Madam Speaker, I am pleased to rise today to contribute to the debate on Bill C-66, an act to amend the National Housing Act and the Canada Mortgage and Housing Corporation Act.
The general purpose of the bill appears to be to place the CMHC on a more commercial footing, particularly in terms of its mortgage insurance business. That in itself is certainly a commendable objective but, as we will see, there are certain problems with it.
As with much that has gone on in the House during the current parliamentary session, the significance of the legislation will likely be noticed by few in the media or the public. It so happens that the bill involves the most extensive changes in nearly 15 years, since 1985, to the National Housing Act and to the Canada Mortgage and Housing Act.
It was in the 1980s, as pointed out by my hon. colleague from Kelowna during his speech on second reading, that CMHC accorded greater priority to social housing needs. The position of the government is that these legislative changes are in keeping with the enhanced role of CMHC in facilitating home ownership, even though it is a crown corporation as an agent of government with respect to social housing concerns. For example, the government has made CMHC a missionary to the homeless through adding $50 million to the CMHC's home renovation program.
Some see a contradiction with the federal government bent on downloading responsibilities for social housing to the provinces at the same time as favouring an enhanced social role for CMHC. Others believe that the very existence of the CMHC illustrates an all too familiar pattern of federal government encroachment on areas of provincial jurisdiction, doing so either directly, under the guise of an issue being of national concern, or indirectly through the use of federal spending powers, in this case federal spending powers to facilitate home ownership with 5% down.
With regard to social housing the CMHC has played a pivotal role with respect to the expansion of co-operative housing. It is through the CMHC that mortgage interest subsidies are provided to these housing co-operatives. Some people argue that it is not equitable to provide mortgage interest subsidies based solely on the fact that a building is collectively owned by a non-profit corporation.
The profit to those living collectively in a supposed non-profit context is the shield from interest rate fluctuations which CMHC provides. In the longer term the profit to those living collectively is a mortgage free environment with the mortgage having been rapidly paid off due to taxpayer subsidies.
People living in non-profit housing co-ops never acquire any equity in the property though they acquire equity in other ways, some argue, based on taxpayer generosity with respect to the co-op mortgages. Some people question why several individuals cannot simply go to a financial institution and ask for financing through a collectively signed mortgage or by way of pooled funds and individual mortgages. To what extent should people who wish to live collectively be treated any differently in terms of government housing assistance than those who purchase homes individually?
Much of the debate on the bill has so far concerned whether it is appropriate for the CMHC to be competing with other financial institutions and whether expanded quasi-privatization of the CMHC is of general economic benefit.
In my riding there is a significant co-operative housing component. In addition, with respect to social housing, generally my hon. colleague from Kelowna mentioned during his second reading speech that as of 1992 an amendment to the British Columbia municipal act requires that municipalities include housing policies in their official community plan.
It may be said that in British Columbia social housing issues were being addressed far earlier than before they became politically fashionable in other provinces or even in the House.
I note that pursuant to the bill CMHC will be able to provide interest rate relief. However, such relief is regarded as only applicable to individual borrowers due to the competing provisions in the Interest Act. Many people understand that they can generally get out of an onerous mortgage interest rate by paying a three month penalty. These provisions are designed to protect consumers who may not appreciate interest rate fluctuations to the same extent as corporate borrowers.
Corporate borrowers generally are stuck with the mortgage interest rates they initially agreed to. This obviously causes problems with long term high interest rate debt in circumstances where, as now, mortgage interest rates have been low for quite some time. One sector that is disadvantaged in this respect is the co-operative housing sector. Many housing co-operatives are tied to high interest rate, long term mortgage obligations.
They would prefer to be able to pay an interest rate penalty and to refinance. Their mortgage lenders would obviously prefer otherwise. The taxpayer through CMHC would appear to end up paying a higher interest rate subsidy to housing co-operatives than would otherwise be the case if they could refinance their mortgages at current rates.
In the same way people choosing to live collectively perhaps should not be accorded greater government housing assistance than those who prefer to purchase housing individually. People who choose to live collectively should not be treated any differently from individual purchasers in terms of mortgage prepayment privileges.
My point is that whatever one thinks of financial institutions, housing co-operative borrowers are really no different from individual borrowers in terms of sophistication and social need. Therefore I want to use this opportunity to put on the Hansard record my concern that mortgage prepayment privileges be made available to housing co-operatives.
I know that the government has been lobbied on this issue but has yet to see fit to act. Quite apart from this being the right direction to take, it cannot prejudice the government's relationship with the financial institution sector any more than the government has already managed to do.
Another issue I would like to address has to do with an issue that was raised by Ms. Janice O'Brien, executive director of the B.C. Association of the Appraisal Institute of Canada, who noted:
These amendments are designed to allow Canada Mortgage and Housing Corporation—to operate in a commercial manner. The Appraisal Institute's experience shows that they raise serious public policy issues.
In particular, the Appraisal Institute of Canada noted:
Bill C-66, amendments to the National Housing Act—is designed to allow Canada Mortgage and Housing Corporation—to operate its mortgage insurance business “on a more commercial basis”. However, as long as CMHC is a crown corporation, parliament has responsibilities to act as a watchdog.
The Appraisal Institute of Canada asks members of parliament to examine Bill C-66 to ensure that it doesn't provide CMHC with a licence to operate in a more commercial manner by compromising or sacrificing its responsibilities for public federal housing policy.
The concern is that we do not repeat the mistakes that were made in the U.S. While CMHC moves away from appraisals, federal housing officials in the United States are strengthening appraisal requirements for all federal mortgage insurance.
Computerized underwriting is not replacing appraisals. Instead aggressive new consumer oriented standards are being prepared for all federal mortgage insurance appraisals. U.S. appraisals would be required to provide more detailed disclosures to the consumer about the condition of an appraised property. The U.S. experience by itself suggests the need to review CMHC's current practices.
As with opposition to any legislation, the fact that parts of a bill are objected to and the bill voted against does not mean that one is opposed to the direction of the bill.
The official opposition supports the principle that Canadians should have access to affordable housing in order to acquire housing and recognizes the role that public mortgage insurance plays in supporting it. However, in keeping with the general view of the official opposition that private sector options should be explored, it is suggested that greater private sector competition in the provision of mortgage insurance should be encouraged.
What the legislation does is further entrench government intervention in the housing market, an area of provincial and municipal jurisdiction. The prejudicial impact on existing financial institutions is largely unknown.
For these reasons, among others, the official opposition will oppose the legislation in its current form but nonetheless remain pleased to have had an opportunity to place the concerns of Canada housing co-operatives, which I fully support, on the record.