Human Resources Committee on June 13th, 2024

[Daniel Oleksiuk]

It's a good question.

I agree with the general sentiment that those charges are too high, and the shift from property taxes to taxes on building is a problem. As for exactly how to weigh all those factors and what to reward to cities, I think that may be complicated, but yes, I think that should be a factor, certainly. Cities that are taxing the production of new housing certainly should be a factor in how those funds get distributed. I think it is important.

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

Thanks.

I'll ask the same question of Mr. Finlayson.

In terms of the local costs and fees and charges, do you think it makes sense, Mr. Finlayson, that we have a federal government that, among its many programs, has a $4-billion fund giving money to cities based on promises to be better, while at the same time those cities are increasing the cost to build?

[Jock Finlayson]

That is definitely a concern. I can't speak to what's happening elsewhere in the country, but here in B.C., especially in metro Vancouver, the costs of various taxes but also development cost charges, community amenity contributions and a variety of other fees that are levelled on the development of new dwelling units add hundreds of thousands of dollars to the eventual cost.

What's happened over time—and I'm not known as somebody who believes taxes are too low, but Daniel's actually right. We've tilted the municipal finance structure a bit to essentially put a lot of burden on new builds. Although most citizens here would not agree that their property taxes are too low, they are actually quite low relative to the assessed values of the properties. There's a problem there.

Indeed, the federal Minister of Housing got into a spat with some municipalities here in metro Vancouver because, at the same time that they were pleading poverty and saying they wanted to see more affordable housing or any kind of housing come to market, they were ratcheting up further the community amenity contributions and development cost charges.

It's definitely a problem. I don't know that the federal government can fix it, other than linking its own funding to good behaviour at the local level and at the provincial level. That's really the lever that the Government of Canada has. They do not control the behaviour of municipalities or how they finance themselves.

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

That's a very good point.

I'll continue on with you Mr. Finlayson, on the number of units needed to restore affordability. We're talking about millions of units. Can you tell us what level of investment we're talking about? How much money needs to be spent in the housing space to restore some semblance of affordability?

[Jock Finlayson]

I'd have to get my calculator out and do a little bit of additional work, but it is monumental. Let me just say something else in that context, Mr. Aitchison.

Canada is already devoting 8% to 9% of GDP, of national income, to homebuilding, home renovation and real estate intermediation. The United States is spending 4% to 5% of GDP on the same thing. We're already devoting a lot of national income to developing, renovating, rehabilitating and transacting in housing.

I do actually worry a bit as an economist. I recognize that we need more housing, but I wonder whether we should be spending 10%, 11% or 12% of national income on housing. If we did, what are the things we wouldn't be investing in?

There's a limit to the pool of savings at the macroeconomic level that exists in Canada. We're already spending a tremendous amount of our national income on housing. I think there's almost some macroeconomic constraints, apart from everything else, that would stand in the way of a sort of monumental ramping up of the resources for housing.

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

If I could jump in, Mr. Finlayson, does that mean, then, that we need to attract new investment into the housing space?

[Jock Finlayson]

Absolutely. I mean, the needs are tremendous. One of the earlier speakers talked about co-op or non-market housing. We need all of it, certainly here in the province of British Columbia.

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

If I can jump in again, Mr. Finlayson, because I'm running out of time, if we need to attract new investment into the housing space to meet the needs, do you think it makes sense that the government has made changes to the capital gains tax rate? Is that going to help attract new investment into the housing space in a housing crisis?

[Jock Finlayson]

I think any increase in the taxation on capital deployment or the returns that will be generated from capital deployment will act as a headwind to capital formation. Higher capital gains taxes are not helpful to encouraging capital formation, whether that's in housing or any other part of our economy.

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

I think that makes the point fairly well.

I'm not sure how much time I have left. It looks like about five seconds.

Thank you, Mr. Finlayson. I appreciate your time.

[Jock Finlayson]

Thank you.

[The Chair, Liberal, Bobby Morrissey]

Thank you, Mr. Aitchison.

Next is Mr. Long for six minutes.

[Wayne Long, Liberal, Saint John—Rothesay, NB]

Thank you, Mr. Chair.

Good morning to my colleagues.

Thank you to the witnesses for your testimony.

I have a few comments before I ask some questions. I was elected as a member of Parliament in 2015. I think it was quite clear there was a challenge from coast to coast to coast with respect to housing and housing shortages, so early in our mandate, we came forth with our national housing strategy, recognizing that there was a leadership role for the federal government to play.

If we go back over previous governments, this situation has been created, to be clear, over many governments back many years, but if you look at just the government that preceded us, the Harper government, they didn't just back away from housing; they put the car in full reverse and stepped on the gas. The amount of housing starts in the previous government's mandate, or years in power, were very small.

Then we look at the current Leader of the Opposition. When he was housing minister, you could count on two hands the number of housing starts that were created under his mandate. You see his commitment and seriousness towards housing when he compares co-op housing to Soviet-style housing.

I recognize that my friends and colleagues across, as the opposition, will be critical, and it is their job to do that. I think two things that are very clear when you see their questioning and their responses to some of the witness testimony are that they feel this is all something we bear responsibility for and that it's all affordability, without recognizing there's an affordability crisis, really, worldwide. We're certainly not responsible for the affordability crisis in the U.K., in Europe and in the United States. We recognize we need to play a role. I think we all agree that all three levels of government have a role to play.

I'm from New Brunswick. Sadly, we have a premier and a Conservative government there who also have the same view with respect to housing. They don't view it as a priority. Our neighbours in Nova Scotia and Prince Edward Island joined us in removing the sales tax from new apartment builds, and you can see that Nova Scotia and Prince Edward Island have tripled the building of apartments in a three- to four-month period.

My first question to you, Mr. Oleksiuk, is this: How important is it that provinces join us on the removal of the tax on new builds, and what can we do to entice other provinces to take more of a leadership role when it really is their file?

Thank you.

[Daniel Oleksiuk]

This goes back to what Mr. Finlayson and I were talking about with the shift from property taxes to building taxes, effectively, whether it's GST, development cost levies, development cost charges or community amenity contributions—all of the many headings under which there are a lot of taxes on new housing. I think there has been this idea that increasing property taxes has been a third rail of politics, and it simply can't be done.

Given how bad things have gotten and how poorly incumbents have done by following that logic, I'd encourage you to think that it's actually not the case. Shifting all of the cost on to new people, on to young people and on to builders and then not taxing incumbents at all has not been a hugely successful strategy for incumbents.

What can be done at the federal level given that it is provincial contributions? Again, as I said in my introductory remarks, I think tying that kind of a tax shift to housing accelerator funding in the future is something that could be considered, because the provinces and municipalities are not using their tax bases to contribute. They're asking you, at the federal level, to effectively raise income taxes and corporate taxes to fund these kinds of things, and they're begging when they're not using their own tax base on the gigantic amount of property wealth that's out there.

[Wayne Long, Liberal, Saint John—Rothesay, NB]

Thank you.

We've come forward with programs through the national housing strategy, whether it's the co-investment program, the rapid housing initiative, the apartment construction loan program or the housing accelerator fund.

As a point of clarity on the housing accelerator fund, the purpose of that fund is to incentivize change. We're working, I think, very effectively across the country with municipalities to incentivize that change. Can the program be strengthened? It's a new program. Sure. However, the municipalities I talk to, and certainly those in my riding of Saint John—Rothesay—we were there to do an announcement a few months back—are very appreciative of the program. I think that goes for most municipalities across the country.

As a point of reference, all of those programs that we have come forward with, the Conservative Party has voted against. One of them was the right to housing. That right to housing was embedded in our national housing strategy and, again, the Conservatives voted against it.

I respect my colleagues very much. I know their job is to challenge, but when you vote against every one of those initiatives and really don't come forward with solutions of your own, that's a cause for concern.

[The Chair, Liberal, Bobby Morrissey]

Thank you. Your time has gone over, Mr. Long.

We'll move to Madame Chabot

The floor is yours for six minutes.

[Louise Chabot, Bloc, Thérèse-De Blainville, QC]

Thank you, Mr. Chair.

Thanks to the witnesses as well.

Ms. Laflamme, thank you for appearing as the organizer and director of the Front d’action populaire en réaménagement urbain, or FRAPRU, a Quebec organization that, for more than 40 years, has done much to improve the situation regarding the right to housing by making people's housing needs known and proposing measures to address them. I commend you for that.

This isn't the first study that we've done on the national housing strategy or on the housing crisis. With all due respect, we hear many witnesses discuss the market economy, laws, and supply and demand.

If we create supply, we'll also create demand and thus be able to meet the needs of the most vulnerable people and the need for more co‑operative housing.

Would you please comment on that logic?

[Véronique Laflamme]

Thank you for your question.

As I briefly mentioned in my remarks, for us at FRAPRU, the housing crisis is due to housing affordability as well as unavailability. It's also driven by real estate speculation. The crisis won't be resolved if we focus solely on increasing supply without considering the types of housing in which we invest public funding.

That's precisely what our main criticism of Canada's national housing strategy has been since it was announced. Despite its objectives, which are to reduce the number of households with urgent housing needs, funding has mainly been allocated to increasing supply but with very minor and insufficient affordability criteria. As a result, many billions of dollars have been invested in housing construction, but there's been very little in the way of results in increasing the number of social and community housing units that have actually been built. That's the problem. We see that the supply of social and community housing is stagnating, and even declining in Quebec for the first time, and the fact that federal funding isn't being allocated to increase the number of social housing units has contributed to that.

I must say, Ms. Chabot, that there has recently been a glimmer of hope, although our sense is that this is a race against the clock. We're witnessing a certain will to action. Since 2017, we'd been demanding that investments, the billions of dollars allocated under Canada's national housing strategy, be reallocated and invested on a priority basis in various forms of non-profit social housing. We've very recently begun to feel that we're been heard, but the programs haven't yet been redrafted. Consequently, before even more billions of dollars are spent, we urgently need to make sure that funding is earmarked for the non-profit housing sector. We can suggest ways to get there. The list is long, but I'm going to name a few.

The most general one, which would be foundational, would be for the federal government to set a clear goal to build various forms of social housing, meaning non-private-market units, which we still don't have. Yes, there's a goal in Canada's housing plan to build units, but we don't know how many will be non-profit, whereas they're the only ones that are consistent with the ability to pay of a majority of renter households. This isn't a trivial problem.

More specifically, there are programs, including the affordable housing fund, that have just been created and should focus entirely on the non-profit sector. The contributions option should be enhanced because many social housing projects can't build genuinely affordable housing without contributions. Loans are not enough, although they could play a role. The loans program is also more generous; it's the one with the biggest budget to date, but it's mainly designed for private builders.

So this is a debate that must be held. What purpose is served by these billions of dollars that, as a previous speaker mentioned, aren't unlimited? Does the government want to favour the private sector or strengthen the non-profit sector? CMHC has significant resources. We think that, if the government sends a very clear message that it wants to grant low-cost loans to the non-profit sector, that could have an impact, particularly in Quebec. We know that high interest rates are making matters difficult these days because they complicate financing arrangements.

The problem, more generally, is that there are no more self-sufficient programs like the ones we used to have before the federal government withdrew. You have to knock on three, four, five or six doors to complete financial arrangements for social housing projects. That's not right when you want to meet the needs of vulnerable people, especially those who are homeless. On that subject, we welcomed the creation of the rapid housing initiative, the RHI, which provided 100% funding for building costs. Unfortunately, it was the only non-recurring component in the national housing strategy. It has just been announced that it will become a component of the affordable housing fund.

Once again, there has to be a quick call for projects, and funding has to be disbursed so these projects can now be built without taking any more years.

[Louise Chabot, Bloc, Thérèse-De Blainville, QC]

You have 30 seconds left, Ms. Laflamme.

[Véronique Laflamme]

I don't know if we'll be able to discuss this again, Ms. Chabot, but, as you can see, we have many measures at our disposal. It's important that funding be disbursed so we can help renter households, which are now totally desperate and feel they've been left to their own devices.

[Louise Chabot, Bloc, Thérèse-De Blainville, QC]

Thank you.

[The Chair, Liberal, Bobby Morrissey]

Thank you, Ms. Chabot.

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

[Alexandre Boulerice, NDP, Rosemont—La Petite-Patrie, QC]

Thank you, Mr. Chair.

Thanks to the witnesses who are with us this morning for this important study.

Ms. Laflamme, thank you for all the work you've done in Quebec over the years to defend people who are in difficulty and need housing.

You were quite clear in your introduction about the fact that there are 1.6 million households in Canada that spend more than 30% of their incomes on housing, which leaves them in a precarious position and, in many instances, in poverty. You've taken stock of Canada's national housing strategy, which was introduced in 2017, under which more than $40 billion has been spent. Despite all that spending, the strategy hasn't really met people's needs. Another approximately $40 billion still remains to be spent under it.

Affordable housing has often been defined, for example, as housing at a price equal to or less than 80% of the average market price. However, you argue, based on reverse logic, that we need social housing at a price that shouldn't be determined by the market but rather by people's capacity to pay so that it doesn't exceed 25% of their income.

How could we use the $40 billion remaining under Canada's national housing strategy to build housing at a price that will be determined by people's capacity to pay, not by the market?

[Véronique Laflamme]

Good morning, Mr. Boulerice. Thank you for your question, which is an important one.

Yes, the benefits of establishing market-based affordability criteria are limited, especially in a context such as what we see in Toronto and Vancouver, for example, and across Canada, where median market housing rents are exploding. So you have to bear in mind that there are no guarantees that the so-called affordable rents that are available in the private sector and that are financed will actually remain affordable over time.

However, consistent affordability over time is the principal characteristic of social housing, whether it's provided by co‑operatives, non-profit housing organizations or public organizations. By focusing on these types of housing, we ensure that they remain collective property and that they meet the needs of future generations, in addition to the very immediate needs of the public.

Public lands are one of the major issues when it comes to how the billions of dollars remaining under the strategy should be spent. I didn't mention that in my previous intervention. The budget tabled on April 16 focuses on public lands. However, nothing to date has guaranteed that those public lands are intended for non-profit housing projects, either exclusively or at least on a priority basis.

We can see, in the context of the federal lands initiative and certain projects carried out by the Canada Lands Company, that the affordable housing requirements are low. In some cases, only 20% of units must be considered affordable. There's no guarantee for the non-profit sector even though it plays a key role in meeting needs. The utilization of public lands for which we've already paid collectively must therefore be monitored. That's a key element that we propose, and it probably would cost nothing.

The second element that we propose is that the Canada rental protection fund, which was just announced to protect affordable housing from speculation, be enhanced. The contribution component of that fund is inadequate, and there must be assurances that the fund will be reserved for the various types of social housing. This is an effective way to oppose speculation. It wouldn't help build new housing, but it would help maintain affordability by insulating rental buildings from the speculation dynamic.

Third, and I repeat this because it's of major importance to us, the affordable housing fund must be enhanced and earmarked solely for the non-profit sector. Considering all previously announced measures, according to my calculations, the figures don't even add up to $4 billion reserved for social housing out of the $40 billion remaining to be spent.

Consequently, the public funds set aside for the non-profit sector must be secured, and there must be contribution components that are clearly earmarked for that sector. That would send a message to non-profit sector actors that they can take on projects and that we encourage them to act because we need to meet existing needs.

It is extremely urgent that this message be sent. For the moment, however, funding that is clearly reserved for that in the affordable housing fund is inadequate.

There must—

[Alexandre Boulerice, NDP, Rosemont—La Petite-Patrie, QC]

I apologize. This is extremely interesting, but I only have a minute left.

In the NDP, we absolutely agree that public lands must serve the public interest. They must be used to build community and co‑operative social housing that meets people's needs. There have to be firm requirements. We've been saying so for years.

The mayor of Montreal recently said that she had an objective of 20% non-market housing. We, here in Canada, lag far behind certain Scandinavian countries. Do you agree that governments should work toward perhaps increasing the percentage of non-market housing to the 20% mark in Quebec and Canada?