Human Resources Committee on June 9th, 2023

[Jenny Kwan, NDP, Vancouver East, BC]

What I'm hearing from you is that we need both from the federal government; that is, we need the government to actually build social housing or co-op housing and, in addition to that, we also need rent control measures in order to actually dampen the situation we're faced with right now with the housing crisis. Am I correct to understand that? Maybe just a quick yes or no...?

[Steve Pomeroy]

Yes, but “yes, but”, in the sense that I've generally been a proponent of vacancy decontrol, because I thought that it did create balance. While existing tenants were protected, it allowed investors to generate returns. Because of the excessive increase we've seen in the last few years, I've changed my view on that, and I think we do need to think temporarily about some way to suppress these very large increases.

[Jenny Kwan, NDP, Vancouver East, BC]

Thank you.

The other question I have is this one. The federal government in the 1990s walked away from housing altogether, but prior to the cancellation of the national affordable housing program in 1993, successive governments—Conservatives and Liberals—also started to cut funding to housing programs, to the devolution...in terms of the subsidies as well. In order to address the housing crisis, do we need the federal government back at the table, aside from construction dollars, but also in working in partnership with the provinces in a cost-shared approach to subsidies to make rent affordable?

[Steve Pomeroy]

Yes, and I think that has happened. The national housing strategy was a massive re-engagement of the federal government in 2017 and starting in 2018, but I think the weakness of the national housing strategy is that it has been very much a federal housing strategy and has not engaged the provinces to the degree to which it should and, therefore, lever additional provincial resources to assist in attacking this problem.

Some provinces are independently more active than others—certainly your own in British Columbia—but I think the national housing strategy has to be far more collaborative and far more expansive in terms of its collaboration with the provinces on this issue.

[Jenny Kwan, NDP, Vancouver East, BC]

On the question around subsidies, though, there isn't a current subsidies initiative from the federal government, so this is for the operating side: Do you think the federal government needs to get back into providing operating subsidies on the operating side in collaboration with provinces and territories?

[Steve Pomeroy]

You can address the subsidy in two ways: by providing upfront capital grants and by reducing the amount of mortgage [Technical difficulty—Editor] that projects have to carry. That has the same effect as giving them a bigger mortgage. You gave them payments to help pay their mortgage, which is the way we used to do things. It's a wash, in terms of that approach.

I think it makes more sense, from a policy point of view, to separately support supply. For households that can't afford that supply, provide them with a housing allowance. Within the national housing strategy, the Canada housing benefit was designed to do exactly that—provide subsidy to households for whom the rents were too high. I think that program is woefully underfunded and should be significantly expanded if we, in fact, want to address the needs of low-income people.

[The Chair, Liberal, Bobby Morrissey]

Thank you, Ms. Kwan.

Go ahead, Ms. Gray, for five minutes.

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

Thank you, Mr. Chair.

Thank you to all the witnesses for being here today.

My first couple of questions are for Mr. Irwin.

You sent in a brief and asked that the committee focus on the issue of rental supply, and that governments avoid putting forward restrictions that limit new rental supply.

From your vantage point, are there any new or proposed restrictions in the jurisdiction of the CMHC that are presently limiting Canada's ability to build more rental supply?

[Tony Irwin]

In terms of CMHC, we talked a little, earlier.... Through the chair, [Inaudible—Editor] engaged Mr. Dixon about the mortgage insurance rates that have been increased. Increasing those now will certainly be detrimental to getting....

We are in a crisis. We don't want to be alarmists, but I think we all acknowledge this is a crisis. We need to keep that at the forefront of all decisions we make. What can we be doing that will help? In times like these, you have to not do things like increasing mortgage insurance and tightening underwriting on loans.

As all the witnesses said—Mr. Pomeroy spoke about it, as well—it's very important that we are able to unlock funding through CMHC, the RCFI, MLI Select and mortgage insurance rates that actually get shovels in the ground and rental housing built. Mr. Dixon talked about all the projects they'd like to be doing. They will provide more affordable rents with support from various levels of government, including CMHC.

We were a bit perplexed over the recent move by CMHC to increase mortgage insurance rates. This is not the right time to be doing things that make it more difficult to get rental housing projects built.

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

Thank you very much. I agree, for sure, that there is a housing crisis.

To tag onto that, can you go through the biggest regulatory challenges you would face in adding to an affordable supply of rental and housing units, and what that breakdown would be with different levels of government? Specifically, at the federal level, one example is.... I've read reports about the different tiers of the step code and how that can add to the cost of housing. Although energy efficiency is very important, it adds to cost.

What are some of those different regulatory challenges that affect affordable supply?

[Tony Irwin]

When you look at the costs that go into building rental projects and how that squares with being able to provide affordable housing, you've had many witnesses here—whether it was on Tuesday or today—talking to you about the challenges in getting purposeful rental projects built that can also be affordable. It is a big challenge to navigate that.

Whether it is looking at the fundamentals around how long it takes to get projects approved, or the different government fees and charges.... We're seeing, certainly in Ontario—I speak about that, since it's my primary jurisdiction—policy changes to help make that better by giving discounts and deferrals on government fees and charges, because they recognize that's something they can do to help get projects going.

Ultimately, when it comes to affordability, what we're saying is that we require all housing types and all partners at the table. There's a huge need for non-profits and co-ops. We work with a lot of organizations. Habitat for Humanity does great work. We need them at the table doing what they do. We need to be doing what we do. There's an ability, whether it's through different government subsidies, grants or supports—Open Door in Toronto, for example—to get buildings built with affordable components in them.

Inclusionary zoning is a topic that gets a lot of attention. There's an assumption that we oppose that. The response is that we understand what that policy tool is intending to do. As long as we can get the density required to make the project economically viable, we can make that work.

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

Thank you.

I just want to add one more quick question here. Based on that, how much would regulatory delays and charges add to the cost of new rental units?

[Tony Irwin]

I'm sorry...?

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

How much would that add to the costs of rental units, the regulatory burdens and charges you were referring to?

[Tony Irwin]

I think it's tough to give a blanket response to how much it is. I think it depends on the project and jurisdiction. The reality is that government fees and charges are a huge cost. If you look at the overall cost of a project, government fees and charges and, I would say, red tape caused by sort of the delays and the time it takes.... Time is money.

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

Do you have a percentage estimate, for example, a range that it might be?

[Tony Irwin]

I don't know. Maybe Mr. Dixon may well be able to provide a number on that.

[Dan Dixon]

There have been various studies that indicate that adding transfer taxes, plus development charges, plus payroll taxes, plus HST self-assessment on the completion of a new rental adds roughly 30% to the cost of a new rental property.

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

Thank you very much.

[The Chair, Liberal, Bobby Morrissey]

Thank you, Ms. Gray.

Now we'll go to Mr. Long and see how his sound quality is.

Mr. Long you have the floor.

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

Good morning.

Thank you, Mr. Chair.

Good morning, colleagues.

Thank you very much to our witnesses for their presentations this morning.

[The Chair, Liberal, Bobby Morrissey]

Mr. Long, I'm sorry. Translation advises me that they cannot interpret.

We'll now move to Mr. Collins.

Mr. Collins, you have five minutes.

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

Thanks, Mr. Chair.

Thanks to the witnesses for attending this morning.

Mr. Pomeroy, I'll start with the student housing recommendation you've made. You've given some very interesting information to the committee past and present as it relates to the impact that students have on the rental housing market. All of us around the table who have a university or a college in our municipality know the strains that student housing can put on a neighbourhood and, by extension, on those people who are looking for an affordable home to purchase or an affordable place to rent.

As it relates to government programming, currently I think we do offer in bits and pieces through the national housing strategy support to colleges and universities for new supply.

What do you suggest in terms of either legislative improvements as part of the strategy or new funding for colleges and universities to assist with that issue?

[Steve Pomeroy]

Through you, Chair, yes, international students have become a very, very significant factor in demand. We saw over 650,000 international student visas issued last year. They do displace people in the local rental market.

While a non-profit organization working in collaboration with the university could potentially utilize current programs of the national housing strategy, it's not something that's promoted or encouraged. Given the limited funding, most of them would choose to use their funding for low-income households.

There is a displacement effect. If you build a 1,000 units of student housing, that would stop the displacement of a 1,000 units in the local, low-rent market. It's a very indirect way of impacting on that affordability need. The more important piece is the way that student housing is configured, and there are a number of projects that have been built in Waterloo and in Ottawa. I think they have one in Hamilton as well. You have four students sharing a unit with private bedrooms and bathrooms, and a shared living area.

The rent per square foot of that type of product is very, very high and very, very lucrative. I think there is an opportunity to stimulate and encourage the construction of student housing. It could be done completely through private sector, or it could be done in collaboration with universities, if they happen to have land that they could identify for a site to do that. It would have a hugely impactful effect on displacing this pressure that students are putting on their local market.

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

Thanks, Mr. Pomeroy.

Mr. Dixon, your friend and colleague Mr. Brooks was here at our last meeting. My question to him was: How do we utilize the financial clout of REITs to assist in creating supply, but, more importantly, affordable supply? I think you referenced a project here today that's happening in the GTA that accomplishes that.

What kind of programs or incentives do we need to provide to ensure that the work that you're doing is creating supply rather than taking it out of the system? There has been critique in certain sectors of the country when they look at the impact of REITs on the rental market.