HUMA Committee Meeting

     I call this meeting to order.

     Welcome to meeting number 115 of the House of Commons Standing Committee on Human Resources, Skills and Social Development and the Status of Persons with Disabilities.

     I want to remind those in the room that to avoid feedback, please place your earpiece in the approved location on the table in front of you. Please refrain from touching the mic while it is active, which is while you're speaking, to prevent hearing damage to the interpreters.

     On a point of order, Mr. Chair, there's English translation on the English channel.

    Is it good now?

     That's better. Thank you.

     Thank you, Ms. Gray.

    Today's meeting is taking place in a hybrid format. Members are appearing in person in the committee room and joining us virtually on the screen.

     Please direct all questions or comments through me, the chair, and please wait until I recognize you before speaking.

     You may speak in the official language of your choice. In the room, interpretation is available using the microphone in front of you. For those appearing virtually, click on the globe icon at the bottom of your screen and choose the official language of your choice.

     If there is any interruption in the translation, please get my attention. You can use the “raise hand” function online. If you're in the room, you can get my attention. We'll suspend while it is being corrected.

    This meeting is taking place pursuant to Standing Order 108(2) and the motion adopted by the committee on Monday, February 12, 2024. The committee is commencing a study of federal housing investments.

    Before I welcome the witnesses, I want to point out that we were late starting. We may be interrupted again, but we have the resources to conduct a full two-hour meeting, which is my intention. I've had a request for the first hour to be extended to an hour and 15 minutes, which I have agreed to, unless there is a strenuous objection from the committee.

    We will then suspend while we transition to begin our review of version one of the volunteerism report.

    Today, we have with us in the room, Kevin Lee, chief executive officer of the Canadian Home Builders’ Association.

    By video conference, we have Richard Lyall, president of the Residential Construction Council of Ontario, and from the Royal Bank of Canada, we have Robert Hogue, assistant chief economist.

    Witnesses, we were delayed because of votes in the chamber, but we will be proceeding with a full meeting.

    We will begin with Mr. Lee.

    You have up to five minutes for an opening comment, if you choose to make one.

    Thank you very much for having me and for the invitation to be here while this committee takes on the important issues around housing.

    As you know, I'm the CEO of the Canadian Home Builders' Association, which represents over 8,500 member firms across the country in home building, land development and renovation, and supports the suppliers and service providers in the residential construction sector. This represents over 1.5 million jobs and $211 billion in economic activity from coast to coast. Our members build low-rise and high-rise housing for home ownership and for rent.

    The motions that launched this study speak to three different but related parts of the housing continuum: one, below-market-rate housing, which is often referred to as social housing or affordable housing; two, market-rate purpose-built rental; and three, market-rate home ownership. I draw your attention to these three different parts of the continuum because it is important to understand how they are intrinsically connected.

    In the current housing crisis, all three are under stress, which is not surprising because affordability in the market-rate part of the continuum has deteriorated brutally over the past decade and a half, which in turn has put more pressure on the below-market-rate affordable housing stock. This is important to understand because there is often a call for more funding for affordable housing, which you will no doubt hear a lot about in this study. While that funding is important, I'm here to tell you that you'll never fix the affordable housing issue with funding alone. There are simply not enough tax dollars to go around.

    As past chair of the International Housing Association, I can tell you that these challenges are not unique to Canada. Experts from developing countries in the IHA tell us something about their countries that applies equally to developed countries like Canada: If you don't first fix housing affordability, you can never fix your social housing problems. If you don't fix housing affordability, people can't buy homes. That puts pressure on the rental housing stock, as more people are forced to rent, and rent prices keep going up due to increased demand and other affordability issues. This in turn puts mounting pressure on the social housing stock, as more people need housing assistance because they can't afford market-rate rental units.

    In this scenario, no matter how many affordable units you build, the lineup will keep getting longer for more. I heard a term for a similar problem from a policeman when I was involved in studying the challenges in Vancouver's Downtown Eastside. He said that without policy fixes, trying to deal with addiction on the streets was just like shovelling water. If you help one person, then there is a new one right behind taking their place and it's like you did nothing.

    We need to break that cycle in housing. That can only come with fixing housing affordability across the board.

    The current issues of housing affordability have developed over the past two decades through policy action or inaction at all levels of government. There's no silver bullet to fix it. We need a comprehensive approach that comes with the challenge from all angles for all levels of government.

    We know we need much more supply. Numbers like building 5.8 million units over the next decade are important targets to strive for, but our industry can't build more homes if people can't afford them. While high interest rates have slowed the market down right now—and we need those rates to come down as soon as possible—it is actually the ever overtightening of mortgage rules that has been knocking well-qualified buyers out of the market for the past 15 years. We were therefore very pleased with the move to 30-year amortizations on insured mortgages for first-time buyers in new construction. We would advise that this be extended to all insured mortgages for new construction as soon as possible. A revision of the stress test is also critical and long overdue.

    High interest rates have also severely hampered purpose-built rental construction, but again, the problems began long before the rise in interest rates. The PBR business model has been broken for decades, resulting in a lack of PBR supply. That is why we had long called for and are happy to have secured the removal of the GST on purpose-built rentals last fall. I would note that we also need to fix the GST threshold for the new housing construction rebate.

    Back to PBR, we need simplified access to more low-interest financing and less encumbrance on that financing on things that drive up construction costs. Energy efficiency, accessibility and more affordable housing units are all fine, but not if they are excessive and drive up the costs of the market-rate units.

    That brings us to the building code. There is too much going into the building code too fast. It is driving up house prices and reducing housing supply. We need to make some smarter choices to optimize all of our housing challenges.

    I'll wrap up by saying that there are several other issues driving up house prices, too, from development taxes to red tape to Nimbyism to labour shortages. We are seeing the start of policy action to address these, which is good, but we need to keep going at all levels of government.

     I look forward to your questions. I'd be happy to expand on any and all of these issues.

    Thank you.

     Thank you, Mr. Lee.

    Mr. Lyall, you have five minutes, please.

     Thank you for the opportunity to be here, Chair Morrissey and members of the standing committee.

    I just want to say first that I concur with Mr. Lee's comments.

     I'm pleased to have this opportunity. We're in a crisis moment. It's a crisis in not just housing but also in growth management. The data points are truly shocking when you look at them.

    I'm the president of the Residential Construction Council of Ontario. We're a council of builders in Canada's largest province. We know that the housing crisis is affecting many developed countries across the world, but we are one of the most afflicted, in my view. It's ironic, because we occupy one of the best pieces of land on the planet. We have unparalleled resources in land and people, and yet we can't build affordable housing for our existing Canadians and those to come, which is critical, especially for the next generation.

    I would urge you in your deliberations to take all of housing into consideration, not just one part of it. There's research that supports this, because this especially affects what we're seeing now, where first-time homebuyers are pretty much extinct.

    This crisis has been decades in the making, as Kevin noted. There were various points where we cancelled long-term investments in social housing and where there was a budget freeze by Canada Mortgage and Housing. Then we introduced the GST. In the 1990s it was supposed to have been adjusted for inflation. It didn't happen, and I think that's coming back to bite us now.

    We've been warning about some of these things for some time, but that's not anything new. Some solutions are in the works now with all levels of government, which is quite positive. That's a good thing. We certainly support the efforts by the federal government with respect to purpose-built rental housing, because that's absolutely needed. It's vital for economic development and labour mobility and so on. But we need to do a lot more.

    Some of the problems we have lie in the area of excessive red tape. That's not necessarily a federal problem, but it certainly has been growing over the years. One of the general problems we've had is that we've had different actors at various levels of government and within governments all acting in a way that affects housing, but no one's really coordinating it from the 30,000-foot level. Something really needs to get done there. We need to run simulations. We need to digital twin. We need to examine better what the impact of proposed measures would be. We're not forecasting well enough. We're still mired by outdated regulations, inefficient approvals processes and file management not really utilizing the most advanced techniques.

    The OECD ranked us 34th out of 35 countries in our ability to get things done. We've been calling for over a decade to modernize and digitize our approvals processes, both development and building. That's been very, very slow. In fact, we're well behind other jurisdictions. This can't be left to municipalities. They don't have the individual expertise. They don't have the economies of scale to deal with that. Frankly, we need common performance standards across the board, which would help.

    We did the first study, with some others, on how much the taxes, fees and levies are on new housing now. It varies across Canada, of course, but in the greater Toronto area, it's 31% of the cost of new housing. In British Columbia they did their own study, and it's 30%. That is by far the highest in North America. It's not sustainable. It particularly hits the first-time buyer the most. We effectively tax housing like we do alcohol and tobacco. It's like a sin tax. It doesn't make sense, and it's too much.

    We need to do things on lands—Crown lands, government lands—and we need to deal with innovation and modular housing and mandates there. Things like building information modelling mandates are badly needed.

    I would point out to you a recent report by CANCEA that was really interesting. It was on the social value cost of the housing crisis in the GTA. It was prepared for the Toronto real estate board, of all things—quite surprising, but I commend them for that. It equated the housing crisis with chronic illness. It was equated with cancer, diabetes and heart disease. That's how bad it is.

     We often look at things in little silos. We need to take a broader view and a holistic view of what the broader impact of this is.

    We need to do more. We need to work more effectively together, and that's industry and all levels of government. I think we can do this. I think we're getting there because I think we're hitting a wall because, as you probably know, in most parts of the country housing starts are starting to come down. The supply is actually falling at the worst possible time. I think that reflects exactly where we're at.

    We need that broader oversight. I'm not sure how that can work. I reckon we're one of the most decentralized countries in the world, and that's not necessarily a problem, but we have to pull together to borrow an old rowing term on this, and I think we can.

    Anyway, I'll stop there.

     Thank you.

    Thank you, Mr. Lyall.

    Now we go to Mr. Hogue from the Royal Bank of Canada.

    Mr. Hogue, you have five minutes.

    Thank you for the opportunity to speak to you today.

     I, as an economist, have been tracking and following the housing market for many years, and specifically focusing on housing affordability. This is a report that RBC has been putting out for decades now. It goes back to the mid-1980s. The developments over the past several years are telling us that we are indeed in a crisis, which is a term I don't use very lightly.

     As was said before, this was, in some parts of Canada, decades in the making. In fact, in the second half of the 2010s, we were talking about a crisis in the Toronto region or in the Vancouver region. I think what happened since then is that we had a perfect storm that occurred because of the pandemic and the policies that were put in place to get us through it, which made it, unfortunately, a nationwide crisis. When we look at our measures, which specifically look at ownership affordability, the cost of ownership has increased tremendously in every single market across Canada that we study.

     This is not an isolated issue. It is pretty much a nationwide issue, which is probably why the committee is looking at this very specifically. Now, the sources behind this, and I think both Mr. Lyall and Mr. Lee did a good job at highlighting some of those factors, although they're very complex and cut across all levels of policy-making and through the industry as well, I narrow it down to very simple terms from an economics point of view. It's been the inability of the supply side to adjust and respond quickly enough to sharp increases in demand.

     For those of you who have had an economics 101 course, when you have a stronger demand than supply, the adjustment mechanism is prices. This is exactly what we've seen, especially during the pandemic. When home prices nationwide in the space of 24 months increased by 50%—that's five zero—it really puts tremendous stress on homebuyers.

     As Mr. Lee pointed out, it had some impacts across the entire spectrum, pushing a lot of people into the rental space where now today the rental vacancy rates are at the lowest ever recorded by CMHC. Rent has gone up and is increasing incredibly rapidly pretty much across the board in Canada. For those who cannot afford to buy, this puts them in rentals. Many renters now cannot afford market rent and that puts them into social housing. I could only agree with what has been said before me. We need to tackle it as an entire system here, and not just from a punctual point of view.

     From a policy perspective, I am encouraged now to see that there seems to be a consensus that the focus should be a lot more on the supply side. This was not the case until we were in this crisis, to be honest, and this is something that economists like me have been talking about for years. We need a much nimbler supply and a quicker supply response to the demand that we have. To me, the shift towards focusing policy on the supply side is a big first step. I think going forward what we need are not only the policy plans and intentions but really delivering on those plans and intentions.

    Thank you.

     Thank you, Mr. Hogue.

    We'll now begin with Mr. Aitchison for six minutes.

     Thank you, Mr. Chair.

    Thank you, gentlemen, for being here today.

    My first question is for Mr. Lee.

    Mr. Lee, the federal government has announced a number of different plans over several years, starting with the national housing strategy in 2017 and most recently their latest, most ambitious plan ever. The centrepiece of that, of course, is the housing accelerator fund. It's $4 billion. That was a centerpiece of their budget a couple of weeks ago when they announced they were going to build 3.87 million homes.

    Is it helping? Are starts improving as a result of any of that?

    I think we're still early on with that program. You'll have to ask CMHC for the data that they have. It's their program. I will say that what's interesting about that program is that it targeted the right thing, we would suggest, which is getting more supply online. Although the municipalities could use the funding for whatever they wanted, essentially, within the housing spectrum, the idea was that we would address the policies, practices, procedures, approval timelines, permitting systems and all of those things to get more online and come with concrete goals. Hopefully, performance measurements get followed up on, and the actual payment of the housing accelerator funds that go out will legitimately be based on real numbers. That will be really important moving forward.

    You stated that it's not just a supply crisis, that it's an affordability crisis, and a big part of the reason for that affordability crisis is, in fact, government charges and fees. Is that correct?

     That is correct.

     Do you think it was an oversight of the government to not include local charges and fees as one of the criteria to receive that housing accelerator funding? You have examples now where cities have been awarded money by the federal government and, in the next breath, they're increasing their development charges.

    There's no question that we need to target development taxes, as we refer to them in all of the different ways that they come about and are labelled. Could it have been in the accelerator fund? Yes. I do think the minister has been saying that when you raise development taxes, they don't want to give you accelerator funds.

    We've also called for the connection of investment in infrastructure and transportation and transit to be tied to housing outcomes. There is talk now of that being tied to development taxes as well.

    To your point of whether or not we should be addressing local municipal taxes, which have gone up 700% over the past 20 years and are a big part of the problem, yes.

     I'll turn to Mr. Lyall next.

    Sticking with development charges, they've gone up over 400% on average in the last decade around the country. On those development charges that municipalities charge, there's an understanding by some that the developers just pay that. Who pays the development charges? Who pays those fees that developers and builders have to pay to local municipalities?

     As Kevin said, it's a development tax, and it's a tax paid by consumers. It's regressive. It's not income tested, and the people who get hit the hardest the most by those taxes are the ones who can least afford housing. It is very un-Canadian, among other things. Also, they've been out of control. Apportioning blame on all of these issues is really pointless at this time. We have a systemic problem here in that we're not managing growth properly.

    For example, when you look in the GTA area, you have DCs, development charges, that have gone up 900% in just over a decade, which is crazy. In fact, just this month, they've gone up again in Ontario.

    Sales cratered last year, as we know. Housing starts are falling, because housing is unaffordable. The first-time homebuyer is extinct. We can't build new housing for the middle class. In fact, Habitat for Humanity's new client is the middle class. Who would ever have thought we'd get to that point? That's where we are.

    DCs are completely wrong-headed, and it's a function of our not managing growth properly. Other countries don't have this problem. They are dealing with housing much more effectively than we are. They have much more affordable housing. If you compare us to the United States right now, we've diverged from the United States on many data points. Pick your data point, we're diverging from the U.S. Our productivity is dropping, and real incomes are dropping here. In the U.S. right now, rents are flat or dropping because they overbuilt rental housing, for example. Their housing market is starting to come back. Meanwhile, we are going in exactly the wrong direction, and we have to compete with them. Let's not forget that—

     I'm going to stop you there because I want to get in a question for Mr. Hogue as well.

    Mr. Hogue, would you say that a big part of the problem here in the affordability crisis that we're seeing in housing is related to government charges and fees, and that the federal government really missed an opportunity to try to pressure municipalities to reduce those fees?

    Well, I think those government charges are part of the issue. I mean, they're not the only reason we are where we are today. I think our worry is that for that marginal unit you add to the housing stock, what you're adding is something that's a higher price than people can afford. Unfortunately, you're not building homes that are affordable in sufficient numbers just because the construction or building costs are high. Government charges are part of that equation in some parts of Canada but not everywhere.

     Thank you, Mr. Aitchison.

    Mr. Coteau, you have six minutes.

    I'm going to share half of my time with my friend, Mr. Long.

    Mr. Lee, thank you for being here.

    Thank you to all our witnesses for joining us.

    Removing the GST is a big part of the plan for government to move forward on the construction of apartment buildings. Do you think this is going to have a positive impact in building more apartments in the country?

     Yes, we do. As I mentioned, the business model for purpose-built rentals has been broken for a long time, and the numbers just don't pencil out. In order to build more purpose-built rentals, you have to be able to do it and not lose money, frankly. The taxation system has been a problem and is now an opportunity, thanks to the removal of the GST. Unfortunately, the high interest rates have come at the same time, so we still need other support, like more low-interest financing and that sort of thing. It's really important that we get that model for purpose-built rentals working so that we can get more supply online.

     Have you talked to people within the sector about how it's going to impact them and how that savings can be transferred to the actual renter? Has there been discussion? If so, what kinds of savings are we looking at? Is this going to have a positive impact on the renter at the very end?

     I think the most important way it's going to have an impact on the renter is by actually having units to rent. We have a huge supply issue, so right now what you see is increased rental rates. It's costing people more because of the lack of supply. It's very expensive to build right now. I don't think that, thanks to some savings on GST, all of a sudden you're going to see plummeting rental rates. However, what will happen if we get enough purpose-built rentals is that, overall, we're not going to see those accelerating rents like we've seen, because we'll have many more purpose-built rentals, which are exactly what we need.

    This morning I was in the House, and there was a debate around Bill C-356. It's the Leader of the Opposition's bill, which would actually essentially put a tax, the GST, back on apartment building homes. Would that have a negative impact on the sector if it does pass?

     Yes. I mean, I really do think we need all forms of purpose-built rentals, not just those that are sort of in the below-market-rate space. We need many more.

     Have you spoken to any provinces that.... Well, let's stick to Ontario. Has there been any discussion around removing their portion of the GST from new builds?

    Yes, there has been.

     Do you think that's going to go through?

     That I can't say. You'll have to ask them.

     Thank you for your time. Thank you for being here.

    I'll turn it over to Mr. Long.

    You have three minutes and 10 seconds.

    Thank you, Mr. Chair.

    Good afternoon to my colleagues.

    Thank you to our witnesses for coming today. It's a very important subject.

    The Canadian Home Builders' Association was just in my riding of Saint John—Rothesay for its conference. Thank you for that. It was wonderful. I'll give a shout-out to Brad McLaughlin, a local representative there who does a great job.

    My first question, Kevin, is for you.

    One thing that does frustrate me, looking across the House at times, is the criticism that we get from the other side on what we've done or what we haven't done. We look across, and whether it's our national housing strategy, the program, the co-investment fund, the rapid housing initiative, the housing accelerator fund, or the fact that you could argue that the jurisdiction for housing is provincial and not federal, I think we stepped in in a very big, important and meaningful way. That's despite the fact that the Conservatives, of course, have voted against every one of those programs.

    It's true. We did.

    I think that, to be straight, we've made historic investments in housing, investments that the country's never seen.

    What do you think the housing space would actually look like if some of these changes had been enacted 15 years ago?

     That's a good question. If we would have had all of these actions on housing supply....

    The new federal plan has some potential. I hope everybody keeps building on that moving forward because they're the types of actions and holistic approaches that need to occur if we're going to get more supply on board and get affordability under control.

    What would have happened 15 years ago, I don't know, but I'm hoping that we're building from here going forward. Certainly, if we had it back at the time when we were all...the industry was talking about lack of supply at that time and development taxes and all those things. That's not new, so we're hoping that we'll keep moving forward.

    Thank you for that.

    Mr. Lyall, in my riding of Saint John—Rothesay, we had a wonderful announcement on the housing accelerator plan. Grand Bay-Westfield had a great announcement on the accelerator. Through the accelerator fund, 179 agreements with communities across the country have been secured. The accelerator fund is there to cut red tape, get homes built faster.

    Mr. Lyall, how important is it that we work with municipalities to cut that red tape?

     I think it's important for all levels of government to work with each other on this particular issue. I don't really have a comment on that. For me and for our group, it's whatever works. We need to put things in perspective. The construction industry in Canada, the housing industry, is the number one industry. For construction overall we're talking tens of billions of dollars, $160 billion a year, half of which is pretty much residential, so we need to put some of these measures in perspective.

    The fact is that, right now, by and large the market is dysfunctional, so housing accelerator funds and encouraging municipalities to modernize and improve things are good. I think there are things that are related to standardization, which is important. Think of our building codes: This is how you have to build a building across this particular jurisdiction. We have a national building code. In Ontario we have a provincial building code. They were introduced to create those standards, which are important, and I think we need the same types of standards for some of our processes, because part of what we're dealing with is systemic.

    Thank you, Mr. Lyall.

    Ms. Chabot, you have the floor for six minutes.

    Thank you, Mr. Chair.

    I'd like to thank our witnesses.

    Mr. Hogue, to begin, I'd like to thank you for your analysis of the budget. In your testimony, if I understood correctly, you stated that the imbalance between supply and demand was one of the main causes of the housing crisis. We're quite familiar with the principle of supply and demand, which is part of the laws of the markets. Even if I don't know much about economics—I'm not even sure I know the basics—I understand it. Here, we're talking about housing that is on the market.

    However, a lot of studies have been done on this, and when we talk about affordable housing and social housing, the supply of non‑market housing becomes important too. For example, projects focused on housing affordability and social housing must be carried out in conjunction with community groups and housing co‑operatives. Don't you think that this too could help solve the housing crisis?

    Yes, absolutely. That's what I was saying earlier. We need to expand the housing stock as a whole, including social housing and affordable housing.

    As I noted earlier, the pressures on housing affordability associated with home ownership are driving many people back into the rental market, including social housing. It is therefore important to tackle this problem by increasing the supply of all types of housing, including, of course, affordable housing and social housing.

    Thank you.

    However, when it comes to affordable housing and social housing, there was a crisis long before the current home ownership crisis. There was a fundamental problem that has yet to be resolved. In my opinion, what you're describing is a consequence of this.

    Among the seven measures you have outlined to fix the housing shortage, you propose changing the mix of housing produced. You state that “responding to growing rental demand requires a shift in the mix of housing Canada has been producing”, and that “past completions for rental units where demand is poised to skyrocket are way off”.

    What are you referring to when you say that the mix of housing units produced needs to shift?

    This relates to what we just said. In the past, many single‑family homes, for example, and an increasing number of condos were built. It's now necessary to provide a variety of housing. The trend is increasingly shifting towards rental housing as well, because more and more people will be able to afford it. This also includes social housing.

    Thank you.

    Both the Conservative and Liberal parties tend to point fingers at our municipalities. However, both large and small Quebec municipalities are the prime movers responsible for zoning, urbanization and identification. Do you think that penalizing them will help achieve the objectives?

    I think that it's better to take a more positive approach towards municipalities, to encourage them and to reduce barriers to construction, especially for affordable housing.

     Social groups, community groups, housing co‑operatives and the federal housing advocate argue that we need to definancialize housing and invest in the capacity to bring projects to fruition. The creation of more affordable and social housing will alleviate some of the burden on the public.

    The construction of more rental units, even at today's prices, could also benefit some people living in social housing. We're talking about a whole range of possibilities here.

    I don't mean that everything is connected. However, we're talking about different things. The problem is getting worse. One thing remains unaddressed: Housing is a right.

    Normally, the amount allocated to housing shouldn't exceed 30% of income. Your studies show that, in some large cities, mortgage payments can amount to over 60% of a homeowner's income. This may even be the Canadian average. Is that right?

    That's why we're calling this a crisis right now. Even middle‑class people are struggling to become homeowners. As a result, this issue must be urgently addressed.

    Thank you.

     Thank you, Madam Chabot.

    Mr. Boulerice, you have the floor for six minutes.

    Thank you, Mr. Chair.

    I want to thank the witnesses here today for this key study of a crisis that affects so many people in all our constituencies.

    Mr. Hogue, in your recent study on the affordability of the real estate market, you emphasized that high interest rates were affecting home ownership and sometimes even retention. We can't just look at individual cases. However, people we know in British Columbia have seen their mortgages increase by $2,600 a month, bringing their monthly payment to $6,000.

    From a broader perspective that covers more than an individual, a household, a family or an area, I want you to tell the committee how the high interest rates are affecting Quebec and Canadian families.

    Yes, high interest rates have contributed to the current crisis. This is the most recent phase of skyrocketing housing costs, particularly for home ownership. Earlier in the pandemic, property prices increased dramatically. Since the Bank of Canada raised interest rates, also dramatically, ownership costs have increased exponentially.

    We believe that, once the Bank of Canada starts lowering interest rates—which we think will happen soon—property costs should come down a bit. However, our expectations shouldn't be too high in this area. The pressures will remain for a long time.

    In a recent statement, the Canadian Labour Congress, or CLC, said that high interest rates are hurting families and that the Bank of Canada should be asked to lower interest rates. The CLC is concerned about a rise in unemployment and job losses. You talked earlier about a perfect storm. This storm could also put people out on the street and worsen the homelessness crisis.

    Do you see things the same way that the CLC presented them to us?

     We need to step back and look at the Bank of Canada's core mandate, which is to maintain inflation at a stable level of around 2% over the medium and long term.

    Inflation has soared. The cost of living has risen dramatically in recent years, which plays a role in this and contributes to the difficulties facing many Canadians today.

    Now that we've seen the impact of high interest rates, cooled the economy and brought inflation down, we're getting closer to a victory in this area. We aren't there yet, but we're getting there. As a result, we're expecting the Bank of Canada to start lowering its policy interest rate soon and to ultimately set the rate at more neutral levels. The rate could be a few percentage points lower than its current level. This should ease the pressure on many households, such as those households in British Columbia and other places facing drastic mortgage rate hikes.

    You referred to the Bank of Canada's mandate. Obviously, the federal government can't tell the Governor of the Bank of Canada what to do and when to do it. However, the government or Parliament must determine the Bank of Canada's mandate.

    In a number of countries around the world, this mandate is twofold. Here in Canada, we have a single mandate. Its sole objective is to control inflation. However, many other countries around the world may have two or three objectives, such as home ownership or keeping jobs in the country. Economists, including Senator Diane Bellemare, have been promoting this solution for years.

    Do you think that this solution should also be considered?

    This issue will be debated. The Bank of Canada's mandate is reviewed every five years. I think that the next review will take place in about two years. I'm sure that this issue will be part of the discussion.

    I don't know of any country with a central bank mandated to promote home ownership. However, we know that some countries, such as the United States, are mandated to maintain low and stable unemployment. Canadians and the central bank need to discuss this issue.

     Thank you, Mr. Hogue.

    Lastly, I want to say that the committee asked the Governor of the Bank of Canada to testify, to come talk to us and to explain his work. However, he turned down our invitation. We in the NDP find this quite deplorable.

    Mr. Hogue, I won't ask you what you think. I don't want to put you on the spot. We in the NDP think that it would be worthwhile for the people from the Bank of Canada to take part in this discussion on the housing crisis.

    That wasn't a question. It was just a comment.

     Thank you, Mr. Boulerice.

     Ms. Gray, you have five minutes.

     Thank you, Mr. Chair. Thank you to all the witnesses for being here.

     My first questions are for Mr. Hogue from RBC.

     Mr. Hogue, I'd like to quote some numbers from your recent RBC housing affordability report. It says that as of October 2023, a “household earning a median income needed to spend...63.5% of it to cover the costs of owning an average home”.

     Can you please confirm what that same number was in 2015?

    I would have to look at what the numbers were. It was certainly much lower than that.

     The number was 39.3%, which is lower than even the long-term average.

     I'm sure you would agree that, comparatively, home ownership was far more achievable in 2015.

     Relative to today, that's what our statistics show.

     Your report showed that in Toronto, a household would need to spend 84.8% of its income to cover the cost of owning a home. In Vancouver, you referred to a “full-blown crisis”, where it now takes 106.4% of median household income to own a home.

    Your chart refers to 140% of household earning for a single detached home, which is where it has skyrocketed in the Vancouver area.

     As well, we now hear that chronic homelessness is up 38%. The federal housing advocate referred to homeless encampments as “a physical manifestation of exactly how broken our housing and homelessness system is” across Canada.

     Is this the worst housing affordability that Canada has ever seen?

     This is the highest level of home ownership cost as a share of household income that we've had, according to our RBC affordability measure.

     Thank you.

    My next questions are for you, Mr. Lyall.

    CMHC states that housing starts are down and will continue to be for the foreseeable future. The Canadian Home Builders' Association issued a press release on April 30 of this year stating that 54% of builders expect fewer housing starts in 2024 compared to 2023, and 31% stated that they have cancelled projects.

    Are those numbers and trends similar to what you're seeing where you are in Ontario?

     Yes. I would suggest that it's a little worse here, certainly in the GTA and the GTHA. We have some pockets where things are a little different, such as Kitchener-Waterloo, which is a tech centre. Of course, tech is a bit on fire right now, although we'll see what some tax changes might do to that.

    Right now, yes, we're staring into a pit. What we're saying is that when cranes come down, they're not going back up. We're seeing purpose-built rentals that were condos. The changes to the purpose-built rental taxation situation is very helpful in keeping some projects going, but we're headed down in a big way. Our subtrades pipeline is dry. It's drying up.

    Claims were made in Liberal budget 2024 that they will build 3.87 million homes by 2031, or about 550,000 homes per year. For every day of the year for the next seven years, that's completing 1,515 homes each day, or one home every 57 seconds.

    Given what builders are saying, how realistic is this?

    Not a chance.

     Well, that's pretty impactful. Are Canadian builders able to complete building 550,000 new housing units in 2024 or 2025, based on what you know?

     No. We were at full production before some of this stuff happened. Now we're slowing down. We have hundreds of framing crews sitting at home now. It's working its way through the process.

    Now, this is Ontario, but there are different parts, such as Calgary. They're doing very well right now, but their prices are going up. That will probably hit a bit of a ceiling. Vancouver, well, that's another planet, and Quebec is different again. They're doing some things really well up there, but they have their own housing problems.

    I have one last quick question.

    Do you believe the Liberal promise is attainable, given the measures included in the Liberal housing plan?

     No.

    Thank you very much.

    There are some good things for PBR, but the main part of the market is owner occupied. That's the bulk of it. So, no.

     Thank you, Ms. Gray. You were right on time.

    Mr. Fragiskatos, you have five minutes.

    Thank you, Chair.

    Thank you to the witnesses for being here today.

    I don't want to get buried in the numbers here, because I'm sure the debate will continue on that from the Conservatives, but let's keep in mind that measures introduced by the federal government, if matched in terms of ambition by the provinces and municipalities, will get us to where we need to go, that is, much more homebuilding to address the crisis at hand.

    We can talk about the problems at hand and simply identify what those problems are. We shouldn't sugarcoat it, because this is a housing crisis, but I think if we're going to be serious as a committee but also, more broadly than that, as parliamentarians, we should be engaged in a discussion on the policy changes that will incent a much better situation.

    Mr. Lee, I'd like to thank not just you in terms of your leadership but also the organization writ large on calling for foundational change. I think zoning is an example of that. Zoning is fundamental to the discussion.

    Mr. Aitchison, when he opened things up, talked about the housing accelerator fund. It is certainly the signature program of the government on this, as it should be. It's addressing a foundational problem. But with all due respect to him, I think he has misunderstood what the HAF program is all about. If you look at it as he does and ask how many homes we've seen built, this is not the right way to approach it. I think the right way to understand it is in the changes it leads to at the municipal level in return for federal funding for transit, infrastructure, affordable housing and all sorts of things. Cities can benefit if they make those zoning changes, as mine has, in the city of London.

    Mr. Lee, what do you think about something like the housing accelerator fund as incenting change on such a fundamental issue as zoning?

     I think the approach that was taken to really attack zoning, permitting and that sort of thing is really important. It's equally important because those monies were promised based on housing outcomes and housing numbers, so I think it's also going to be important that we make sure the municipalities that were granted the funding successfully achieve those numbers through the course of the program, as was its intent.

    To go back to the question of whether zoning change is hugely important, it absolutely is. Do municipalities need some help to get there? Evidently, because two, three or four years ago, municipalities were not even agreeing that supply was an issue. I think there has been a lot of change in the conversation through a lot of work by a lot of people. That's critical, and upzoning is essential if we're going to meet our housing goals.

     Thank you very much.

    Mr. Hogue, I'd like to ask you the same question.

    Sir, you wrote the report “The Great Rebuild: Seven ways to fix Canada's housing shortage”, which colleagues on the other side will quote from quite openly, and that's their right. I would advise them, again, in a very professional way, to actually read it. My colleague Mr. Lawrence is showing me the report. That's great. You're appearing virtually, sir, so you can't see it. I'm sure he has looked at the section on recommendations that talks about the importance of zoning changes. You wrote about easing zoning restrictions.

    Can you talk about the housing accelerator fund and how it's important to achieving that goal?

     I think it's one of the measures that have been put out there to incentivize municipalities to adopt more efficient, quicker and less expensive ways to approve projects. I think what has been said so far has made it very clear that the length of time and the expenses involved in putting forth new housing projects in many parts of Canada, particularly in Ontario, is a big part of the problem. Therefore, any measures like the affordable housing fund that incentivize municipalities to expedite their processes and make them less cumbersome are definitely steps in the right direction.

     I have 20 seconds left, so I won't have time to get into the discussion, but, Mr. Lee, if at some point we can go off-line on this, I would love your thoughts on the freezing of development charges as a condition for provinces receiving federal infrastructure support.

    Very quickly, what do you think of the conditionality aspect of that measure?

     Like we said earlier, development taxes are out of control, and every measure that can help get them back under control is going to be essential moving forward.

    Would you say that any party with a serious housing plan would offer that conditionality? Give me a yes-or-no answer.

     I expect all parties will want to do something about development taxes.

    Does that include conditionality?

    Thank you, Mr. Fragiskatos.

     Ms. Chabot, you have the floor for two and a half minutes.

    Thank you, Mr. Chair.

    Mr. Lee, thank you for being here.

    You're the chief executive officer of the Canadian Home Builders' Association. How do you contribute to building affordable housing?

    I know that there are different definitions of affordable housing. However, we should have a common definition. According to the Canada Mortgage and Housing Corporation, affordable housing costs less than 30% of a household's before‑tax income.

    Do you have any public policy recommendations for the government that would help build more affordable housing?

    Thank you for the question.

     In terms of the Canadian Home Builders' Association, we principally build market-rate housing. The job of our association and our members is to make sure that market-rate housing is available, and we do what we can to make sure that it is affordable for middle-income families.

    In terms of affordable social housing, our members do get engaged with that as well, typically with not-for-profit partners that are focused on this. They'll partner in a variety of ways to help make this happen. There are certainly ways to lower the cost of housing through finishes and that sort of thing, but, in general, the cost to build housing is the cost to build housing. I would suggest that social housing, affordable housing, is a societal problem. I think it's really important that we not expect developers to pay for that kind of thing, because developers don't pay for that; it just becomes the buyers of other houses who end up subsidizing the costs of social housing.

    When we look to solutions, I think it's really important. Let's take the example of inclusionary zoning. Inclusionary zoning is very popular with municipalities right now, where they are going to require developers to have a certain number of units be below market rate and be affordable. That can only be done if some sort of public subsidy is provided, because if it's not, then the existing units and the units that are going to be built for market rate become more expensive because they're paying for those.

    I think there are some very good public policy measures that can be taken. For example, providing subsidies on land, reducing development taxes and those types of things can make the cost of those affordable units less expensive. I don't think we can require people who are trying to make a living building housing or the people who are trying to get into their first home be the ones who have to subsidize social housing.

    Thank you, Ms. Chabot.

    Mr. Boulerice, you have the floor for two and a half minutes.

    Thank you.

    Mr. Hogue, at a previous meeting, the Parliamentary Budget Officer came to talk about an assessment of something he called—if memory serves—invisible homelessness. He was talking about people who, for example, live in their cars, or people forced to live three or four to an apartment to share the cost of rent, when this may not have been their game plan. In addition, let's not forget the French film Tanguy. Many young people are still living at home at the age of 25, 30 or 35. This seems to be a growing phenomenon. These young people don't have the means to buy their first home.

    In your study, did you also observe or assess this phenomenon of children no longer leaving home?

    Honestly, we would like to carry out this type of study. However, it's hard to know who is staying at home for economic reasons and who is staying at home for other reasons. It's about data, and to my knowledge, I haven't seen any data of this nature yet.

    People around the table often talk about affordability, affordable housing and houses that people can afford. In your opinion, what conditions would give a young couple the opportunity to become home owners and buy their first home?

    We often hear that the cost of rent or housing shouldn't exceed 30% of gross income. However, this applies only once the property has been purchased. It's becoming increasingly difficult to buy a first home. In your opinion, what are the solutions?

    The affordability issues vary in severity depending on the part of the country. In Vancouver, the bar is extremely high for young families who want to settle there and buy their first home. They must make many compromises with their choices. In other small municipalities across the country, young couples may have a somewhat more realistic chance of buying a condo or a family home at some point in the future. Conditions and solutions in this area vary greatly across the country.

    Thank you.

     We agreed to go one hour and 15 minutes, which would be 5:05.

     We'll conclude with Mr. Lawrence for five minutes and then Mr. Collins, if that's that agreeable.

    Go ahead, Mr. Lawrence.

     Thank you very much.

    My colleague was indeed prescient.

    I wanted to spend a little bit of time on “The Great Rebuild: Seven ways to fix Canada's housing shortage”. I will be talking about the recommendations in there, as well.

    We'll just set the stage here. The story is as old as time in that we have an imbalance in the market where we've had demand outstripping supply. This has led to price shocks from oil to consumer goods to now housing.

    I want to start on page 6. You point out in a great chart that the number of households, which has increased from 2015 to 2019, has greatly outstripped the housing stock. In the rest of Canada it appears as though the number of new households is at 400,000 while the housing stock is a little under 300,000.

    Have I relayed that chart correctly, Mr. Hogue?

     I believe so.

    I'm just scrambling very quickly here to find it in the print version.

    While you look that up, I'll fill in a bit of air here and say I think we can all agree that the problem over the last nine years has been that the amount of demand for housing and new household formation has dramatically outstripped the number of houses.

    Then we can talk a bit about what that has translated into. As my colleague said, we've seen that the average home, as percentage of median household income, has gone from 39%, in other words, four-tenths of a paycheque of an average Canadian, to now six-tenths. That's a rise of almost 50%.

    As worrying as that definitely is, I am perhaps most troubled—and I've certainly seen this in my community. We've actually seen the rent increases go from an average in 2015 of about $20, to an unbelievable average increase of $100 in 2023.

    Mr. Hogue, are you as concerned as I hope all Canadians are at this dramatic increase in the rise in rent for Canadians?

    This is exactly why we're talking about a housing crisis here. These home ownership costs as well as rental costs have gone through the roof and are putting tremendous pressure on many Canadians, including all the way up to the middle class.

    This is why you're having this committee study right now, I'm assuming, as well as looking for solutions across the board, across all levels of policy-makers here.

     From there, perhaps we'll talk a little bit about some solutions that you propose in here.

    One thing you say is, “Lower interest rates will help” maybe a little bit, but not a lot. You do have also an excellent chart—so you don't have to go searching for it, it's on page 11—that shows the number of housing starts decline as interest rates increase. In fact, we've had testimony on this, as well.

    If interest rates continue to stay high—and I will tell you that Tiff Macklem, Governor of the Bank of Canada, said that excessive government spending will lead to interest rates staying high—will that have a detrimental impact on housing affordability?

     It will remove the chance of housing affordability improving in a material way.

    The drop in interest rates that we're expecting over the next year or year and a half will help, but we'll have a mild.... Compared to the massive deterioration that we've seen in affordability, it would only restore a part of it.

     To solve the housing crisis, we've seen numbers either from the government or from the CMHC of between three million to five million additional houses or doors over the next 10 years.

    Are your projections or forecasts showing that Canada will be anywhere near that over the next 10 years, if you have those projections?

    The projections we have would come short. We'd need to [Technical difficulty—Editor] construction sector to deliver the number of units that will be needed over the next several years.

    Just to confirm, we've heard from multiple witnesses that the current Liberal plan will continue to have a deficit of housing supply, which will lead to continued unaffordability in the housing market.

    Thank you.

     Thank you, Mr. Lawrence.

    I believe we have Mr. Collins for five minutes.

    Thanks, Mr. Chair.

     I'll start with Mr. Lee.

     I've had a number of conversations since last fall, when we announced the GST removal on purpose-built rentals, with local construction firms as well as housing advocates about the benefit that flows through to those who are trying to reduce the cost of building affordable rentals.

    Can you talk about what it means to those who you deal with in terms of the benefits that accrue to those in the industry?

    As we were saying earlier, I think that the removal of GST was an important part of making the business model viable for purpose-built rental, and more needs to be done. As I said, we need lower interest on loans, and that can come through CMHC as well. We need to be better able to access those loans with fewer hoops to jump through.

    In the absence of doing that kind of thing and removing the GST on purpose-built rental, we've seen what the market has done, which is an inability to build. Unfortunately, right now we're seeing a big slowdown still because of the high interest rate environment and other issues, especially in the GTA. So we're going to need some more action to get more action in terms of construction moving forward.

    I asked that question because the government is being asked to remove the GST on purpose-built rentals through a private member's bill. Do you support removing it or is it...? How long do you think that incentive should remain in place?

     I'm sorry, you're saying they're being asked to retract the...? I think as long as you want more purpose-built rental built moving forward, you're going to need to not have GST on purpose-built rental or you're going to have to find some other way to make the business model more viable. The GST is part of it and, as I said, low-interest financing is part of it.

    Municipalities and provinces have ways to also reduce the costs of building construction and need to play their part as well.

     Mr. Lyall, can I ask you the same question? You talked about GST incentives in your opening comments. You talked about it being one of many incentives that are required to close the gap on cost and lower the cost to those who are seeking to access that product.

    Do you support keeping the GST waiver in place now, or would you suggest that we move on and look to other initiatives?

     We need to shock the market. Right now, we're looking at.... I can tell you that in our circles down in this part of the world, which is really my core base, we're doing comparisons now to 1991, where the industry went down 85%.

    We got to the point...and I don't want to assign blame here, and I'm not partisan, but we tax housing too much. Housing costs are too high. We can't build new housing that the middle class can afford. If that's not a problem, I don't know what it is.

    Mr. Hogue might comment on this, but when I look at housing costs relative to who we have to compete with south of the border, we're about 50% higher, with an apples-to-apples comparison. It's never been that far apart. The data points are staggering. I was a construction worker. I paid my way through university. I had a car. I had an apartment. I was able to do all those things. Life was very good for me at that time. That's impossible today.

    Then I worked in government. I worked in trade, industry policy, technology policy. I was in economic development. I've been doing this job for 30 years and I've never seen numbers like the numbers we're looking at right now. They are frightening. I don't mean to scaremonger, but it's bad. We've got to get our costs down. A big part of that is we have one of the most inefficient development and building approvals processes in the world. That's not a knock. There are some municipalities and so on, and there are people working really hard at this. We have the people. Also, our taxes are too high. I could tell you about a comparison with Dallas, Texas.

     I do have other questions.

    Mr. Richard Lyall: I'm sorry.

    Mr. Chad Collins: No problem.

    Mr. Lee, I think everyone mentioned it's an all-of-government approach in terms of getting us out of this housing crisis, and it's taken decades to get us to where we are today.

     I find it interesting that provinces come to us oftentimes. I'll use the Province of Ontario as an example. They come to us and ask for transit resources, and when we ask them for something on the housing file, we receive little support in return. I can go through, as my friend and colleague Mr. Long did, and tell you all of the programs where we have to assist the industry and not-for-profit sector in terms of providing support. Then when I turn to the Province of Ontario, I'm not certain anyone on this call in this meeting could name one program the Province of Ontario has right now to incentivize new development.

    What does the federal government do when we have reluctant partners like the Province of Ontario when it comes to building either affordable housing or getting them on board for policy issues or matching funding like we're going to ask them for on our encampment fund?

    Do you have any suggestions in that regard?

    It looks like I'm out of time. The chair is going to jump in, but if you have something to provide in writing, I'll take it.

     Give a short answer, Mr. Lee, and that will conclude—

     We need all levels of government working together. Finding that alignment and having those discussions are paramount because if we don't, we're going to just spiral the way we are right now, so we definitely need everybody working together.

     Thank you, Mr. Collins.

    I offered the last question to Madam Chabot and Mr. Boulerice, but they were okay.

    With that, we will conclude the first hour and 15 minutes of today's committee meeting. Again, thank you to the witnesses for appearing and providing their testimony. It's most appreciated.

    I will suspend for a few moments while we transition to in camera to begin going over version one of the committee's latest report.

    [Proceedings continue in camera]