:
I call this meeting to order.
Welcome to meeting number 149 of the House of Commons Standing Committee on Finance. Pursuant to Standing Order 108(2) and the motion adopted on Thursday, September 21, 2023, the committee is meeting to discuss policy decisions and market forces that have led to increases in the cost of buying or renting a home in Canada.
Before we begin, I'd like to ask all members and other in-person participants to consult the cards on the table for guidelines to prevent audio feedback incidents. Please take note of the following preventative measures in place to protect the health and safety of all participants, including the interpreters. Use only a black approved earpiece. The former grey earpieces must no longer be used. Keep your earpiece away from all microphones at all times. When you are not using your earpiece, place it face down on the sticker placed on the table for this purpose. Thank you for your co-operation.
Today's meeting is taking place in a hybrid format, pursuant to Standing Order 15.1. In accordance with the committee's routine motion concerning connection tests for witnesses, I'm informed that all witnesses have completed the required connection tests in advance of the meeting.
I would like to make a few comments for the benefit of the members and witnesses. Please wait until I recognize you by name before speaking. For members in the room, please raise your hand if you wish to speak. For members on Zoom, please use the “raise hand” function. The clerk and I will manage the speaking order as best we can. We appreciate your understanding in this regard. All comments should be addressed through the chair.
I'd now like to welcome the witnesses for our first panel today.
We have from the University of British Columbia, as an individual, Professor Patrick Condon.
Welcome, Professor.
From the Corporation des propriétaires immobiliers du Québec, we have the director of economic affairs, Paul Cardinal, and the director of public affairs and government relations, Madame Anne-Louise Chauvette.
Welcome.
Our third witness, from St. Michael's Homes, is Mr. Robin Griller, the executive director.
On that, we'll hear opening statements from our witnesses.
We'll start with Professor Condon, please.
:
Thank you very much, and thank you for the invitation.
For 30 years I've held a position at the University of British Columbia's School of Architecture and Landscape Architecture. During that time, my teaching, research and publications have been in the field of sustainable design. This has allowed me to partner with Canadian municipalities in executing path-breaking sustainable community projects, most notably the East Clayton sustainable neighbourhood project, a project that provided affordable homes in a walkable neighbourhood for over 10,000 new residents.
I have published a number of books about sustainable communities, leading up to the one entitled Broken City, which I have brought and will leave with the committee. This book contains the conclusions that bring me here today.
In my discipline, the challenge is to facilitate plans that balance social, ecological and financial considerations. This community planning and design process has always put housing affordability at the top of a long list of objectives, because a sustainable community that no one can afford to live in is indeed an oxymoron.
For over three decades, I have had the privilege of working with hundreds of others on the mission of a truly sustainable Vancouver region. During these decades, Vancouver and its region have gained world fame for its path-breaking livable region strategic plan. Even more globally well known is Vancouverism, a model of urban density done right.
All of these efforts, supported, importantly, by local voters, led to an eventual tripling in the number of housing units in the city of Vancouver, an already completely built-out city, in just four decades. Thus, all of this new housing was and is in the form of infill housing units, units already added to completed residential districts, or on converted industrial lands. No other centre city in North America has come even remotely close to this heroic achievement—this tripling of housing supply—in just four decades.
Unfortunately, all our efforts to keep housing affordable through this heroic addition of new housing supply have been in vain. Adding 200,000 new housing units did not lead to lower home prices and the lower rents that we had hoped for.
Indeed, if adding new supply to existing urban neighbourhoods would lower prices, Vancouver should have by now North America's lowest home prices. It has the highest by far.
My recent attempt to answer this puzzle is contained in my most recent book, Broken City. The answer appears alarmingly or fairly straightforward. Adding new supply in conformance with what many call “the law of supply and demand” did not lower home prices for renters and buyers in Vancouver. What it did correlate with is a tremendous increase in our urban land prices.
Presently, the assessed value of Vancouver urban parcels is typically 10 times greater than the assessed value of the structure above it. In just the year 2016, the aggregate value of all privately owned parcels in the city increased by an eye-watering $100 billion.
Even though Vancouver has it worse than most cities, this is not just a Vancouver problem. This is not even just a Canadian problem. This is a global problem: a global problem that is afflicting most of the world's major cities, the so-called global cities, like Vancouver and Toronto.
The more these cities attract investment enthusiasm from both here and abroad, the higher the land prices go, and the more impossible it becomes for builders and developers to provide homes at prices that average wage earners can afford.
What can we do? My suggestions are explained in my book.
Step one, stop using tax dollars to incent private developers. That only adds one more buyer to the already overcrowded market for urban land.
Step two, use new land use authorizations to stream publicly generated new land value into social benefit and away from the already overstuffed pockets of land speculators.
Step three, use the funds thus acquired to support the expansion of Canada's non-market housing sector, a sector that was the envy of the world before this body discontinued supporting it in the 1990s—
:
Quebec has the largest private rental apartment stock in Canada. It has nearly a million buildings, almost as many as Ontario, British Columbia and Alberta combined.
Like just about everywhere else in the country, we are experiencing an acute housing crisis, with a vacancy rate of 1.3%, practically an all-time low. This means that households sometimes end up on the street on July 1 because of significant rent increases and pressures. Rents went up quite a bit from 2013 to 2023, nearly 50%.
The crisis has many causes, but three factors stand out.
First, net migration has skyrocketed, particularly in relation to non-permanent residents, who overwhelmingly rent when they arrive here. Second, home ownership has become unaffordable. Third, an aging population is driving some older households back to renting.
Supply has simply not been able to keep up with demand for a number of years. There are a lot of barriers. Construction costs, of course, have increased by 40% since the pandemic. Between 2021 and 2023, the cost of financing a typical rental property went from 2.55% to 7.3%.
While the climate is now more structurally favourable, land scarcity, excessive regulatory requirements, lack of infrastructure and development charges are all factors that have been holding back new construction for decades.
We recently saw an acceleration in rental housing starts, but this was due to the exceptionally low rates in place during the pandemic, something that won't happen again any time soon.
Since then, residential construction has been declining. It is currently not profitable to build new unless the rents are very high, which many people cannot afford.
The existing stock of rental housing is more affordable, but profitability is steeply declining. Renovation, maintenance, repair and insurance costs have ballooned, as have mortgage interest costs. Defaults are mounting, all in an environment where rental increases are regulated.
It is very difficult for owners to renovate their buildings. However, Quebec's rental stock is old and poorly maintained.
In short, we're in a perfect storm. According to the Canada Mortgage and Housing Corporation, CMHC, 1.2 million homes across all housing categories would need to be built to bring affordability back into the housing market by 2030, which amounts to tripling housing starts. This is in Quebec alone.
What happens is that market rents, the ones that make new rental construction profitable, are very high, almost twice the cost of rents in existing housing. Unfortunately, the perfect storm has consequences. Sometimes the only way to make the purchase of an existing building profitable is to carry out renovictions.
On top of all these stumbling blocks, the federal government now wants to throw in another obstacle. It intends to increase the capital gains inclusion rate by more than $250,000. This measure will really hurt Quebec's middle class because of our unique model. Quebec has 82% of the country's rental buildings with three to five units, which makes it a particular problem in Quebec. This rental stock represents some 300 small buildings and more than 500,000 rental units, which is one third of the province's total supply.
We do not foresee the crisis resolving itself quickly. There is a critical need for public policies that stimulate construction and the renovation of existing rental stock. However, that is not enough. There also needs to be a much more attractive tax environment for owning a rental property and, to that end, the government should consider bringing back tax incentives, as there have been in the past.
In conclusion, while everyone agrees that more supply is needed to solve the crisis, opinions naturally differ on how. In recent years, public policy has tended to increase the tax and regulatory burden on property owners. The exact opposite should be done.
If you stifle owners, you stifle supply. If you over-regulate prices, you create a shortage. There is a pressing need to recreate an environment conducive to rental investment, and to do so, you have in your hands the powerful tool of taxation.
We urge you to use it.
:
Thanks for inviting me to speak to you today.
St. Michael's Homes operates four buildings providing supportive housing and bed-based addiction treatment. Like other non-profit housing providers, we are keen to develop new housing. However, for the past 30 years or so, since the federal government first got out of housing, the rules in place for capital and financing access have made it highly challenging to develop housing that is meaningfully affordable.
While every funding announcement prioritizes non-profit, affordable and supportive housing, the models and policies in place create major impediments to actual development. This results in affordable housing developments in recent decades being carried out by for-profit developers, resulting in housing that often has a minimum number of only nominally affordable units. Where the affordability measure is based on the average market rent in a well off neighbourhood, those affordable units may in fact be anything but affordable, even for middle-income Canadians.
The current year's federal budget is a good start to improving the situation. The removal of the GST, access to federal lands, $14 billion earmarked for the affordable housing fund and the improvement in coordination between the federal government and the provincial governments are all welcome, but existing policies at federal institutions like CMHC, insufficient resourcing for capital sustainability and a lack of coordinated supports for non-profit housing development between the three levels of government leave lots of opportunities for improvement.
In order to support a greater number of developments by non-profits, there need to be changes in some of the policies in federal institutions like CMHC. I'll give you a few examples.
The financing available for projects is generally based on the rent collected, which directly undermines the capacity of non-profits to develop truly affordable housing.
A current building, in planning for 99 units, will receive only $17 million in financing out of the $54 million required, because it is “deeply affordable”. A for-profit developer would build 30% nominally affordable units with 70% market rents to receive full financing, but this non-profit will likely have to sell other affordable buildings to obtain the needed capital dollars. Additionally, per door capital funding models mean that only the smallest units—bachelors or studios—are viable, as you will have fewer doors with larger family housing units, which prevents the development of truly affordable housing for families.
CMHC will often demand A-grade security on financing. This means that if you are building supportive housing, you may be required to get a provincial commitment of support dollars for 50 years, which is not a reasonable expectation. If we want significant non-profit housing development, these approaches and models need to be changed through consultations with non-profit housing providers.
Second is capital stability, which is also needed for non-profit housing developments: The affordable or deeply affordable rents that low- to middle-income Canadians can pay cannot achieve sustainability for truly affordable housing in its absence. The capital dollars granted in the 1970s and 1980s allowed for the maintenance of buildings for the 50 years of capital funding. This approach should be reinstituted and enhanced to allow for sustainable affordable housing that stays affordable. See, for example, what's happening in some places in the country, such as Winnipeg, where provincial governments did not sustain capital resourcing after the end of federally funded mortgages, leading to the loss of affordable housing.
Third, a lack of coordination of programs between multiple levels of government leads to long, convoluted, multi-year processes that may or may not lead to financing or capital funding. As a result, non-profits spend substantial staff and cash resources taking substantial risks that may not lead anywhere. The three levels of government often do not coordinate their approaches with each other or between capital dollar and support dollar access. I know of potential building purchases by non-profits that could have broken even if they'd had support funding attached, only for the municipality to say, “We aren't accepting applications for support dollars this year.” In such situations, buildings don't get purchased and affordable housing doesn't happen.
Ideally, the solution to this would be a government agency to do much of the background development planning work in partnership with non-profits, so that we could turn properties into housing that we can run, which is our area of expertise. Among us, we have lots of properties that are ripe for redevelopment.
Thus, the key changes needed are coordination among the levels of government to simplify the development process for non-profits, ideally through a government development office; changes to funding models in federal agency policies and practices to remove unnecessary barriers to the development of deeply affordable and supportive housing; and capital supports that bridge the gap between the cost of developing and maintaining housing and the affordable rents to be paid by low- and middle-income Canadians.
Thank you for your time today.
:
It won't actually hurt new construction as much as it will hurt existing owners.
As I explained, small rental buildings of two, three, four or five units are very common in Quebec. Many years ago, a lot of middle-class people bought these buildings. It was a way for them to be able to buy in centrally located areas, in urban centres, because they could earn additional income from the building.
The people who bought 10, 20 or 25 years ago will easily earn capital gains of more than $250,000 and will be taxed more. Many of them were relying on that asset to fund a good part of their retirement.
Now they are faced with varying tax amounts. We've run a variety of scenarios. As I said, the amount can vary a lot, but in a number of cases, people will have to pay $50,000 or $60,000 more. That will somewhat undermine the retirement plans of someone who has an asset that they can't break up to sell, as they could with shares. In our opinion, it isn't a passive investment either, because that person still invested the time and money to maintain the building. They end up penalized.
:
Thank you so much, Mr. Chair, and I want to thank our three presenters today for their excellent presentations.
I'm going to start off with Mr. Griller of St. Michael's Homes.
First, Mr. Griller, I want to say a huge thanks to you for the amazing work you and your team do for Ontarians who have mental health and addiction issues. I know you provide a wide range of programs for them. I know that one of your offices is in my riding of Davenport, and I know we are very grateful to have you in our community and very grateful for the work you do.
I'm also very grateful that you talked a bit about some of the good things that our federal government has included in our housing plan—taking the HST off construction and making public land available for affordable housing—and the fact that we're really working hard to try to coordinate better all three levels of government.
That being said, you've indicated there's still some work for us to do. I really appreciate that you have gone into quite a bit of detail on some of the recommendations you have or policy changes it would be helpful to see at CMHC.
I'd love it if you would explain a bit more, in a minute. You talked about instability of financing at CMHC and, further, the lack of coordination between the federal government and the provinces. If you could maybe be more specific as to what you're indicating there and what your recommendation is, that would be very helpful.
:
Sure. Here's one of the fundamental things: What am I good at? My team is good at running supportive housing and affordable housing for low-income Canadians with disabilities. That's what we're good at.
We're not experts in housing development, so when we have to do all the work around development preparation—so architects' drawings, permit access, working with the city to eliminate fees associated with development and all that stuff—we have to hire external folks to work with us often, and we spend much of our senior management time on those development pieces. Ideally, there would be a government institution through which the three levels of government could work together on that, so we wouldn't have to.... When you think about it, when a private developer develops a building, that's what they do for a living, the development piece. Since their model generates a profit, it doesn't matter how much they put into it in resources in advance to develop it, as long as they make a profit in the end.
Since we're non-profits, all those resources—
:
Mr. Griller, thank you so much. I think I got your point, and I think it's an excellent one.
I'm going to end with Mr. Condon.
Thank you so much for your presentation. I'm sorry you didn't finish.
First of all, I really appreciate your indicating that the rising cost of housing is a global problem. It's happening right around the world.
You mentioned two very key recommendations to us, and I think you had many others. One recommendation was to stop incentivizing private investors. I think you also made a recommendation around land speculators. Would you able to elaborate a little on both of those in terms of what we need specifically to do?
Thank you.
:
Sure. As I mentioned in my presentation, land is the problem. For example, in Vancouver, land is sold by the buildable foot. It's between about $600 and $800 per buildable foot, while construction is between $300 and $400 per buildable foot. The problem, really, in my view, has to do with land and the out-of-control price of land.
In response to the previous speaker, there's a lot of information out there that if you have free land, you can build affordable housing. The rents will cover the amortization of the mortgage, maintenance costs and so forth. We don't have free land, though, so what do we do?
It can be done a couple of different ways. One way that I promote is what the City of Cambridge has done. They have said that they will allow double density in any part of the city above the existing zoning, but in return for 100% affordability. What that does is create a market for non-profit housing providers that is not in competition with the market providers, because that extra bonus in land value only goes to the non-profit provider.
Now, each different city would have to look at their own economics separately. Adding CMHC funding, as the previous speaker mentioned, would be a good way to support that, but the key point I'm making is that the problem here is not the cost of building. The building might have increased in cost by 30%, as was just mentioned, but the cost of the land has increased by 500%. Policy mechanisms are available, notably through zoning and development charges, to manage land price.
I would like to welcome all the witnesses and thank them for being here to give us their informative views. We certainly appreciate it.
My questions are for the representatives of the Corporation des propriétaires immobiliers du Québec, or CORPIQ.
Before I get to my questions, I would like to respond to Ms. Dzerowicz about coordination between levels of government. What we see in Quebec is that between the time the money is allocated through the budget and the time it is transferred and gets to people on the ground, two or three years have gone by. In light of the current housing emergency and the increase in costs, an expedited process and better coordination would do the greatest good.
On that note, I'll turn back to the CORPIQ representatives.
Thank you for all the points you raised in your presentation. If I understand correctly, we'll receive your PowerPoint presentation once it has been translated into both official languages. We will read it with great interest.
I want to start by going back to the change in the capital gains inclusion rate. I think it could lead to unfairness. There's a bill coming this summer, and we should be examining it this fall. We would certainly like to invite you back for that. The goal is to create a fairer tax environment for people like nurses and construction workers in relation to millionaires, who pay a lower tax rate thanks to capital gains deductions. We are in favour of the principle.
However, there is a negative impact, and your members are often affected, unfortunately. You said that 82% of the country's rental apartments in two- to five-unit buildings are in Quebec. That's the Quebec model. We're talking about a few small units. People very often use it as a pension fund. They pay for their multiplex their entire lives and then sell it when they retire. It's their pension fund. Now these people are being penalized.
I would like you to say a few more words about that and propose solutions that the government could consider this summer when drafting its upcoming bill.
:
That's a very good question.
You're right, it penalizes people who own small rental buildings in Quebec. A very high percentage of them are middle class. Often, they live in the building and have tenants, whom they naturally have to manage.
When the change in the capital gains inclusion rate was announced, there were stories in the media about people who were earning very little, $60,000 or $70,000 a year, but still managed to buy a multiplex. However, that was 30 years ago, and they paid into it all their lives. Now that is what they are counting on for their retirement. The effects can be quite harmful.
You also opened the door to a number of solutions. I would like to tell you, first of all, that we are asking that an exception be made for small rental buildings of between two and five units. That is what we'd like to see. If not, there are other possibilities. In some OECD countries, when the capital gain is realized in the short term, the tax rate is much higher. When the building has been owned for many years, the tax rate becomes very low, if not zero. It also has the beneficial effect of preventing flipping and over-speculation.
Your first suggestion is to exempt owners of small rental units from the measure. Otherwise, you say that we could look to what is being done in other OECD countries, where the inclusion rate decreases depending on how long the building has been owned. People who use that income as a pension fund would be exempted. We will suggest these solutions to the government and try to bring it on board.
At the moment, there is a $250,000 threshold, below which the inclusion rate remains at 50%. You've clearly shown us that this is insufficient for most of these people. They can't claim the $250,000 deduction every year, but only when they retire. They get it only once.
If we wanted to adjust the $250,000 threshold for a once-in-a-lifetime sale, how much should we set it at to properly protect your members?
In its communications, the government says this measure is aimed at the richest 0.13% of the population. I discussed this with tax expert Luc Godbout, who had studied the issue. He explained that, in the year a person sells his multiplex, he is part of the ultra‑rich, but only that year. When you look at the same person's income in previous or subsequent years, you see that it's very low. They're often below the median or average. That's their pension fund. The goal of tax fairness is really to make millionaires pay at an equivalent or fair rate compared to what middle‑class people pay, and to exclude them.
Could anything be done about the first disposal of a multiplex by an individual, for example? Do measures of this kind exist in other countries?
:
Thanks very much, Mr. Chair.
I appreciate the testimony from our witnesses today. I think it's been an excellent panel.
I did provide notice of a motion to the clerk, which has been distributed. I would like to move that motion now, Mr. Chair, as follows:
That the committee hold no fewer than four meetings devoted to a prestudy of the ways and means motion introduced in the House of Commons on June 10, 2024—
That is the capital gains ways and means motion.
—that at least one meeting be held prior to June 25, 2024, and that witnesses may be submitted by each party prior to Friday at 5:00 p.m.
Friday would be tomorrow.
Mr. Chair, we've heard from witnesses today some very important testimony about the impact of this on, in particular, landlords. There is obviously some misunderstanding of the impact of these new tax rules, such that the government, in an effort to start a class war, has made a mistake. They don't understand, actually, that it's landlords, self-employed individuals who incorporate and individuals of modest incomes who will actually be paying this tax or be affected by this tax.
In fact, StatsCan data indicates that for individuals who have $250,000 of capital gains or more in one year, it is almost always an event that is once or twice in a lifetime. That is, data shows that, for example, in 2011, of the individuals who claimed capital gains tax increases in excess of $250,000, two-thirds of those individuals never, ever were in that group again.
The government is correct, then, that 0.13% of tax filers are in this group. The problem is that it's almost a new 0.13% of tax filers every single year. Over 50 or even 75 years, the number of tax filers affected by this tax change are millions of Canadians. It is not the same 40,000 people each year who have capital gains in excess of $250,000.
I think the government's made a fairly large mistake. I think they recognize that. That's why it's a ways and means motion and not final legislation. I think they're considering making carve-outs. In an effort to help the government with its legislative agenda, Conservatives are willing to prestudy legislation.
I'll note that is not normally a practice of ours. We think, frankly, stakeholders deserve to have their voices heard. We know a number of them have come out publicly to say they have challenges with the current legislation.
If the government is considering amendments, perhaps this committee will be able to offer that opportunity to have witnesses provide their testimony.
On one other quick point, of those individuals who have in excess of $250,000 in capital gains in one year, almost 50% have an income of less than $120,000. These are modest incomes. In fact, 10% of those individuals have incomes of less than $20,000.
We think we should study this. We think we should give witnesses an opportunity, and we would like to take the time to do that on Tuesday next week, Mr. Chair.
Frankly, Conservatives would be open to amendments to this motion to increase the number of meetings before June 25. Of course, that's the date this is supposed to take effect. We would also be open to hearing from the herself for up to two hours.
I'll note that the motion as it stands right now does not include those things, but if someone would like to make an amendment to that effect, Conservatives would definitely support that amendment.
Thank you, Mr. Chair.
:
Thank you very much, Mr. Chair.
I will just reiterate a couple of comments made by my colleague.
One is that Conservatives would be very open even to additional sittings before we rise to get on the record some important testimony with respect to the capital gains.
Further, we would definitely like to hear from the with respect to the capital gains tax. She has certainly been outspoken in the media.
I'll just go back and reiterate a couple of other comments.
This motion was clearly rushed out the door. There are considerable errors in it, including with respect to the calculation of the capital dividend account. As more and more professionals look at it, they see the simple errors this government has made by rushing this motion, even though it had a couple of months to get it sorted.
It's clear that the Bloc has also realized the error of its ways in voting for this initially. Perhaps it's because of great stakeholders, like the ones we heard from today, on the impact of the capital gains inclusion rate.
We believe that considerable study is needed. Just to build on my colleague Mr. Chambers' excellent comment—I'll put it a little more crudely, because I'm not quite as eloquent as Mr. Chambers—the reality is that only 1% of Canadians will die each year, but in the end, 100% of us will pass away. That is the analogy I would use here. It may be only a relatively small portion in any given year, but as Mr. Chambers said, given a long enough time, nearly all Canadians will be affected by the capital gains inclusion increase, whether directly or indirectly.
I look forward to hearing what my colleagues from the Bloc and NDP, in particular, have to say with respect to this motion. It's relatively rare that an opposition party would move to a prestudy of government legislation. We definitely see that there's an opportunity—in fact, I would say a need—to discuss this further.
Once again, I would reiterate Mr. Chambers' comments that Conservatives would be very open to additional meetings before we rise. What are we on today? We are on the 13th. By the 25th, Canadians will have to decide whether they sell their property and their assets and realize the existing capital gains inclusion rate of 50% or wait until after the 25th.
Time is of the essence. We owe it to Canadians to give them a better understanding of the capital gains tax increase, so that they can understand and decide their affairs more fittingly.
In fact, the limited time is unfair in itself. At the very least, we owe the Canadian public more ability to hear from witnesses in testimony about the impact of the increase with the inclusion of the capital gains tax.
At this point, I will pass the floor on.
Thank you.
:
I have a point of order, Mr. Chair.
This is dragging out. Can I ask my colleagues if we could postpone this debate until the next panel, perhaps the last half hour of the meeting, when we have only department officials? We have witnesses from the parties here right now. We could at least have our four minutes of questions with these witnesses, and then we could carry on the debate on this motion.
Again, I think we're going to come to an agreement on it, but it makes more sense to me to have it in the next part of the meeting, when we have department officials, who can always come back much more easily. Also, I think there are far fewer questions for them than for these witnesses.
Can I ask that we adopt that strategy here?
[English]
I'm going to use the rest of my time to ask questions of Professor Condon.
Professor Condon, thank you for being here.
We have only about two and a half minutes left, so I'll be concise, and if you can be as concise as possible, we'll get to as much as possible.
My colleagues may remember this. Back during our pre-budget consultations, when this committee was travelling in Toronto, we had a gentleman named Joe Polito, who happens to be from my riding of Etobicoke Centre, present to us. He provided a presentation on how we could do more to make housing more affordable.
He explained how he thought that a land value tax could help make housing more affordable. I think he was speaking to the issue of trying to incent those who own land to put it to good use: in other words, to develop it so that there was housing available for folks, rather than sitting on it and speculating on it.
Do you agree with his argument that a land value tax could make housing more affordable? If so, why?
:
Yes, I do agree with that.
That theory or fact goes back to Adam Smith, who said the same thing. He said that since land is not a productive factor of production with capital and labour—land is necessary but not productive—taxes should come essentially as much as possible from that source. Milton Friedman and others have said the same thing.
Point two is that it is a good tax, but it would be politically very difficult to change the taxing strategy that we have. If all of you can figure out how to do that, that would be great, because we don't emphasize land value as a destination for tax. The credible theory for this is that by taxing land instead of income or instead of capital gains, as you're considering, you do not undercut the vigour of the economy, and it ends up making things like housing more affordable, because it will be valued for its use value only, rather than its asset appreciation value.
I promised to be short, so I will say in the next 10 seconds that if it's politically impossible to restructure the world around a land value tax, there are also other mechanisms that have to do with zoning regulations and things like bonus density and so forth and are policy tools that do the same thing. They mitigate what would otherwise have been a land price inflation in the absence of those policy requirements.
Thank you, professor, for all the answers and elements of analysis you've presented to us. They're very interesting and we'll be looking at them carefully.
Mr. Cardinal, in your presentation, you reminded us that construction costs have risen by 40% in recent years. What's more, the rental housing stock is in need of major renovation, but here too, renovation costs have skyrocketed. Meanwhile, the purchasing power of tenants has not increased at the same rate.
What would be solutions to be able to renovate the rental stock and ensure the construction of rental housing, while preserving tenants' ability to pay?
:
Our view on this is that we need tax incentives, like the good old tax credit. As we've told you, it's difficult for people to renovate rental properties, given that they generate little net income, it costs more and you have to borrow more.
Another advantage of encouraging the renovation of rental housing is that it would greatly improve energy efficiency, and we would greatly reduce greenhouse gas emissions from older buildings, particularly those built before 1980, because the standards were different then.
In Quebec, in addition to this difficulty in renovating housing due to the economic climate, the Tribunal administratif du logement has rules for setting rents that make major renovation work very unprofitable.
To give you an idea of how absurd this is, the payback period for major renovations varies according to the rate of return on guaranteed investment certificates, plus 1%. At the height of the pandemic, this meant payback periods of up to 50 years. But no renovation work has a useful life of more than 50 years. So there's a real pitfall there.
Naturally, it's a provincial provision. On the federal side, we give tax credits or grants to homeowners for renovations that improve energy efficiency. Why shouldn't we offer such incentives to rental property owners too? I think it would all add up.
:
—and I don't believe my colleague has received the amendment in both official languages.
As I understand it, we're now on a subamendment to invite the . I think we can tie this up pretty quickly.
We have an invitation to the . As it relates to clause-by-clause, we would agree to a reasonable clause-by-clause start date once we see legislation. If that's going to be a hang-up and if you're going to try to pick the clause-by-clause start date now, that's obviously going to be a challenge. We would agree to a reasonable clause-by-clause start date once we see legislation.
If the government would like to bring in a clause-by-clause motion on September 21 or whenever we come back, once we have legislation, that's no problem, but we have at least one meeting left before June 25. It sounds like there's some general agreement to devote Tuesday's meeting to this issue.
The only sticking point is this clause-by-clause, which we actually don't need to resolve today. Conservatives would agree to a reasonable clause-by-clause start date once legislation is tabled. If that's acceptable to the parliamentary secretary and the government, I think we can continue on. I believe that is the consensus. We'd have to test the room on that, but I think that's where we are. That's how I understand it.
We have the motion and the amendment from the government. We agree to everything the government has, but for clause-by-clause, I've just made a recommendation to the government on how to fix the clause-by-clause language and that we add an invitation to the , which we know is not a summons; it's just an invitation.
I think that's a pretty reasonable position to land on for today. It means we can have the rest of this meeting—we still have some time left—and meet on Monday. I'll just leave that for the government to consider. If they want to suspend for a bit, that's no problem. We're here to find out.
I'm wondering if we could come to an agreement on sawing it off by saying “two weeks”. We're talking about when the committee would start clause-by-clause after the bill comes to the committee.
We just went through a budget bill where we crammed in a lot of witnesses and started clause-by-clause in less than two weeks. That was a 650-page bill. We're talking about a single issue.
We could have a number of meetings. I think the motion calls for at least four. That should be a lot of meetings to get the basic points out. We can always have more if the committee decides that.
I think that giving us two weeks to begin clause-by-clause from when the bill comes to committee allows for at least a full four meetings, because if we start on Tuesday.... I'm happy to agree to Tuesday.
I will point out again that we continue to come to agreement on the agenda of this committee, and the ink is barely dry on that agreement when we have motions to change that. I'm finding that a bit frustrating, but I'm happy to do that. I would point out that the capital gains tax was announced in the budget on April 16. We've had about two months that we've known this is coming.
Given all that, I'm happy to work with my Conservative colleagues. I agree that it's an important issue. We have different perspectives on it, but I think that airing those different perspectives and doing a dive into this issue is important.
However, let's not hold up an agreement to pass this motion, to get started on Tuesday—examining capital gains and having four meetings, at least, on this—over an issue of when we start clause-by-clause. I think that saying that we will not start it for two weeks after the bill comes should satisfy everybody's concerns. Obviously, the government will want to move this bill on and needs some comfort that it will, and I think this is a reasonable compromise. I would just hope that we can start clause-by-clause two weeks after the bill comes to the committee, and then we can pass this motion.
I tend to agree with the consensus that seems to be emerging.
I'd just like to remind you that, when we present an untranslated motion, the interpreters translate it as well as they can, but there may still be some vagueness. So it's always best to present a motion and written amendments so that we're all on the same page.
I'd like to propose a favourable amendment that would gain consensus.
As proposed by Mr. Davies, I would prefer that clause-by-clause consideration of the capital gains bill begin no later than two weeks after its formal referral to committee by the House of Commons. However, I would add the adjective “parliamentary”, which would be my friendly amendment, to clarify that these are indeed parliamentary weeks, to avoid the bill being introduced for a week followed by a parliamentary recess.
I therefore propose simply adding the word “parliamentary”, and would prefer that we opt for “two weeks” rather than just one.
I would like to see this all done by UC so that we don't go through the subamendment-amendment type of thing, but Conservatives would still like to see two hours for the . We believe that this is a substantial and pressing issue.
There are actually a number of technical errors with respect to the legislation, and that in itself could consume some time. You don't normally see that level of errors in financial bills. In my discussions with prominent economists, lawyers and accountants, they see some significant issues. What would perhaps separate this from different invitations, where they have been of a lesser amount in terms of time, is the number of technical questions I would like to ask the .
That being said, we do have a precedent of actually asking the to appear for two hours, but we have no ability to compel her to stay for two hours. In fact, if you look back, this committee has asked a number of times for the minister to appear for two hours, and she has appeared for one hour. We're realists, and we realize that if in fact the minister chooses to come for only an hour, regardless of what it says in our motion, that is her prerogative and her right.
With respect to the clause-by-clause, you give an inch, you take a mile, right? That's what comes to mind there. Conservatives came in good faith, not to help the Liberal government but because we believe Canadians need this information to sort their own affairs, as the deadline of June 25 looms. We did propose a prestudy, which might be unprecedented, so to now ask for a clause-by-clause date prior to our even seeing the legislation, I think, is a bridge too far, to be candid.
My colleague Mr. Chambers was even agreeable—and I might even disagree with him on that—to put in a reasonable clause-by-clause date. Mr. Chambers is much more diplomatic than I am. Conservatives are significantly challenged by putting in a clause-by-clause date before we have legislation. That, I believe, would also be unprecedented.
I would counsel, to the extent that you would accept any of my advice, to quit while you're ahead. Take your victory. Conservatives have no plan, no intention, to obstruct the capital gains legislation going through committee. That is evidenced by our willingness to prestudy it.
Like I said, I would counsel the good folks on the other side to quit while they're ahead.
:
I once had socks with pigs on them that used to get us through these log jams, Mr. Chair—bring back the socks—but I think it is unprecedented for a committee to agree to a clause-by-clause start date without seeing legislation. I wouldn't ask our analysts to dig through previous motions, but I would think you would struggle to find one.
In that vein, I can speak only for myself, but I will work on persuading my colleagues, in order to be very generous here, that if the government has an objective to ensure that the bill is not held up at committee, we would agree to starting clause-by-clause no later than three weeks from when we get the bill, which means we could start it earlier, but that you absolutely know that it will start in the fall, when we get it.
That seems eminently reasonable for a party, any party at the table or any member of Parliament to agree to moving to clause-by-clause without even seeing the bill. I respect Mr. Davies' observation that what we did with the budget was quite abridged, but we had had that bill for a while in text form. We don't have this bill in text form. All we have is a ways and means motion and, as I said, the rumours are flying ferociously—to continue to use alliteration—that there will be carve-outs, and the carve-outs are very complicated to write. That's why I think they didn't end up in the ways and means motion.
If we're to have a bill with carve-outs, that's going to be very complicated, but by giving the government the comfort of three weeks, no later than three weeks—well, three weeks generally, but we'll leave that up to interpretation—it will mean that the bill will leave the committee and be reported back to the House in the fall.
That's a guarantee, depending on when you guys decide. I suppose it depends on when you decide to table legislation in the House, but we would agree to starting clause-by-clause three weeks after the bill comes to the committee. That gives you the comfort that you're going to get a clause-by-clause start date, and if things are going very well, maybe we'll agree to start it sooner. However, I think we're actually starting a very dangerous precedent here by agreeing to establish clause-by-clause start dates before we even see legislation.
I will remind folks that Parliament will always look different after the next election. It doesn't matter who's in power and who's not, but you should be very comfortable with the idea that any precedents you're setting now will be used by a future government. I will tell you that if you guys die on this hill, then if I have anything to do with it, every single bill that comes to the finance committee will have clause-by-clause prestudy in it from here until I go, because we're going to go down a really bad road here.
I think we're being pretty reasonable. We'll agree to go to clause-by-clause at three weeks. You know you will get your bill out. That will create an impetus for the government to table its legislation early so it can come to the committee early and you will have it in the fall. If the three weeks is a no-go, then we might as well suspend until the end of the meeting, but that's kind of a fallback position and a reasonable agreement.
Of course, that is unless the government is nervous about having the study next Tuesday, which is what I suspect is really happening. The government doesn't want to have the witnesses we just had come in and say how bad the legislation is going to be, which is the only reason for which they must be putting in a drop-dead clause-by-clause start date, which has never happened before.
It is what it is, but let's see what they think.
:
I will confess that I don't think I've ever been involved in a debate over when clause-by-clause starts on a pre-budget, so I'm struggling to work through what the implications are.
However, I'm conscious of this fact: If we didn't have this motion here today, what would the status quo be? The status quo would be that the legislation would be tabled sometime, I presume. We would come to this committee sometime in the fall. We would have nothing determined about when clause-by-clause starts. I don't know, to be honest, whether two weeks....
By the way, I agree with my colleague—“two sitting weeks”, I think, is good.
I don't know what the massive legislative implications of starting after two weeks or three weeks are. However, I think the Conservative motion saying “no later than three weeks” gives us the opportunity, as a committee, to determine if it's less than that, so I think we should pass this motion now. I'm okay with starting “no later than three weeks”, because it preserves the option to have this discussion in the fall, once we have the legislation in front of us. It's going to take a vote of the committee at that point, anyway. If, at that point—once we have the legislation—we decide we're going to start clause-by-clause a week or two weeks after, or take the full three weeks, we'll make that determination then.
I think this gives us a compromise that meets everybody's objectives. It puts a certain date on it for the government side, but it allows the discretion to make it less than that once we have legislation, which I think meets the Conservatives' concerns. I'm personally okay with it being “no later than three weeks” on the understanding that how it turns out in the fall will, in my view, be determined by the evidence we hear and by how complex the discussion turns out to be.
An hon. member: Kumbaya.
An hon. member: Shall we hold hands?
The Chair: It's passed by unanimous consent, as our gracious clerk here, Alexandre Roger, says.
We had a second panel here from the Department of Natural Resources. I see the officials in the back. On behalf of the committee, I'll apologize to the officials from the table. We have four minutes left. We thank you for coming.
I see MP Ste-Marie's hand up.
We want to thank them. We are not going to have time to be able to hear from our department officials from Natural Resources.
MP Ste-Marie.
:
Okay. Also, is that meeting the Tuesday meeting? Is that what we're doing on the Tuesday meeting?
An hon. member: That's unless you want to meet on Monday.
The Chair: I'm just trying to get everything clear here.
An hon. member: We want our standard meeting time.
The Chair: Yes, the standard meeting time on Tuesday.
Members are saying witnesses. Just that any witnesses.... To do that, members, just be aware that sometimes we are putting the clerk and the hard-working team here on a kind of a mission impossible. To be able to get those witnesses and everything ready for the Tuesday, that is the challenge. Alexandre does go above and beyond, but it is, yes—
An hon. member: Beyond and above.
The Chair: Yes. It is a big challenge, you know, from where we are right now, to be able to do that and get the names on Friday and then try to get people here by Tuesday of next week.
MP Chambers.
:
Members are always able to continue to submit witnesses. We do try to set a deadline so that Alexandre and his team can do the best job they can to contact those witnesses and deliver headsets—you can imagine the logistics of all of this—so that everything works.
You can continue to submit, but the sooner, the better. Maybe get hold of the ones you're able to, so that when the clerk calls, they're ready to go. Is that good?
Okay, members, shall we adjourn? Oh, wait.
I'm sorry, MP Davies. Your hand went up.