Human Resources Committee on June 9th, 2023

[Tracy Gray, Conservative, Kelowna—Lake Country, BC]

How will the increase in interest rates from where they are right now affect the affordability of housing and the supply of housing?

[Krish Vadivale]

The increase in interest rates most likely will stall the development of new housing, because, again, as a cost that's baked into the pro formas that are used to calculate whether or not we want to build this, it makes it more expensive.

Then from an investment perspective—not to delve into financial theory here—effectively if your risk-free rate is up, the expected rate of return on any investment across the board is higher. It really makes investors re-evaluate the risk return profile of building new housing.

[Tracy Gray, Conservative, Kelowna—Lake Country, BC]

In the written submission that you had sent to the committee, you had mentioned that a $400,000 unit build has risen in cost to $500,000.

What would you say would be the largest causes of that increase? Is it government fees, is it inflated costs of materials, is it skilled labour shortage? What would be your analysis?

[Krish Vadivale]

It is all of those things. It is the increased cost of labour. It is the increased cost of materials. It is development charges, and of course the ever-growing cost of capital.

[Tracy Gray, Conservative, Kelowna—Lake Country, BC]

One of the other things that were in your submission as well was your efforts to build an additional 200 affordable homes in Hamilton, but you also mentioned was that there is a rise of Nimbyism, limiting construction on affordable homes.

Can you go into greater detail on the kinds of tactics that you see used to stall construction of new homes, and how those issues might affect the supply of housing?

[Krish Vadivale]

I can't say specifically with that project, but in general I think the tactics that are used are to try to suggest either that a building is too high or that the surface area coverage is too much in an attempt to effectively reduce the number of affordable homes that can be in there.

Another one would be to push for underground parking as opposed to above-ground parking, which effectively will reflect on the feasibility of the building, forcing you, from a pure economics perspective, to have a higher mix of market-affordable rent.

[Tracy Gray, Conservative, Kelowna—Lake Country, BC]

What would you say are the biggest regulatory challenges that you face in adding to the affordable supply of rental and housing units?

[Krish Vadivale]

It's funding.

[Tracy Gray, Conservative, Kelowna—Lake Country, BC]

It's access to funding.

[Krish Vadivale]

Yes.

[Tracy Gray, Conservative, Kelowna—Lake Country, BC]

There was a report by the C.D. Howe Institute last month that identified municipal and provincial regulation as a significant burden of regulatory costs on new builds.

Do you have any comments on that?

[Krish Vadivale]

I would say that's likely true, especially if you contemplate time as a cost.

[Tracy Gray, Conservative, Kelowna—Lake Country, BC]

Do you mean the time it takes for—

[Krish Vadivale]

That's in terms of delays.

[Tracy Gray, Conservative, Kelowna—Lake Country, BC]

It's delays and time for construction.

Adding to that cost, presumably you're financing it during that time, so then with the length of time, the costs just keep going up because you're not able to—

[Krish Vadivale]

Yes.

[Tracy Gray, Conservative, Kelowna—Lake Country, BC]

I have a few more seconds here.

Can you go into a little bit more detail on some actionable items the federal government can take, whether it's different regulatory forms or through the CMHC, to assist in the affordability of housing?

[Krish Vadivale]

Sure. Like I mentioned earlier, access to more funding through the CMHC for reducing the threshold through MLI Select or any development of any new tools in the tool box for what can be used to incentivize new housing development would be great.

From the affordability perspective, a fund to target acquiring old-stock buildings and moving them from the for-profit to non-profit realm would also help shore up the community housing element in the overall mix of housing supply.

In part, to combat Nimbyism through making available—

[The Chair, Liberal, Bobby Morrissey]

Thank you, Mr. Vadivale.

We'll conclude with Mr. Collins for five minutes.

[Chad Collins, Liberal, Hamilton East—Stoney Creek, ON]

Thanks, Mr. Chair.

My questions would follows the same themes of those by Mrs. Gray. They would be for Mr. Vadivale.

Sir, we had previous testimony by CMHC about REITs' involvement with the national housing strategy. I think the testimony provided by CMHC was that—

[Tracy Gray, Conservative, Kelowna—Lake Country, BC]

I have a point of order, Mr. Chair.

My apologies, Mr. Collins, but we're at time at the end of the committee and we do have parliamentary duties shortly.

As much as we'd like to hear some more, perhaps Mr. Collins can write to the witnesses and get some written testimony. We are at time.

[The Chair, Liberal, Bobby Morrissey]

Okay. We did start late. That's why I was prepared to extend by five minutes, but if I do not have consensus to move beyond the set time....

I don't have consensus. With that, the committee must adjourn.

The committee is adjourned.