Mr. Speaker, I am pleased to join the debate on Bill C-285, legislation that would require CMHC to transfer surpluses from its reserve to the provinces.
With some conviction, I can speak to a common belief among parliamentarians that Canadians ought to have a fair chance to own or rent their own home and that we acknowledge the importance of stable, affordable and good quality housing.
While the intent of Bill C-285 is commendable, in that it seeks to encourage the supply of affordable housing, it would, in truth, have the effect of negatively impacting on Canada's national housing system. It would make it harder for future governments to respond to the changing housing needs of Canadians.
Before discussing the specifics of Bill C-285, let me briefly provide some context regarding the role of CMHC. The main objective of CMHC is to assist Canadians obtain safe, quality and affordable housing. It accomplishes this through the provision of funding for affordable housing, as well as for renovations and repairs that benefit low income Canadians. It also accomplishes this through mortgage loan insurance.
CMHC mortgage loan insurance allows consumers to buy a home with as little as 5% down at interest rates comparable to those reserved for homebuyers with a down payment of 25% or more.
Since its initial offering in the 1950s, mortgage loan insurance has been used to facilitate the financing of nearly nine million homes. This helps many Canadians realize home ownership.
This brings me to why Bill C-285 is so problematic. The mortgage insurance business is characterized by long term, cyclical patterns. During strong housing markets, mortgage loan insurance sales rise and claims paid out decline.
However, the reverse is true during economic downturns, which was the case in the 1980s and the early 1990s. In order to manage the risks inherent in the insurance business, CMHC follows the prudent business practices set out by the Office of the Superintendent for Financial Institutions.
CMHC has earnings set aside for capitalization of $3.4 billion against the $274 billion worth of outstanding mortgages insured as of December 2005. These earnings set aside for capitalization represent 1.2% of its portfolio. This is consistent with OSFI directives.
CMHC's reserves provide a cushion to ensure its mortgage loan insurance business will not have to rely on additional taxpayer dollars to meet its obligations, even in bad economic times. This is why it is essential that CMHC continue to have adequate reserves. This will allow its mortgage insurance business to remain commercially viable and sustainable over the longer term rather than dependent on government subsidies.
Bill C-285 ignores the need for prudent business practices and would transfer CMHC's retained earnings that are set aside for capitalization, thus jeopardizing mortgage loan insurance's availability for future generations of Canadians. Parliament should not erode this cushion.
Another consideration is that all of CMHC's income is already included in the accounts of the Government of Canada. It is public money; that is to say that CMHC's net income has been recognized in the government's revenues dollar for dollar. CMHC is a federal crown corporation so its financial results are accounted for on a fiscal year basis and consolidated with the government's financial statements.
As I noted earlier, the federal government, through CMHC, provides approximately $2 billion each year for the ongoing support and management of assisted social housing for over half a million households. Through its mortgage loan insurance and assisted housing programs, CMHC helps respond to market circumstances as well as Canadians' evolving housing needs.
By taking the CMHC reserve out of the federal fiscal framework, Bill C-285 would tie the hands, not just of future Parliaments but also this one. Reducing the flexibility of both CMHC and Parliament to respond to developments in the housing market does not appear to be a wise way to secure the future of Canada's housing system.
I would remind the House that the former Liberal government echoed these sentiments in the previous Parliament by voting against a nearly identical private member's bill, Bill C-363. Speaking for the Liberal government, the current member for North Vancouver noted that legislation would tie the government and Parliament to an inflexible formula. The member further noted that CMHC's capital reserve helps ensure this crown corporation remains self-funding with no need for government subsidies.
As I alluded to before, Bill C-285 seeks to ensure funds transferred from CMHC to the provinces are utilized for both social and affordable housing purposes and to contribute to the creation and development of housing co-operatives.
However, Canada's new government is already taking concrete actions to strengthen our housing system. Budget 2006 contains several concrete examples of that commitment. The budget aims to support families, build safer communities and, indeed, a stronger country, including, by necessity, housing.
Accordingly, in Budget 2006 our new government made a one time strategic investment of up to $1.4 billion. This was for the establishment of three housing trusts with the provinces and territories for affordable housing, northern housing and for aboriginals living off reserve.
In addition, the budget announced an immediate one percentage point reduction of the GST, a measure which is already putting money back into the pockets of hard-working Canadians and stimulating the economy.
The reduction is also having a positive impact on the overall housing industry by making housing more affordable to Canadians. As Stephen Dupuis of the Greater Toronto Home Builders Association remarked, this reduction will have a tangible impact for prospective new homeowners. “On a $300,000 home, it could be as much as $2,000 in the buyer's pocket”.
Likewise, Dave Benbow, president of the Canadian Home Builders' Association called the GST cut a major benefit to new homebuyers, stating, “This action improves housing affordability for many Canadians”.
These measures complement existing Government of Canada initiatives to maintain the existing affordable housing stock. In that respect, funding for the residential rehabilitation assistance program and several related housing renovation and adaptation programs have been renewed for the fiscal year 2006-07, an extension which represented our commitment to $128.1 million.
Additionally, at a cost of almost $135 million, the Minister of Human Resources and Social Development also extended the national homelessness initiative, including the supporting communities partnership initiative until March 2007.
On top of those measures, the government is in the process of delivering on the $1 billion affordable housing initiative in collaboration with provincial, territorial and local partners. Thanks to this funding, new affordable housing is being created in communities across the country.
As I think all hon. members will realize, Canada's new government is moving forward on the objectives set out in Bill C-285 without embracing the flawed manner proposed in the legislation. Consequently, I call upon the House to consider the prudent course of action and reject the inflexible formula proposed in Bill C-285.