Human Resources Committee on June 6th, 2023

[The Chair, Liberal, Bobby Morrissey]

There's a group that wanted to watch the parliamentary process. They had reached out to me a while back. I said that they could come in the last half-hour to a committee that was under way. This is on housing, so I said “please do”.

We're joined by our colleague, Arif. Welcome.

We're now moving into the second panel. The committee is studying the financialization of housing. We have with us this afternoon, from the Alliance des maisons, Dr. Gaëlle Fedida, coordinator, political affairs, and Mélanie Miranda, coordinator, housing. From the Canadian Alliance to End Homelessness, we have Tim Richter, president and chief executive officer. From the Canadian Federation of Apartment Associations, we have John Dickie, president. He is in the room with us.

We will start with five minutes and Dr. Fedida.

You have the floor for five minutes, please.

[Dr. Gaëlle Fedida, Coordinator, Political Affairs, Alliance des maisons d’hébergement de 2e étape pour femmes et enfants victimes de violence conjugale]

Hello.

The Alliance des maisons d’hébergement de deuxième étape pour femmes et enfants victimes de violence conjugale, which is a group of second-stage shelters for women and children who are the victims of domestic violence, has 38 member shelters in Quebec and has been working on the issue of the social housing stock.

I would like to pick up on something mentioned earlier, even though I often disagree with that person. It is indeed close to five per cent of the population that has much more specialized needs, and the government has a responsibility to those people.

First of all, there are the women who are victims of domestic violence.

Further, in our opinion, the various programs are not tailored to the victims' specific needs, and the processes are onerous and very inflexible. I would also add that the program objectives do not match the needs of the women using our shelters.

The third point pertains to the various funding envelopes, specifically, what is allocated to the private sector versus what is allocated to non-profit housing organizations. This was discussed at length in the last hour. I must say that it is very unfortunate that we no longer say social housing, but rather affordable housing. We must get back to the social dimension and an understanding of this extremely vulnerable segment of the population who need public assistance.

We have specific recommendations in this regard. Our brief has not yet been translated, but you will be receiving it in the coming days.

First, we would like to see a program for shelters that truly meets victims' needs and that addresses specific needs, in particular the significant challenges relating to the confidentiality of our shelters. Our shelters must remain confidential to ensure the safety of the women, children and workers.

Second, social housing—with emphasis on the word “social”—must be available to victims when they leave emergency shelters or second-stage shelters. That is not the case now, in view of the lack of social housing. When social housing is available, some priority must be given to survivors of domestic violence.

The third recommendation pertains to the distinction between funding earmarked for the private sector and funding for non-profit housing organizations that offer services to vulnerable populations.

Fourth, we call on the government to support all of the right to housing recommendations that were published recently by the federal housing advocate. I think her recommendations are all excellent.

Finally, we also emphasize that the proposals must be considered through a gender-based lens.

The National Housing Strategy included targets for women when we negotiated it with Minister Duclos. Unfortunately, we are not sure that some of those targets are in fact being met. In any case, they are not being met in the Canada-Quebec agreement.

I could name a number of challenges with these various programs. Non-profit housing organizations that offer services are in competition with the private sector, but it is not a level playing field at all. For the rapid housing initiative, for instance, the submission deadlines were very tight. People in the private sector are obviously much better equipped to submit what was required within such tight deadlines. Community organizations that help the victims of domestic violence do not develop projects with 100 housing units. Our focus is the women's safety. Second-stage shelters work with women who are at the greatest risk, namely, those whose partner has proven to be dangerous and who spent time at an emergency shelter. That applies to 8% of the women who use an emergency shelter.

For safety reasons, we cannot create shelters with more than about 15 units. Getting a backhoe loader to build 15 units obviously costs the same as getting one to build 50 units. So our projects are much more expensive. That is one of the reasons that a distinction must be made with respect to projects that provide social housing for very specific populations. We must not be in competition with the private sector in this regard because we are not on an equal footing.

These populations are in extreme need. The shortage of shelter spaces is well known by the department responsible for the status of women.

[The Chair, Liberal, Bobby Morrissey]

Thank you, Dr. Fedida.

We'll now have Mr. Richter for five minutes or less.

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

Thank you very much.

Good afternoon, everyone. Thanks for the opportunity to appear today.

As you know, the term “financialization” is normally raised in the context of behaviour by some market actors who will purchase low-cost, older rental housing and increase the rent to generate more profit. Often they do this by evicting existing tenants. This contributes to a major problem in Canada's housing market. As you know, Canada is losing affordable rental housing at a really alarming rate.

According to housing policy expert Steve Pomeroy, over 550,000 units of housing that rented below $750 a month were lost between 2011 and 2021. This means, obviously, that there are fewer and fewer options for low-income households.

The issue of financialization alone isn't the problem. The bigger issue here is the erosion of affordability in the rental housing market. There are many experts who can give you a better analysis of the rental market and affordability issues that we face—you've heard from some already—but it strikes me that there are really three key factors.

The first is a lack of rental supply. CMHC says that Canada needs to build 5.8 million homes of all types in the next nine years to restore affordability, but Canada has built only 570,000 rental units in the last 30 years. We also have a dire lack of deeply affordable social and community and supportive housing. These supply constraints and the increasing demand drive increased rent and decreased affordability.

The second issue is the cost of new construction. It is three times more expensive to build new rental housing than it is to purchase and convert existing housing, and it's also way faster. There's a clear financial incentive to the market to purchase old housing.

The third is a lack of provincial regulation and tenant protection. Without tenant protections, an investor can buy a cheap property and increase the rent to whatever the market will bear. In provinces where there's rent control, there's often a loophole where there's no control on vacant units, which creates a financial incentive to evict people to increase rent.

If we only attack one element of the problem—actions by some of those market actors who purchase low-cost, older rental units and raise rents to generate more profit—we won't solve the affordability problem. Further, we might make it worse by pushing out desperately needed private investment. To restore affordability of rental housing, we need to create about 1.74 million units of purpose-built rental housing. Building this much rental housing would cost at least $610 billion. Unless governments are prepared to invest that much, we need private investment.

It's critical that we stop the loss of low-cost rental housing and aggressively add supply of market-affordable and deeply affordable housing.

I'd like to propose seven potential solutions.

First is to make purchasing existing rental housing less economically attractive. One option to do that would be to tax the purchases of rental housing by private investors above a certain number of units to target large-scale purchases or to tax the profits from those purchases.

The second solution, as Ray Sullivan mentioned earlier, is to create an acquisition fund to allow NGOs to purchase and renovate rental housing and protect low-cost rental. This has been done in British Columbia and, as soon as it was announced, apartment owners, REITs and others were coming out of the woodwork to sell some of their older buildings. It's a great way to preserve existing affordable housing.

Third is creating economic incentives to build. You've heard some of those ideas, for example, accelerated capital cost allowance and low-income housing tax credits. Other finance and tax tools could be very effective.

Fourth is to push the provinces to put in place tenant protections to prevent renoviction. This could potentially be achieved as part of infrastructure and housing investment negotiations.

Fifth, I'd recommend revamping the national housing strategy to generate at least 350,000 units of deeply affordable rent-geared-to-income housing units, including 50,000 units of supportive housing.

Sixth is to provide urgent rent relief to low-income households. Canada right now is under a wave of new homelessness on the same scale as Canada's largest natural disasters. People are being pushed out of their housing by huge increases in the cost of rent. We have proposed the creation of a homelessness prevention and housing benefit that could stop or at least significantly slow this deadly wave of new homelessness. We can protect low-income Canadians until new housing can be built. It will be far more expensive to solve homelessness after it happens than to prevent it in the first place.

Finally, we need to revamp the Canada housing benefit. Three-quarters of people in core housing need are there only temporarily, and they're all in housing. Housing benefits can be used to provide temporary affordability support and respond to sudden changes in housing need or affordability, leveraging existing private and near-market housing.

Thank you all very much for the opportunity. I look forward to discussing this further.

[The Chair, Liberal, Bobby Morrissey]

Thank you, Mr. Richter.

Now it's Mr. Dickie for five minutes.

Go ahead.

[John Dickie, President, Canadian Federation of Apartment Associations]

Thank you, Mr. Chair.

I am the president of the Canadian Federation of Apartment Associations. CFAA represents 15,000 owners and managers of over 1.5 million rental homes across Canada, through 13 member associations and direct memberships.

My main professional qualifications are first-class honours B.A. in economics and a long career as a lawyer for those in rental housing. Starting 40 years ago, I acted for renters for six years, in renters and tenant associations. I always like to tell our members that so they don't hear it from somebody else. I'm open about that being where I started. Since then, I have acted for rental housing providers of all sizes.

Many people picture rental housing as apartments in large buildings such as one can see in any large city. However, many other apartments are found in walk-up buildings of three stories or in three-, four- or five-unit buildings. Quebec is famous for its plexes—fourplexes and sixplexes. Over 3,000 rental homes are row houses. All of that together is the purpose-built rental market. It totals 2.5 million homes.

Besides that, there are a little over half a million rental homes in social housing—also called community housing—and then there are two million more rental homes that many people are unaware of or ignore. Those are the rental homes in the secondary rental market. They are rented single-family homes, duplexes, doubles, accessory apartments and rented condos—whether in condo towers or ground-oriented complexes. Anyone can drive or walk down many city streets and not realize that those homes are rented. There are two million of them across Canada. That includes in Toronto, where there are 200,000 of them.

The total rental supply across Canada is five million homes. The details of this are set out on page 2 of CFAA's joint brief with the Federation of Rental-housing Providers of Ontario.

Now, most rental homes of all types are good substitutes for many others. Apartments in towers compete with low-rise apartments and rented condos as well as with the rest of the secondary market. This widespread competition and the fragmented nature of the rental housing industry means that large rental providers have no power to set rents above the levels determined by supply and demand.

Another key issue is how much money rental providers make. Some people picture all or most of the rent money going into the landlord's pocket, but the truth is far from that.

At page 3 of the brief, you will find a pie graph showing where a typical dollar of rent goes. Fourteen cents on average goes to property taxes. Twelve cents is for utilities and 19¢ is for other operating costs. That makes up 45¢ out of every dollar of rent, leaving 55¢ for what is called the net operating income, but we're not done with the expenses. On average, another 36¢ goes to pay the mortgage, and 11¢ goes to pay for major repairs and building modernization. That leaves just eight cents out of every dollar of rent as the pre-tax return on each dollar of revenue—and then there are taxes.

To make its report, the committee will have to choose between two very different views of REITs, rental housing corporations and, indeed, all rental housing providers.

CFAA condemns any action to push people out of their homes. However, under our Constitution it is up to the provinces to regulate and prevent such action. In addition, CFAA believes that such action takes place only in very isolated cases, and that federal tax law is much too blunt a tool to address that isolated behaviour. Instead, tax changes—such as those proposed—could easily have widespread and serious negative impacts on the supply of rental housing.

Excluding REITs or corporations from CMHC mortgage insurance or other housing programs would also risk creating widespread and serious negative impacts on the supply of rental housing.

In conclusion, financialization is not nearly as significant an issue as it is said by some to be, and the proposed cures being suggested to the committee are much worse than the alleged disease.

[The Chair, Liberal, Bobby Morrissey]

Thank you, Mr. Dickie.

This round is going to be five minutes instead of six minutes to each. We'll see how we go.

Students, thank you for visiting.

Mr. Aitchison is next, for five minutes, please.

[Dr. Gaëlle Fedida]

There must be something I said, Mr. Chair. They knew I was going to start.

[John Dickie]

No, it must be something I said.

[Some hon. members]

Oh, oh!

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

I want to start with Mr. Richter, actually.

I specifically want to speak about some of the comments you made in your opening remarks. You made the comment, “If we only attack one element of the problem—actions by some of those market actors who purchase low-cost, older rental units and raise rents to generate more profit—we won't solve the affordability problem” and we might make matters worse. In restoring affordability of rental housing, you said we need about 1.74 million units and scaring away private sector investments is not going to help with that.

What I love is that you recognize we need all hands on deck and that we need all players involved. We're not trying to demonize anybody in particular.

Can you elaborate on that a little bit, Tim?

[Tim Richter]

Part of our challenge is that we're in a significant hole. When you're in a hole, you have to stop digging. We have to think of a way to slow or stop this loss of affordable rental housing.

As I said, you can probably do that through a combination of creating an NGO, like Ray Sullivan talked about, or a fund so that you could purchase some of these older units. Make it more attractive to build and less attractive to buy, and the market will naturally go to where the best economic opportunity is and the behaviour will likely shift.

I think you want to be really careful about that heavy blunt-instrument approach where you're changing the tax treatment of the REITs or making large-scale sweeping tax changes.

I think you can be quite a bit more targeted than that. However, you do have to disincent that behaviour that causes the loss of that housing. Again, the impact of that loss of housing is magnified by the lack of housing supply.

[Dr. Gaëlle Fedida]

That's a great segue, actually, to John. Thank you for that.

John, at the end of your comments, you said that renovictions are not nearly as common as I think maybe the hyperbole would suggest. Other witnesses said they are and that it's a major issue in this country. I'm hearing from Tim that sweeping changes in tax rules against REITs would maybe exacerbate the situation.

Can you talk a bit about how common renovictions are? Obviously, we don't want that to be happening, but we don't really have the authority to stop it.

Can you speak to that a little bit more?

[John Dickie]

Yes. Statistics Canada surveyed tenants in 2021. They found that 7% of tenants had been evicted at some point in their lifetimes. Now, assuming that the average tenancy experience is 10 years—for many people, it's 20 or 30 or 40 years—that means seven-tenths of 1% of tenants are evicted each year. In other words, it's seven out of a thousand tenants.

StatsCan went on to ask the reason for the eviction, and only 10% of all evictions were for demolition, conversion or major renovations. That means that, in any year, less than one out of a thousand tenants are evicted for those reasons. Deducting demolitions that are needed for intensification or new transit lines, we can estimate that only one out of 2,000 tenants are evicted for renovations. The vast bulk of evictions occur in the secondary market, for the sale of a property or the owner's own use, and then we have conflict with the landlord or other tenants and we have arrears of rent. It is a tiny fraction of a small number of evictions that flow from renovations.

There's another table in our submission that addresses that, with older statistics from the Wellesley Institute, an anti-poverty group. It's on page 7 in the submission.

[Dr. Gaëlle Fedida]

You're saying that the vast majority of those kinds of evictions don't happen in the purpose-built rental buildings but tend to happen more in the secondary market.

[John Dickie]

A large landlord, a corporation, can claim personal use. They don't sell single units, typically. It's smaller investors. Believe me, I represent smaller investors too, and I want them to have the right to use their properties as they wish, but that's a question for provincial law.

The point is that those evictions, the vast bulk of evictions, are not for major repairs.

[Dr. Gaëlle Fedida]

Thanks.

[The Chair, Liberal, Bobby Morrissey]

I will now give the floor to Ms. Martinez Ferrada for five minutes.

[Soraya Martinez Ferrada, Liberal, Hochelaga, QC]

Thank you, Mr. Chair.

Mr. Dickie, you just mentioned the provinces. That is a good segue to my next question.

I will start with Mr. Richter, followed by Dr. Fedida from the Alliance des maisons d'hébergement de deuxième étape pour femmes et enfants victimes de violence conjugale.

The government has passed legislation on the right to housing. The federal government has been called upon to reflect on public housing policies based on human rights. It appointed a federal housing advocate.

How do you think the human rights approach can be applied to the financialization of housing?

How can we use that approach, which falls under provincial jurisdiction, to legislate and counter market speculation and the financialization of housing?

[Tim Richter]

I'm an enthusiastic supporter of the right to housing. I think that's key to eliminating homelessness in Canada. I supported and lobbied for the creation of the National Housing Strategy Act. Now the challenge with the act is that it applies only to the jurisdiction of Parliament, so it doesn't yet apply to provinces or territories. In terms of this particular issue, I think that if it applied to provincial legislation in particular, it would mean that tenants should not be evicted simply to increase the rent. It would mean that they would have security of tenure.

[Soraya Martinez Ferrada, Liberal, Hochelaga, QC]

Thank you, Mr. Richter.

Dr. Fedida, do you have anything to add?

[Dr. Gaëlle Fedida]

In our view, that would be a double obligation. There is the right to housing, but above all the right to safety for women. That is in fact a right for all Canadians, but we are talking about women now. These are also recognized rights.

It is more than a right, it is a government mandate, whether at the federal or provincial level. It is also important in the provinces.

Given the danger to women and the duty to provide secure and adequate housing for them, that is how the right to housing in cases of domestic violence will be implemented.

[Soraya Martinez Ferrada, Liberal, Hochelaga, QC]

Thank you, Dr. Fedida.

Everyone agrees that regulations relating to housing fall under provincial jurisdiction. What can we do at the federal level? We have undertaken, among other things, to work on a registry of owners.

In your opinion, how can federal legislation provide assistance in this regard? How should we work with the provinces to introduce legislation on human rights and tenant protection?

Mr. Dickie, I understand that the statistics on renovictions might seem insignificant to you, but I represent the riding of Hochelaga, and renovictions are one of the biggest problems we are facing in Hochelaga right now. We have to remember that behind every statistic, whether it is 1% or very low, are the people it represents. No one deserves to be put out on the street because someone wants to renovate a building and raise the rent.

I would like to hear from Mr. Richter and Dr. Fedida on how the federal government could introduce legislation on the right to housing and preventing renovictions.

[Dr. Gaëlle Fedida]

I heard part of the presentation earlier. The federal government does indeed have real power over taxation systems. In my view, that is a promising avenue.

I don't know if Mr. Richter has something to add. Taxation is certainly a tool at the government's disposal.

Knowing that, how...

[Soraya Martinez Ferrada, Liberal, Hochelaga, QC]

I'm sorry to interrupt you. I would like to give Mr. Richter some time.

Mr. Richter, would you like to comment on that?