Human Resources Committee on Dec. 11th, 2023

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

—but actually it wasn't started until 2022.

[Sean Fraser, Liberal, Central Nova, NS]

It was budgeted for in 2022, and then it started rolling out in September of this year.

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

Got it. Okay.

In London, as an example, the deal there, from what we can tell from the media, hinged on the notion of the city permitting four units as-of-right. Was that roughly...?

[Sean Fraser, Liberal, Central Nova, NS]

That was one of the suggested areas where the application could have been strengthened. There were a few others included in the letter that I sent to Mayor Josh Morgan of the City of London, some of which they had already been actioning, but that was one of the elements that we suggested they could do to go further. It would depend on what you mean by “hinged upon”, but it was certainly an area that we were encouraging the city to adopt.

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

I'm assuming it was an important element of the agreement.

[Sean Fraser, Liberal, Central Nova, NS]

Oh, I think it was very important. It allowed them to be first out of the gate.

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

This program would be an acknowledgement that local red tape is part of the problem, part of the issue in terms of—

[Sean Fraser, Liberal, Central Nova, NS]

Absolutely. Through our conversations, I know that's something we agree upon.

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

That's right.

Of course, unfortunately, housing starts are down in London about 32%. This mirrors the national average between 2022 and 2023. Obviously, these agreements were designed to clear up some red tape and delays that cost money in the local markets, but that's not the only issue.

I'm going to use the example, now, of Aryze developments in Victoria. I'm sure we've talked about this before. They would argue that the real drivers of delays in getting more housing started today are interest rates and inflation. In 2020, Luke's company built 27 new apartments. Between land, labour, materials and everything, it cost just over $5.3 million to get that done. Three years later, those same costs today would be $8.4 million—about 60% increase. Three years ago, the interest on the money to borrow for the project was about $247,000. He says that, today, his interest costs on that same project would be $1.1 million. That is about 345% increase since 2020.

I acknowledge that local red tape is an issue. There's no question about that. This fund is supposed to help sort that out, though I'm not sure it has yet.

What about inflation?

[Sean Fraser, Liberal, Central Nova, NS]

The rising cost of building is certainly one of the factors. That's why I led, in my presentation today, with the need to make the math work for builders. Materials and supplies have increased, land has increased and interest has impacted the financial equation.

That's why we're addressing those issues, but not through the housing accelerator fund, which is meant to address a separate problem. That's why we decided to remove the GST on new apartment construction. That's why we have low-cost financing opportunities that pass on the low borrowing cost, in exchange for commitments from builders to offer homes at reasonable prices. That's why we re-securitized the Canada mortgage bond program to reduce risk, which will have the flow-through impact of providing lower rates of borrowing to builders.

Certainly, the cost of building is one piece of the pie. It's an important piece, and we need to advance measures that address this problem, as we are advancing measures that address the separate problem of red tape at a municipal level.

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

Do you agree with the Governor of the Bank of Canada and Scotiabank economists, who said that excessive government spending and borrowing are also key driving factors in inflation and, therefore, hikes in interest rates?

[Sean Fraser, Liberal, Central Nova, NS]

They can be. If you look at the breakdown they've indicated, you'll see that the spending they're primarily talking about is by provincial and municipal governments. The federal share represents a certain proportion of it, but they've largely pointed to the pandemic emergency spending that was necessary to float the economy. If you actually look—

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

Hold on a second. Just—

[Sean Fraser, Liberal, Central Nova, NS]

—at the counterfactual, I think it's extremely important you understand [Inaudible—Editor] if those investments were not made.

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

Yes, but wait a second, because $2.5 billion of the borrowing the federal government did during the pandemic had nothing to do with the pandemic. Obviously, provinces are part of the issue, in terms of how much they borrow, but this government has borrowed dramatically.

[Sean Fraser, Liberal, Central Nova, NS]

In terms of the—

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

Debt is now over a trillion dollars.

[Sean Fraser, Liberal, Central Nova, NS]

Let's look specifically at what you're talking about.

If you're trying to separate out CERB or the wage subsidy, for example, and say that's not part of the pandemic response, I would go to the wall to argue the contrary. The reality is that we put spending measures in place that were designed largely to protect against economic scarring. It wasn't only to procure vaccines more quickly than most other countries in the world, or to supplement the ability of provincial health care systems to continue supporting people during an emergency. It was also to float the ability of households and businesses to literally keep food on the table.

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

I don't know if we need to relitigate all of that stuff. All I'm saying is that government—

[Sean Fraser, Liberal, Central Nova, NS]

Given the contrary position of the parties, I think—

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

—debt and borrowing are clearly part of the issue. The Governor of the Bank of Canada said so, as have Scotiabank economists. This government has definitely borrowed a great deal of money. Our national debt is now over a trillion dollars, and that's adding to the impact. Former Liberal finance minister John Manley even said the exact same thing.

I'm wondering if you'll acknowledge that. Rather, I guess I'm wondering if you're one of the cabinet ministers who sit in cabinet meetings with the PMO and say we have to rein in the spending and borrowing to help.

[Sean Fraser, Liberal, Central Nova, NS]

My view is that we need to spend responsibly. During the pandemic, it was responsible to make sure we were protecting the long-term interests of the economy.

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

What about right now?

[Sean Fraser, Liberal, Central Nova, NS]

Right now, we need to demonstrate that we are going to spend within our means. We're going to necessarily show a downward track when it comes to spending, relative to our GDP. When I look at the international comparison, though this isn't what's felt in communities, we are trending very much in the right direction compared with international counterparts.

[The Chair, Liberal, Bobby Morrissey]

Thank you, Mr. Aitchison.

Thank you, Minister.

We'll have Mr. Long for six minutes.