Mr. Speaker, it is a pleasure to rise and speak on Bill C-108, an act to amend the National Housing Act.
In 1987, CMHC introduced National Housing Act mortgage backed securities, a new way of attracting investors into the mortgage market and increasing the supply of funds available for home buyers. Since then the program has become a key part of the financial system in two respects: first, as an attractive real estate based investment offering very good yields and maximum safety; second, as a source of financing for the Canadian housing industry. The mortgages are all insured under the National Housing Act.
The fact that these blue chip securities are the only ones of their kind backed by the federal government makes them as solid as Canada Savings Bonds but with the added advantage of higher yields. Yields are greater because their liquidity is market based and their value fluctuates with market interest rates.
MBSs help to increase the amount of private capital available to finance the construction and purchase of homes and rental accommodation and encourages competition in the mortgage market. MBSs help to support the availability of lower mortgage interest rates by assisting smaller approved lenders to compete with the larger ones.
MBSs have also improved the security of tenure for Canadians through longer term mortgages. Before they were introduced, mortgage terms usually ranged from six months to three years and now consumers can benefit with terms of up to 25 years. Over $25 billion worth of mortgage backed securities have been issued since the initiative began in 1987.
Turning to the bill itself, it is quite straightforward. It is intended to increase the maximum aggregate mortgage loan insurance from $100 billion to $150 billion. It sounds like a large sum of money, but at the same time we have heard members on this side of the House explain that this is really a profit making venture on the part of the government, which contributes to the reduction of the
national debt and at the same time encourages housing construction.
Many really do not understand what we are talking about when we say mortgage insurance. Some people have the view that it is like life insurance and it is something that is put on a mortgage to insure someone's life. Most lending institutions will only lend up to 75 per cent of the value of a house or a property available for construction, so there is the leftover portion of roughly 25 per cent. That can only be accommodated in one of two ways, either the person who is building the home or buying the home comes up with that 25 per cent, or the financial institution receives a guarantee that it will be paid back that 25 per cent. That is where mortgage insurance comes in and that is why it is essential.
It is clear from everything I have read that if mortgage insurance was not available for that 25 per cent, housing construction would literally grind to a halt and we would see no activity at all.
I have gone through the joys of constructing a house of my own. I use the term joy very loosely. It is a challenge more than a joy. I contracted out the work myself, which means I used to be seven feet tall and have no grey hair, but after having being beat up by all of the contractors and chasing around, I realized exactly what goes into constructing a home.
What I was struck by in the process was the amount of employment created in the construction of just one home. People have no real appreciation of the facts because a lot of people have contractors build their homes and do not really see the full effect of what one house has in the construction industry.
I had five framers working on my house for six weeks. Those are the people who build the house and do all the rough construction. I had two plumbers working on my house for at least two weeks and three electricians working for another two to three weeks. Eight roofers put on the roof in two days, which I was very impressed with, but there were eight people scampering all over the roof. Four people put up the gyprock and another two put on the plaster. As well, there were painters and finish carpenters.
I was lucky to have fixed contracts so that I did not get beat up by the time that it took on this particular contract, or else I really would have been looking stupid, but fixed contracts are very important in these circumstances. What struck me was the sheer number of jobs created. That does not even account for the other people who were involved, the building supply people, the manufacturers of the pipes, the sinks, the toilets, the sewer pipes and those types of things, the cabinet makers, the people who do the hardwood floors and the carpets.
I am sure I have forgotten some of the people who were actually involved in the process. My wife is sitting at home telling me I have forgotten about this and I have forgotten about that because she did it all and that is why I do not know. She did most of the contracting rather than me.
The fact is that literally hundreds of jobs are created because one person chooses to build a house. If we can make that happen throughout the country, then we are really going to be creating a large amount of employment. It is clear that housing is a major contributor to the creation and the maintenance of employment. That is why mortgage insurance and CMHC have a very critical role to play.
In this major indication of commitment, the government is saying it wants to spur on the housing industry. For those on the opposite side that say it is crazy, that we should not do it, that we should let the marketplace do it on its own, I would like to read some of the stats that are put out by the housing industry.
In a press release in September of this year CMHC forecast housing starts of 112,500 for 1995, an astonishing 30,000 drop from the initial forecast of 141,000 starts at the beginning of the year and far below national housing requirements of 165,000 starts. While the news is a little better in 1996 with CMHC forecasting another 127,000 starts, the housing industry is at recession levels. Ways have to be found to encourage the housing industry because it creates the employment Canada needs.
The press release went on to state that lower interest rates are not the cure all for the current situation. Lower rates will not address the principal problem, the loss of confidence among many Canadians in their employment prospects.
That is why we have a double barrelled task here. First, to create that confidence, which is what the Liberal government is doing now by getting our financial house in order, while at the same time providing those mechanisms like mortgage insurance so that the housing industry can easily facilitate the increase in construction which is necessary. I want to emphasize that the key is confidence. We have to establish confidence. We have now turned the corner on the referendum. It is time to start talking about confidence, about creating employment and carrying this country into the 21st century.
New approaches and new directions for financing the housing industry have to be found. I know the industry has brought forward a number of imaginative approaches. It talked about RRSP loans for mortgages and all of those things. I found it interesting to look at some of the things that Central Mortgage and Housing is actually doing now. I thought I should read those into the record because they are important as we try to grapple with housing. If this country is going to succeed, one of the areas which will help cure crime
problems, create jobs and, in effect, fuel a positive, caring society is through the provision of adequate and proper housing.
Here are some of the objectives of the National Housing Act and what CMHC supports. Through social housing, CMHC works with provincial, territorial and municipal housing agencies and with local non-profit organizations, co-operatives, urban native groups and First Nations, for those whose needs cannot be met by the private market. Assistance is provided to more than 661,000 social housing units.
CMHC's direct lending program enables CMHC to act as a break even lender to public and private, non-profit and co-operative projects that are subsidized by CMHC.
CMHC is helping the Canadian housing industry to promote the Canadian housing system abroad by helping to develop housing export strategies to assist the Canadian housing industry market Canadian housing technology, products and services in world markets.
CMHC's Canada Centre for Public-Private Partnerships in Housing facilitates housing partnership projects involving the production of affordable and accessible housing for low to moderate income households without ongoing federal subsidies.
CMHC continues to provide leadership in improving not only Canadian but international housing standards. Those are just a few of the things that are ongoing.
In conclusion, this bill will be pooh-poohed by the members opposite, some saying it is too little and some saying it is too much. Mortgage insurance has been one of those key catalysts to keeping the housing industry functioning and a positive contributor to the economy and to the creation of jobs. At the same time, as has been mentioned before, it makes a contribution to the reduction of our debt as CMHC returns a profit to the Government of Canada.
I am sure that members opposite will see their way clear to quickly support and pass this piece of legislation.