HUMA Committee Report

Dissenting Report to the

Human Resources, Skills and Social Development and the Status of Persons with Disabilities Committee Report On The Financialization Of Housing

Conservative Party of Canada

October 17, 2023

Introduction

Canada is in a housing crisis, not a financialization of housing crisis. We will not get out of the housing crisis, without building more homes. To build more homes we need everyone pulling in the same direction, the federal government, provincial governments, municipalities, workers, and yes, the private sector. Demonizing, taxing, and blocking private sector involvement in Canada’s housing market, not only keeps us from solving Canada’s housing crisis, but could actually make it worse. Smart federal housing policy incentivizes the private sector to build the housing that people need, across the housing spectrum, instead of demonizing them.

Canada’s Housing Need

After 8 years of Prime Minister Justin Trudeau, Canadians are trapped in a housing crisis that the Prime Minister is responsible for creating. Here are the facts:

• House prices have doubled in Canada since 2015.^[1]
• Monthly mortgage costs have more than doubled to over $3,500 per month.^[2]
• The average rent for a two-bedroom apartment in Canada’s 10 biggest cities is $2,314, compared to $1,171.^[3]
• Nine out of ten young people in this country who do not own a home believe they never will.^[4]
• It now takes over 60% of Canadians' income to cover the cost of owning a home.^[5]
• According to the OECD (2023), Canada has the largest gap between home prices and incomes among G7 nations.^[6]
• Canada has the fewest number of homes per capita in the G7.^[7]
• The CMHC is predicting that housing starts will decline by up to 32% this year.^[8]

The Liberal record on housing has resulted in rents that have doubled, mortgage payments that have doubled, an ongoing and worsening housing supply gap, and they have no idea whether the billions spent on reducing homelessness has made any difference. That is the legacy of the Liberal’s NHS.

Conservative members recognize that the National Housing Strategy NHS has been a failure, and cannot support more funding to the NHS or the CMHC when it has failed so miserably. 

Investment In Canada’s Housing Market

The Canada Mortgage and Housing Corporation (CMHC) says that Canada needs a total housing stock of over 22 million units by 2030.^[9] To reach 22 million units by 2030, the CMHC says we must build 3.5 million more units beyond what will be built anyhow.^[10] The CMHC says those 3.5 million units that are required by 2030, will require “an investment of at least $1 trillion” to build.^[11] The CMHC says we need “increased participation from the private sector” to meet these goals.^[12]

In meeting 48 of the Standing Committee on Human Resources, Skills and Social Development and the Status of Persons with Disabilities and their study on the National Housing Strategy, Bob Duggan, Chief Economist at the CMHC, said the following:

The “financialization” of housing is a word we hear a lot. The reality in Canada is that about 95% of the rental market is provided by the private sector, so financialization is something that exists by design in our rental market. In an environment of a growing population and more demand for more rental units, we need more financialization in order to get more supply to meet the needs of a growing population.^[13]

Conservative members believe that the private sector is not only critical to solving the housing crisis, but essential. No government can spend their way out of the housing crisis, what they can do is incentivize the private sector to get building, and get building quickly.

Calls For Increased Partnership With The Private Sector

Tim Richter, President and Chief Executive Officer of the Canadian Alliance to End Homelessness, said this in his opening remarks during meeting number 72 of HUMA:

If we only attack one element of the problem—actions by some of those market actors who purchase low-cost, older rental units and raise rents to generate more profit—we won't solve the affordability problem. Further, we might make it worse by pushing out desperately needed private investment. To restore affordability of rental housing, we need to create about 1.74 million units of purpose-built rental housing. Building this much rental housing would cost at least $610 billion. Unless governments are prepared to invest that much, we need private investment.^[14]

Conservative members agree with Mr. Richter when he says that to build the rental housing Canadians need, we must work with the private sector, and that no government can spend their way out of the housing crisis, they need to incentivize the building of more homes.

Michael Brooks, Chief Executive Officer of the Real Property Association of Canada, said the following meeting number 72 of HUMA:

The economics of our sector continue to change every day. Nearly a third of households in Canada live in purpose-built rental accommodation. Higher housing prices alongside a growing young demographic and increased immigration—it was apparently 1.1 million people in 2022 and 2.7% of our population, the highest since 1957—have led to strong demand for rental accommodation in recent years…

With rising costs to build and rapidly rising interest rates that are nearly doubling—or even tripling—the financing costs of new projects, the new purpose-built supply is rapidly diminishing and will likely continue to do so. In places like Toronto, the cost to build apartments is approaching $800 a square foot and, to build condos, north of $1,200 a square foot. In both of those cases, given higher interest rates, most new developments don’t pencil out…

Our sector requires capital to build and repair housing. These funds require a return on investment. Whether it's new capital for renovation or to build another building, a return on investment is required. Heavily taxing those dollars is counterproductive…^[15]

I would say the private sector has the speed, scale and scope to solve these supply problems. We're 96% of the market. We need to be at the table with you all.

Conservative members agree that government should be working with the private sector to rapidly increase housing construction, instead of taxing them and driving capital out of Canada’s housing market.

Building Affordable Housing

The housing crisis is most punishing on the most vulnerable among us. Community groups, not for profits, and other Non-Governmental Organizations, are a critical part of solving the housing crisis. Building more affordable, transitional, and social housing is critical as governments and NGOs work together to serve those who need a hand up.

To build more affordable, social, and transitional housing, we need major reforms at the CMHC. It is simply too difficult to build housing for the most vulnerable. Complicated paperwork, high interest rates, and bureaucratic delay is making it incredibly challenging to speed up the construction of desperately needed affordable and social housing stock.

Instead of demonizing housing providers who operate as a private business for the lack of affordable supply, government must be focused on lowering the cost and time to build through reforms at the Canada Mortgage and Housing Corporation, ending inflationary deficits that drive up interest rates, and bringing in more skilled labour to Canada that will help build the homes that people need.

Conservative members support 60 day average approvals at the CMHC, linking bonuses for CMHC executives to performance metrics, and balancing the budget to lower interest rates so that we can unleash NGOs on a war-time effort to build desperately needed affordable and social housing.

Conclusion

After 8 years of Prime Minister Justin Trudeau, Canadians are trapped in a housing crisis. Young people are paying skyrocketing rents, unable to save for their first house. Mortgage payments have doubled. Canada faces a massive housing shortage, with demand at all time highs. The housing market has never been this unaffordable in Canadian history.

Conservative members believe that government efforts should be spent incentivizing the private sector to build the housing people need, and working with private builders to build the social and affordable housing that is required for the most vulnerable.