Human Resources Committee on May 12th, 2022

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

Good afternoon, committee members and witnesses.

I call this meeting to order.

Welcome to meeting number 23 of the House of Commons Standing Committee on Human Resources, Skills and Social Development and the Status of Persons with Disabilities.

Today's meeting is taking place in a hybrid format. Some people are appearing virtually, including committee members, and the rest are present in the room.

I would expect all of us to follow the existing safety protocols related to the pandemic while we're here.

For members participating virtually, use the interpretation services at the bottom of the screen. As well, for those in the room, interpretation services are there. I would ask any member to notify me if we lose interpretation services, so that we can suspend while they are being corrected.

Welcome to the committee today, Monsieur Trudel from the Bloc Québécois, and Mr. Morrice from the Green Party.

I would advise members appearing on the screen to use the “raise hand” icon to notify me when they want to get my attention to be recognized. As well, would members in the committee room raise their hand. I will maintain a speaking order as identified.

I want to thank the witnesses for being here today and for understanding our delay, because the Commons does take precedence.

I had an early discussion with members of the committee and if I have agreement, we'll proceed with all of the witnesses giving their opening statements at once, and then we will go into a full round of questioning to conclude the meeting.

Do I have consensus from committee members to proceed that way?

[Some hon. members]

Agreed.

[The Chair, Liberal, Bobby Morrissey]

Thank you, committee members.

I will identify the witnesses who are appearing.

We have, from BILD Calgary Region, Brian Hahn, whom I spoke to earlier. Welcome.

From the Co-operative Housing Federation of British Columbia we have Thom Armstrong; from the Rose Corporation, Sam Reisman; from the Appraisal Institute of Canada, André Pouliot and Keith Lancastle; from the Canadian Home Builders' Association Kevin Lee; and from the Federation of Canadian Municipalities, we have Daniel Rubinstein.

I would advise each of the witnesses that you have five minutes or less to give your opening comments. I will advise all of you to please stay within the five minutes because our timing is condensed today. Also, when we open the floor to questions, realize that your questions as well as the answers take up the allotted time for the committee member, so if you could be concise, then we will get through all our list of questions.

I will start with BILD Calgary Region for five minutes.

Mr. Hahn, you have the floor.

[Brian Hahn, Chief Executive Officer, BILD Calgary Region]

Mr. Chair and members of the standing committee, good afternoon and thank you for the invitation to address you today on a very important matter for Canadians, which is housing supply and home affordability.

I am the CEO of BILD Calgary Region. We are a not-for-profit association representing the diverse voices of approximately 600 member organizations involved in all aspects of land development and the home-building industries. We are part of a three-tiered organization affiliated with our provincial colleagues at BILD Alberta and, nationally, with the Canadian Home Builders' Association.

As you will see, my colleague from the Canadian Home Builders' Association, Kevin Lee, CEO of CHBA, is with me.

The primary goals of our members are to ensure the affordable, vibrant redevelopment of established neighbourhoods and the development of new communities. Accordingly, BILD Calgary Region advocates for affordability, innovation and choice in the new home building industry. Notwithstanding more recent price increases in demand and prices, Calgary region house prices are amongst the most affordable when compared to other major Canadian metropolitan areas. A meaningful measure of credit for that needs to go the the City of Calgary, as well as the municipalities surrounding Calgary, for their effort. Similar recognition is due to our developer, builder, trade and supplier members for their diligence, creativity, innovation and commitment to affordability.

However, in recent years we have seen this house price advantage erode with significant increases in demand as supply struggles to keep pace. As this relative affordability erodes, the prospect of buying a home has become increasingly more daunting for many in the Calgary area, including first-time homebuyers. The matter of market-priced home affordability is often dinner table conversation with our four young adult children. Like my wife and I when we were their age, our children and their partners seek the independence and security of owning their own home.

Our members agree with the aims in the most recent federal budget. Most particularly, to make housing more affordable, more housing needs to be built and building more housing will require investments. Like other groups, we believe there is a common need for bricks and mortar. To achieve this, investment in hard assets is required, particularly infrastructure hard assets that build the capacity necessary to create and connect housing supply.

These types of assets include water, waste water and storm water lines and treatment facilities; transportation infrastructure including public transportation; and other community infrastructure such as fire, police and emergency response stations. Investment in those types of connecting hard assets—sometimes called off-site assets—creates the capacity required to connect new housing supply. Those same hard asset investments leverage the private investment of developers, home builders and others in the value chain, as well as other investments from provincial governments and municipalities to create housing supply. We believe there will be returns for all those investors, including all orders of government that invest. Returns to government and the generation of public wealth will come by way of incremental income taxes, property taxes, utility revenues and the like, which is all driven by associated employment, employment growth and private investment.

Further, we support the goal to incentivize cities and towns that are stepping up to get more housing built. Any program to drive a particular result must have an associated reasonable set of measurement. Simply put, what gets measured gets done.

We encourage fully transparent measurement and reporting of all government funding for housing, including the demonstration of the value-for-dollar on those investments. To support this, we encourage the adoption of a set of guiding principles similar to those adopted by the City of Calgary for their off-site levy program. Those guiding principles could include commitments to financial sustainability and resilience; accounting for the benefits that development brings to municipalities; the competitive attraction of private investment; genuine collaboration and consultation between government and industry; full transparency and accountability in respect of public and developer funds; and alignment and compliance with applicable laws.

Lastly, we encourage all orders of government to support the development of a competitive Canadian supply chain capacity. There may be many lessons to heeded from our collective experience over the pandemic, but competitively improving national self-reliance is almost certainly one that will serve Canadians well in the uncertain international future.

On behalf of BILD Calgary Region and our members, thank you for your focus on the important matter of investment in leading infrastructure in support of housing supply and improving market-priced home affordability for Canadians.

I'm available for your questions.

[The Chair, Liberal, Bobby Morrissey]

Thank you, Mr. Hahn.

As all the witnesses know, we will first conclude all of the opening comments and then will go to the rounds of questions.

Now we have Mr. Armstrong from the Co-operative Housing Federation.

[Thom Armstrong, Chief Executive Officer, Co-operative Housing Federation of British Columbia]

Thank you so much for the opportunity to appear before the committee to discuss the proposed housing accelerator fund.

My name is Thom Armstrong. I'm the CEO of the Co-operative Housing Federation of British Columbia. CHF BC is a province-wide federation of housing co-ops. We serve 260 co-ops with more than 14,000 member households. We're also a group of social enterprises, including COHO Management Services and the Community Land Trust Foundation.

Our main offices are in Vancouver on the unceded territories of the Musqueam, Squamish, and Tsleil-Waututh nations. I pay my respect to the original stewards of these lands.

The government proposes to invest $4 billion in a new housing accelerator fund, with the goal of increasing housing supply in Canada's largest cities by removing barriers to building housing more quickly. I want to start by saying that whether this fund is successful in achieving its objectives will depend in large measure on how it's structured and, more importantly, how it's targeted.

In our view, the government should target its investment in the proposed fund to serve four main objectives. Firstly, build new homes that are permanently affordable to low- and moderate-income households, which are the households that are most acutely disadvantaged in local housing markets. Secondly, free up land for non-profit and co-op developers to reduce the cost of housing development. Thirdly, incentivize partnerships between municipalities and the community housing sector and its developers, such as Community Land Trust, to increase the supply of non-market housing in larger municipal centres. Finally, allow municipalities to prioritize the acquisition of existing, purpose-built rental properties by the community housing sector if and where it can be shown to achieve the same or similar net outcomes in affordable homes.

I'll speak to each of these very briefly.

First, on targeting, some citizens are clearly more challenged than others when finding affordable housing. There's scant evidence to suggest that investing in untargeted new supply will improve housing affordability. We suggest that disbursements from the fund should be made based on measurable performance targets tied to median rents and incomes, and reserved for homes that will not be investor-owned. As the cost of money, supplies and labour all increase—we're seeing this daily and weekly—grants will be needed to fill the equity gap that's currently a significant barrier to affordability. These grants can come from the fund or they can be combined with funds from other programs under the umbrella of the national housing strategy. The point is that they need to be stacked and they need to be automatic, not subject to individual or separate application processes.

Secondly, the fund should be structured to create incentives for municipalities to provide land at nominal rates to community housing developers. I know free land is not enough these days to guarantee affordability. I wish it was, but without it, we have no chance.

Thirdly, in some parts of the country—I'm thinking of Vancouver and Toronto—community land trusts and other social-purpose housing developers are leveraging partnerships with municipalities to build entire portfolios of permanently affordable non-profit and co-op homes. These homes become even more affordable over time as they're held out of the market and operated on a not-for-profit basis by capable, community-based housing providers. The funds should encourage an expansion of these partnerships to build even more permanently affordable homes. In Vancouver, our community land trust is in the process of adding 2,300 new non-profit and co-op homes to various communities in the province that start at an average of 60% to 75% of average market rents, and those only get more affordable over time.

Finally, I wouldn't have imagined I would be saying this if I had been speaking to this issue six or 12 months ago, but as financing and development costs continue to increase, it may be prudent in some markets and during some economic cycles to consider the acquisition of existing, purpose-built rental properties as a complement to new supply. The community housing sector has been advocating for the development of capital programs to facilitate the purchase of older rental properties that are currently targeted by real estate investment trusts and other investors, and deploying some of the fund's resources to this end may slow, if not reverse, this growing loss of affordable homes in overheated rental markets.

In summary, the housing accelerator fund can have a positive impact on housing supply and affordability, but only if it is tightly targeted to encourage the development of new homes that will be affordable to low- and moderate-income households, or to fund the acquisition of already affordable homes to move them out of the market into what one commentator called “speculation-free zones”.

Municipalities will not be able to go it alone. Partnerships with the community housing sector will be the key to the achievement of these objectives.

I want to thank you again for the opportunity to speak to this issue today.

[The Chair, Liberal, Bobby Morrissey]

Thank you, Mr. Armstrong.

Now is Sam Reisman with The Rose Corporation.

Mr. Reisman, you have five minutes.

[Sam Reisman, Chief Executive Officer, The Rose Corporation]

Mr. Chairman and members of the committee, thank you for the opportunity to share some ideas with the standing committee. I'll briefly touch on some initiatives that I think are working, ones that might be expanded, and other novel approaches. My comments are generally directed towards purpose-built apartment buildings in major urban centres, but they may apply to other locales.

The Rose Corporation is a private developer that currently involved in the development of more than 600 units in York Region, 150 of which fit into some level or definition of “affordable”. In 2017, we completed the first purpose-built rental development in the region, literally, in generations. That's a problem. Our observation is that all purpose-built rental housing is good for the community and remains the least expensive form of conventional housing.

CMHC's commitment to shelter every Canadian in a home they can afford by 2030 is laudable, and their programs are forward-thinking, but they cannot accomplish this alone. Affordable housing will require all levels of government to buy in and do their part.

Fundamental changes of perspective need to be made to confront the challenges head-on, first by beginning to recognize that this is a crisis that has been generations in the making, and it will take generations to get it right. It follows that we must collectively recognize that affordable housing is a long-term investment whose benefits are also realized over an extended time frame. Using measurements that overemphasize short-term metrics in early years will lead to a suboptimal result.

Second, government policy impacting affordable housing needs to be well-coordinated. Currently, federal, provincial, regional and municipal governments are largely acting as independent agents. The result, from what I've recognized and seen, is a mishmash of incentives that literally don't speak to each other. Even same word, “affordability”, is defined by each government agency very differently.

While CMHC's programs are far and away the most cohesive and well-thought-through, enlisting the other levels of government on a set of consistent values, flexibly applied would result in expansive and cost-effective programs.

The following are some recommendations.

Given the current circumstance, CMHC should establish a liaison office to coordinate the various government initiatives and stimulate others. A sliver of the $4 billion would help accelerate this, and I can't overemphasize the value of doing so.

Another suggestion is to eliminate CMHC's requirement to retire mortgage debt for the duration of affordability. What that effectively means is having interest-only loans on certain qualified buildings.

Third, develop new market-priced apartment buildings that are immediately placed under rent control. We saw the experiment in Ontario effectively by accident when Ontario, really in a haphazard manner, threw on rent control from the 1970s on. When the industry changed, it turned to condominiums, but in the meantime, paradoxically, it formed a whole category of affordable homes that many people are living in now, which provide, basically, the affordable rental stock that we see. So, if we put them immediately under rent control now at market prices, we'll find that this solves a longer term problem.

I have some simple examples of cost or risk reductions.

Remove the requirement to assess HST on all new rental developments. That would reduce rents by about five per cent. Property taxes, although a provincial matter, are the single largest component of operating costs of an apartment building—about 10%. The province, working with the federal government and coordinating with them, could encourage the creation of lower property tax assessment classifications for new apartment buildings. There's a compelling rationale, which I can't go through here, for the assessment to run about 50% of the normal rate. A 50% reduction in property taxes would reduce rent by five per cent.

Interest rate fluctuations are the single greatest constraint in underwriting new apartment developments. Currently, CMHC goes a long way in mitigating that risk through its RCFI program. Nonetheless, the debt service payments change wildly as rates change. I suggest that, to qualified buildings and qualified developers, the payments be fixed even as the rate may vary. Development charges are about 10% of cost. If they were deferred, then rents could be reduced by approximately seven per cent. This has been a very effective policy in York Region, and the program should be expanded.

Land values are more variable, but as a percentage of cost, for the purpose of discussion, they can be pegged at around 10%. If the federal...provided grants, that would provide 7% of reductions.

In the last five points, I've identified cumulatively how rents could be reduced in an entire building by 25%, and by simple math it would be 50% if it were half the building.

Stepping out of my area of expertise, I would suggest that a negative income tax directed at subsidies to individual low-income families strikes me as a very efficient way to do it. Subsidies as low as $500 per month would dig deeply into the affordability crisis, and $1,000 per month would have an immediate, overwhelming impact.

My observations, though anecdotal, I believe would be backed up by research. Creating a sinking fund with the $4 billion, or part of it, to direct it that way would have a very ameliorative effect and could be part of a going forward program.

I know that I'm at six minutes, so I'll stop there.

[The Chair, Liberal, Bobby Morrissey]

Thank you, Mr. Reisman.

You can follow up on your points in the question round, as I'm sure you'll get questions. Thank you for your comments.

We'll now go to the Appraisal Institute of Canada.

Gentlemen, I forget which one of you was going to make the statement.

Mr. Lancastle, you have five minutes. Go ahead.

[Keith Lancastle, Chief Executive Officer, Appraisal Institute of Canada]

Thank you very much, Mr. Chair, for the opportunity to be here. We are privileged and honoured to be before the committee today. We appreciate the opportunity to provide our comments on the design and rollout of the proposed housing accelerator fund, as well as to provide some suggestions regarding how the government can build on the federal lands initiative to help increase housing supply.

By way of background, the Appraisal Institute of Canada has over 5,600 members that annually complete over one million appraisals, with a value of over one trillion dollars' worth of real property. Our members provide independent third party opinions of value on residential, commercial, agriculture and industrial real property. This also includes machinery and equipment.

Professionally qualified and designated appraisers continue to be an essential part of Canada's real estate market. Working alongside home builders, realtors, mortgage brokers, developers and homebuyers, appraisers form an integral part of Canada's real estate market. Our members work to meet internationally recognized evaluation standards that help to mitigate risks and stabilize the real estate market by ensuring that lenders, insurers, consumers and others make informed decisions. Appraisers also work with governments at all levels to ensure values are accurately expressed and that policy objectives are met. This includes work on property tax, feasibility studies, expropriation, as well as acquisition and disposition.

As a self-regulatory body, we have a strong focus on consumer protection. We maintain a rigorous disciplinary process and provide a mandatory professional liability insurance program to help protect consumers and our members' clients.

We are also proud to say that we have recently created a council on equity, diversity and inclusion to expand opportunities for aspiring appraisers and to do our part to help combat bias and discrimination in the real estate market.

Now for the subject and discussion that is before us today, which is addressing Canada's housing crisis by, in part, bringing on additional housing supply to the market.

I should say that rising housing prices is not a new issue. Over the past decade, federal government policies have been primarily focused on addressing the demand side of the housing continuum. While recent investments in affordable housing and the first-time homebuyer incentive have helped to alleviate some of the pressures on the housing market, more can and needs to be done.

The pandemic has highlighted the need for more targeted policies to help increase the supply of housing in Canada. While affordable housing initiatives have had some positive impact, housing affordability continues to be a major issue for middle-income Canadians. Demand is expected to persist given several factors, including strong household formation and immigration rates that are set to return to prepandemic levels.

Supply and demand factors have historically shown themselves to be one of the major drivers of housing prices. When supply is curtailed, appraisers will see prices go up, sometimes dramatically. However, when supply increases, the competition decreases, which will, over time, put downward pressure on housing markets and prices. Regardless of what may or may not happen over the next 12 to 18 months in terms of interest rate increases and other macroeconomic uncertainties, the need for more housing units remains.

Increasing the housing supply cannot be achieved without collaboration and coordination amongst all levels of government. While there is no silver bullet or single policy that can change things overnight, we do believe supply is perhaps the most key solution to a more balanced marketplace.

The newly-announced, but yet-to-be-launched housing accelerator fund is, in our minds, a step in the right direction, but it must be implemented rapidly and should focus on housing affordability independent of and in addition to efforts focused on affordable housing. The fund must address the key challenges to new supply, which by all accounts include municipal restrictions or hurdles such as zoning, land use and development restrictions and timelines, while recognizing that Nimbyism will continue to be a factor.

Incentives to encourage efficiencies in permitting and approvals should also be included. Automation of those processes could alleviate much of the administrative burden and compress timelines.

We also believe that other initiatives should be considered, such as the Government of Canada requiring that infrastructure grants only go to areas that have mechanisms that allow for expedited development. Supporting provinces and municipalities in addressing these challenges, whether it be financially, or in some cases—and perhaps more importantly—politically, will go a long way in delivering new supply to the market.

In terms of the federal lands Initiative, whether it is to build, replace or repair existing infrastructure, or to ensure special projects are completed effectively and efficiently, government needs to make these complex and at times difficult decisions in an inclusive and consultative way, while ensuring a timely and appropriate delivery.

The importance of these decisions makes it vital that the right expertise and experience is applied throughout the decision-making process. That expertise should always include opinions of value prepared by professional appraisers.

Buying property or a place to call home is a major milestone in all Canadians' lives, and appraisers from across Canada look forward to working with government at all levels to protect Canadians and help them make informed decisions.

Mr. Chair and honourable members, we appreciate the chance to be here with you today and to share our feedback. We look forward to questions or comments you or your colleagues may have.

Thank you very much.

[The Chair, Liberal, Bobby Morrissey]

Thank you, Mr. Lancastle.

Now we will go to Mr. Lee for five minutes.

[Kevin Lee, Chief Executive Officer, Canadian Home Builders' Association]

Thank you, Mr. Chair.

On behalf of the Canadian Home Builders' Association, or CHBA, and representing some 9,000 member companies in the residential construction sector, I thank you for the opportunity to provide the association's input on the development of the housing accelerator fund.

CHBA welcomes the recognition by the government that housing policy in Canada should address the needs of Canadians along the full housing continuum. We are very glad to see that a proper focus is now finally being brought to bear on housing affordability for market-rate housing. The federal government has taken extensive steps in recent years to address affordable housing through its national housing strategy to support those in core housing need; however, while affordable housing and housing affordability are related, they are very different things that require very different action.

Now, via the housing accelerator fund, market-rate housing affordability has the chance to be addressed by focusing on the most critical factor affecting market-rate home prices—housing supply. If designed and implemented properly, the fund is a once-in-a-generation opportunity to address the market-rate housing affordability and supply crisis.

The $4-billion fund is aimed at growing the house supply of middle-class homes by 100,000 additional units over and above normal activity by 2025. Even more importantly, the fund is an opportunity to help put in place the processes, systems and environment to pursue the 3.5 million additional homes that we need over the next decade to address the housing supply deficit.

To help boost market-rate supply, the fund can and should incent and support municipalities to address several current challenges and barriers to getting more market-rate supply online faster, which will result in permanent systemic change. For example, the fund can help municipalities pre-zone for gentle densification, including infill and mid-rise and high-rise height to increase density, as well as rezone away from single-family to multi-family zoning. It can also increase and enforce as-of-right zoning, which will help avoid process delays.

The fund should be designed and implemented to include supporting permanent improvements to municipal processes, such as permitting, zoning, inspection and approval systems, including implementing e-systems. The fund should also be used to support onboarding and training curricula development for building officials, especially permanent e-learning systems versus time-limited, in-person training. Given the retirement wave of building officials that is coming, the fund could also be used to accelerate the hiring of new city staff to help deal with backlogs now and to get new staff trained and experienced before more retirements and knowledge leave the system.

Another monumental challenge to getting any and all forms and tenure of housing built, including rental, is Nimbyism. A national NIMBY to YIMBY—“Yes in my back yard”—campaign for housing of all forms and tenure is needed, to educate Canadians about the inclusive communities that we need for the future.

The fund should also be designed to help address high development taxes, which are a large part of high house prices. These taxes, which include development charges, development cost charges, amenity fees, levies and all kinds of other names for taxes, are significant contributors to housing costs. These development taxes have gone up by 700% in the past 20 years, from $1 billion to nearly $8 billion across the country, with the worst cases in large urban centres.

As we understand it, the design of the fund is looking at basing the transfer of funds to municipalities on the actual performance of increased housing stock over and above the current pace of development, potentially through measuring increases in building permits. We support this performance-based approach.

We note that the study this committee is undertaking specifically mentions inclusionary zoning, or “IZ” as we call it, as does the budget. Our comment is that if IZ to be supported, it is critical that its potential pitfalls be avoided. IZ is a tool that requires a certain portion of new developments be made affordable to people with low incomes. However, if done wrong, as it often is, the outcome is fewer market-rate housing units and an increase in the price of market-rate housing units contributing to the further erosion of affordability.

When municipalities implement IZ and expect developers to subsidize the cost of affordable housing units, they are actually making buyers of new homes pay for the affordable housing unit subsidy. The development community cannot operate without passing on incremental costs of any form to buyers. Without doing that, development businesses would not be viable. The need for affordable housing units is a societal issue that should be funded by the entire tax base, not by buyers of new homes, especially first-time buyers. Real cost offsets from the city, such as land contribution or reduced development taxes, are required to ensure IZ does not further erode market-rate affordability, reduce the number of market-rate units and/or render the development business untenable.

Thanks a lot for the opportunity to speak today. I look forward to answering any questions you may have.

[The Chair, Liberal, Bobby Morrissey]

Thank you, Mr. Lee.

Now we go to Mr. Rubinstein from the Federation of Canadian Municipalities for five minutes.

[Daniel Rubinstein, Senior Director, Policy and Government Relations, Federation of Canadian Municipalities]

Thank you very much, Mr. Chair, and committee members.

I'm Daniel Rubinstein. I'm the senior director of policy and government relations at the Federation of Canadian Municipalities.

FCM is the national voice of local government. We have 2,000 members, and we represent 90% of Canadians from coast to coast to coast.

We appreciate every opportunity to discuss how our two levels of government can work together and improve people's quality of life, including housing affordability.

There's no doubt that housing affordability is one of the greatest challenges facing Canada today, and for us the solution is clear: It's action, coordinated, ambitious, immediate action from the federal government, from provincial and territorial governments, from municipalities and local governments, from our non-profit housing partners and from the private sector.

Local leaders across the country are ready to do their part to improve housing options for Canadians, and budget 2022 includes key investments to enable municipalities to take action on the housing crisis.

In particular, FCM and our members welcome the $4 billion housing accelerator fund. We believe it has transformative potential to help get housing built faster through direct and flexible investments, which allow municipalities to tackle the most serious local barriers to supply.

We know that housing supply is influenced by a variety of factors, such as financing, availability and cost of land, and the regulatory context and systems in place to review and improve development applications. Today we know that there's particular attention paid to the supply chain availability of skilled labour and materials as well.

Across the country, cities are putting in place systems to speed up the review and approval of development proposals and to accelerate local and regional level planning, and more can definitely be done in this space with support from HAF. HAF's focus on expanding supply is critical, but more important is ensuring that HAF unlocks and accelerates the right supply, and for us that means affordable options, both market and non-market, aligned with our shared federal-municipal vision of low carbon intensification and transit-oriented development.

The right supply also means focusing on the specific local supply gaps unique to each local housing market. In some cities, the challenge might be building enough affordable rental options, particularly family-sized apartments, this is a pretty serious gap in what the market is currently creating on its own.

In others, access to and cost of land is a barrier to transformative projects, especially those that include serious affordability targets. In others, important steps are being taken to improve access to so called “missing middle” options, secondary suites, laneway suites to accelerate TOD, and inclusionary zoning.

The government's commitment to making sure HAF is flexible to the needs and realities of cities and communities recognizes that housing markets are local and that municipalities are best placed to identify what will make the biggest contribution locally to increasing housing supply.

We also note and welcome the budget's commitment to achieve a balanced supply, which includes a needed increase to the supply of affordable housing, and that's critical for us at FCM.

To make HAF a success, it must be designed with municipalities to directly empower action and results, and we have a model that's working well with the rapid housing initiative, RHI. For us that means borrowing from the major city stream model, which provides flexible upfront allocations to major centres. This gives our major urban centres the predictability, flexibility and upfront cash flow needed to act quickly and ambitiously.

Our recommendation is that at least 50% of HAF should be delivered through a major city stream.

The other major component of RHI, rapid housing initiative, is an application-based stream that all municipalities have access to, and this kind of stream is particularly well suited to applications focused on improving planning and development review processes, including regional collaborations.

I want to note that the budget made an important commitment to ensuring that HAF supports rural and smaller communities that are growing quickly, and we know this application-based stream can easily be adapted to include a targeted carve out for projects from rural and smaller communities.

Before concluding, I want to note that HAF is a new addition to the national housing strategy, and I've heard from other witnesses today and at your previous meeting about the success being linked to the rest of the broader national housing strategy. The budget did make important commitments to improve the rental construction financing initiative and the national housing co-investment fund. These program changes are equally important in addressing barriers to expanding affordable housing options for Canadians. We look forward to contributing our advice on how to optimize those programs as well in the future.

Thank you.

I'm happy to participate in the Q and A.

[The Chair, Liberal, Bobby Morrissey]

Thank you, Mr. Rubinstein.

I'll now open the floor to questions, beginning with Mr. Jeneroux for six minutes.

I would ask the committee members to identify the person you're directing the questions to, so that we do not waste time.

[Matt Jeneroux, Conservative, Edmonton Riverbend, AB]

Yes, I agree because we have a lot of witnesses.

Thank you, Mr. Chair. It's a pleasure to be back at the HUMA committee, my favourite committee.

A number of witnesses made the point about the accelerator fund focusing on major cities, and that was our impression, too, when the Minister came here and made the comments. However, then the budget said that the fund would also include rural areas. There have been a lot of questions regarding how this program will run, who's eligible and how the application process will work. I wanted to make sure that all witnesses were on the same page with what we're hearing about this fund as well.

We're now constantly reminding the government that a reason Canada has a housing crisis is that we have a supply issue, which so many of you spoke about. Scotiabank has said that Canada needs 1.8 million new homes built in a year to keep up with demand. A report from CIBC just yesterday said that housing supply numbers derived by the CMHC are “grossly undercounted”. The report also said that the construction industry doesn't have the capacity to meet the government's targets.

That said, I'm not sure if you've seen the report, Mr. Lee, but I'll start with you. Would you agree with the statement by the CIBC that the construction industry won't be able to keep up with these targets?

[Kevin Lee]

I think what I would say is that the targets are really important. To be able to say that we need 3.5 million houses over the next decade starts to point out everything that needs to fall into place in order to get there.

We have a labour shortage that didn't just materialize over the past few years. It's been many years in the making. It's demographics. It's not unique to residential construction; it's across the board.

We need solutions, including more Canadians getting into the skilled trades, and we need to adjust the immigration system to bring in the right people. We're going to need more joint investment in productivity. Frankly, we're going to need to be able to build more houses with fewer people, moving forward.

We went from an average of about of 200,000 or 210,000 housing units and housing starts over the past decade to 271,000 units started last year, so there is some flex in the system.

The bigger issue moving forward is unlocking the ability to continue to do that. The housing accelerator fund and its intent directed towards municipalities to enable them to unlock some of these processes and delays.... That's the number one barrier we have right now to more supply. We need to continue to work on other issues that are related to it, but I think this fund and targeting supply through municipalities is hitting the number one issue we have, and we'll need to continue to work on the others.

[Matt Jeneroux, Conservative, Edmonton Riverbend, AB]

Does it put a lot of pressure on your industry to keep up with the targets that CIBC has indicated? How does the industry feel about these numbers?

[Kevin Lee]

I think the industry feels very positive. I wouldn't call it pressure; I would call it support.

This is something we've been talking about for a long time. We've been talking about the issue of accelerating house prices since long before the pandemic. This became a much bigger issue through the pandemic, but it goes back to stuff that we've been talking to the federal government about for the past decade. We were talking about supply issues. We were talking about development taxes, so we feel now that the lens is being put properly on this. There's a big opportunity to move forward on it.

[Matt Jeneroux, Conservative, Edmonton Riverbend, AB]

Okay, so it just took seven years, but I guess it's finally something they decided to focus on.

I'll go to you, Mr. Rubinstein.

It's good to see you again, as always. FCM does a lot of good work.

You mentioned some barriers when it comes to the national housing strategy as it exists today. What are some that you hope the accelerator program will address specifically?

[Daniel Rubinstein]

Thanks very much.

It's nice to see you as well, Mr. Jeneroux.

I made the point about the other programs in the NHS to draw a distinction that I think you heard from previous witnesses. We have a need to provide a level of subsidy on grants and financing that's appropriate for the kind of affordable housing we want to build. That's both for market rental options and for non-market options by the non-profit partners of our cities.

I'll just note the language in the budget—to look at deeper levels of contribution and different kinds of targets for the depth of affordability through those programs. Those are really welcome. By seeing those changes happen in parallel with HAF, I think it enables HAF to be a stacking opportunity and addressing other barriers such as land—I know that's come up as a common theme—which we may not be able to deal with through other programs in the NHS.

I think—

[Matt Jeneroux, Conservative, Edmonton Riverbend, AB]

Sorry, Mr. Rubinstein. I just have a short bit of time.

When it comes to market housing, I know that a lot of municipalities struggle, and some of your big cities—the Vancouvers, the Torontos, the Burlingtons and the Hamiltons—all really struggle with getting that market housing piece. How do you see this accelerator fund helping from that perspective versus the affordable housing?

[Daniel Rubinstein]

Sure. I think this is where that range of local supply gaps that our members identified and the need for flexibility to direct towards them really matter. For some of our members, there's absolutely an opportunity to invest in the planning, in the permitting systems and in that soft infrastructure that's required.

In other parts of the market, though, we know that there are local incentive programs to build an infill, and hopefully HAF can provide another funding tool for our members to experiment with those kinds of programs and lever the private sector into the kind of supply that we know is most needed.

I think it's going to look different centre by centre, city by city, but absolutely there's a range of gaps and opportunities, both market and non-market, that municipalities are keen to use HAF towards and move fast in that regard.

[The Chair, Liberal, Bobby Morrissey]

Thank you, Mr. Rubinstein.

Now, we go to Mr. Van Bynen for six minutes.

[Tony Van Bynen, Liberal, Newmarket—Aurora, ON]

Thank you, Mr. Chair.

I'll be directing my comments towards Mr. Reisman, and that's based largely on the success that we had with a program within our own municipality in the way that we approached it.

Sam, I only have six minutes, and I'd like to get in three questions, so brevity will win the day.

Number one, I wonder if you could explain the business model difference between a condominium construction project and a market rental construction project. The reason I'm asking is that it's what has led to your request or suggestion for deferral. I'd like to get a better understanding of how we get there.