelessness

It would be the cost of living crisis compounded by the housing crisis. It's created by the housing crisis, and it's been compounded by the cost of living crisis, yes.

Conservative

Tracy Gray Conservative Kelowna—Lake Country, BC

Great. Thank you.

The Parliamentary Budget Officer's report on the government's homelessness program, the Reaching Home program, found that since 2018, the number of homeless Canadians has increased by 20%.

Does this increase reflect the homeless numbers that your organization is seeing as well?

President and Chief Executive Officer, Canadian Alliance to End Homelessness

I think that is a very conservative estimate. I think the numbers are quite a bit higher. Our data on homelessness in Canada isn't great.

Conservative

Tracy Gray Conservative Kelowna—Lake Country, BC

Oh, wow.

President and Chief Executive Officer, Canadian Alliance to End Homelessness

We've seen in some of the communities we're working with increases in chronic homelessness from 50% to 100%.

Conservative

Tracy Gray Conservative Kelowna—Lake Country, BC

That was going to be my next question, so thank you for answering that.

Homeless encampments have become increasingly common. Is this the highest number of encampments that you've seen in Canada?

President and Chief Executive Officer, Canadian Alliance to End Homelessness

In my memory, yes, I would say that's fair.

Conservative

Tracy Gray Conservative Kelowna—Lake Country, BC

The Liberal government's national housing strategy initially set a target of reducing chronic homelessness by 50% by 2027-28. Is Canada on track to meet that target?

President and Chief Executive Officer, Canadian Alliance to End Homelessness

The short answer is no. I think the critique of the federal government's homelessness approach that was put forward by the Auditor General is probably the most comprehensive.

I would say there are a couple of challenges. They said they wanted to reduce chronic homelessness by 50%. The question is 50% of what? I'm not sure they have a good baseline. They have point-in-time counts, but in my mind, that isn't the most accurate approach, but they are good for what they are.

The other thing that I think is important is the federal government's Reaching Home is a program; it's not a strategy. The challenge the Auditor General highlighted, which I think is accurate, is that the government's homelessness goal wasn't matched with their housing plan. If homelessness is a housing problem, your housing strategy has to reflect your homelessness objective. I don't believe that to be the case at this point.

Conservative

Tracy Gray Conservative Kelowna—Lake Country, BC

Thank you very much for that.

The Liberals put Infrastructure Canada in charge of the government's program for reducing and ending chronic homelessness. However, Infrastructure Canada has not adopted reducing and ending chronic homelessness as a performance indicator for its homelessness program, which is listed as one of their core responsibilities.

In your opinion, shouldn't a government department in charge of reducing and ending chronic homelessness have that as a performance indicator for how their programs are doing?

President and Chief Executive Officer, Canadian Alliance to End Homelessness

Yes.

Conservative

Tracy Gray Conservative Kelowna—Lake Country, BC

Thank you. I agree.

Infrastructure Canada is also running the veteran homelessness program, yet we've heard that more homeless veterans are being found all the time.

Do you believe Infrastructure Canada is administering that program well?

President and Chief Executive Officer, Canadian Alliance to End Homelessness