THE STANDING SENATE COMMITTEE ON BANKING, COMMERCE AND THE ECONOMY
EVIDENCE
OTTAWA, Thursday, November 23, 2023
The Standing Senate Committee on Banking, Commerce and the Economy met with videoconference this day at 11:29 a.m. [ET] to study matters relating to banking, trade and commerce generally.
Senator Pamela Wallin (Chair) in the chair.
[English]
The Chair: Hello and welcome, everyone in the room and online, to this meeting of the Standing Senate Committee on Banking, Commerce and the Economy. My name is Pamela Wallin and I serve as the chair of this committee.
I would like to introduce the members of the committee who are with us today: Senator Loffreda; Senator Bellemare; Senator Deacon, Nova Scotia; Senator Gignac; Senator Marshall; Senator Miville-Dechêne; Senator Petten; Senator Ringuette; and Senator Yussuff. Welcome to all of you.
We have a brand new senator, Senator Cuzner, who is visiting today and observing the activity, unless he is somehow inspired to reach for the microphone and ask a question. Welcome.
Today, we continue our discussion on housing affordability. We have the pleasure of welcoming the Honourable Sean Fraser, Minister of Housing, Infrastructure and Communities. Also with us today is Bob Dugan, Chief Economist at Canada Mortgage and Housing Corporation, or CMHC. Welcome to you both and thank you for joining us.
We will begin with your opening statement, Minister Fraser.
Hon. Sean Fraser, P.C., M.P., Minister of Housing, Infrastructure and Communities: Thank you, chair.
Before I begin, let me address two matters. First, there will be a vote in the House of Commons during proceedings today. Thankfully, I will be able to vote virtually. It will interrupt for only a minute or two. To the extent that we need to extend on the back end to accommodate, I’m more than happy to.
Second, congratulations to Senator Cuzner on your recent appointment. This is someone who gave me a lot of time when I was a new MP. To see that he remains on Parliament Hill to expand our collective wisdom as parliamentarians is something I am very glad about.
Thank you for the opportunity to engage on a topic that is extraordinarily important not only to the Canadian economy but, more importantly, the people who live within it across Canada.
We are in a national housing crisis and need to build more homes. We need to build them by the millions if we are going to restore a level of affordability that existed only 20 years ago in Canada.
One of the things I find encouraging is that I think we can solve the challenges before us. It will take time and investment, but ultimately I think the challenges are solvable.
I find that, as a society, sometimes we make problems complicated because they are big. This is a big problem, but thankfully the solutions are apparent and don’t appear to be that complicated. Behind every big problem is a series of smaller ones. If we can identify and invent solutions to those smaller problems, we can solve the big problem.
The first challenge we need to overcome if we are going to defeat the housing crisis is making the math work for the people who are going to build the homes, both in and outside of the market. We are dealing with increased costs. The cost of materials, supplies, labour, land and interest rates have all gone up. If we are going to get people building at the pace that we need them to, we need to reduce the cost of building.
We have advanced measures, including a waiver of the GST for new apartments that are going to be rented. We have low-cost financing programs and other measures that we can implement to reduce the input costs for builders to inspire them to build at a faster pace.
The second challenge that we need to overcome is 30 years of government decisions — I should say both Liberal and Conservative governments — against making investments in affordable and social housing across Canada. We are paying the price for that today.
Thankfully, in 2017, with the adoption of the National Housing Strategy, the federal government has gotten back into the space of making investments in affordable housing. You will have likely seen in the recent Fall Economic Statement the additional $1 billion of capitalization into the Affordable Housing Fund, which will continue the pattern of investing in housing for low-income families — who deserve to have a roof over their heads as much as anyone else in the country.
The third challenge we need to overcome is changing the way that cities allow — or, in many cases, don’t allow — homes to be built. We have challenges with municipalities. I should say that many of them are leaders when it comes to home building across Canada; however, there are other communities where we literally make it illegal to build certain kinds of homes that would provide housing for people in need of it.
Usually, this is done through zoning practices. You see restrictive zoning practices across Canada that make it very difficult to build small multiplexes, for example. We see a lack of attention, given the need to build more density around the services that people need, around the infrastructure that they use and the economic opportunities they want to pursue.
The Housing Accelerator Fund is a response to this challenge. We’ve put federal money on the table to incentivize municipalities to cut red tape, increase their ambition, speed up permitting processes and zone differently so we can make space for the people who live in our communities and those who will move to our communities to drive the economy for the next generation.
If we solve all of these problems, we are still going to run into the bottleneck of the productive capacity of the Canadian workforce. We are producing homes at near-record pace. In the 1970s, there were a few years that would outpace the construction right now. However, in recent history, we’re at or near the best rate of home production that we have seen.
But we need to blow through the all-time record if we’re going to solve the housing crisis. We can do this in a few different ways.
We can work with organized labour to identify training and skill development opportunities to create the skills that we need in this country, and we can work with private sector employers to identify what programs we could put in place to drive the skill development that we need.
We can use targeted immigration programs to bring in people from around the world who know how to build homes and want to move to Canada.
We need to incentivize more homes to be built in factories. There are emerging technologies that give me incredible hope — in modular housing, panelization, 3-D printing and mass timber — that will allow us to scale dramatically the production of homes, but we have to create a space where investors are going to decide to make the necessary investments.
There are other challenges that we need to solve: helping young people to get into the market, helping people who are in the market now to deal with the rising cost of mortgages, and continuing to support communities who are dealing with people who do not have a home at all.
Chair, I see that I’m out of time, but I wanted to let you know that for each of these problems, I believe there are solutions. I believe that, if we work together across levels of government and with the private sector and non-profit organizations, we can bring Canada’s national housing crisis to an end. Thank you.
The Chair: Thank you, minister. We appreciate those opening comments. My colleagues, of course, will drill down on that.
Let me ask one question off the top. You said last month that not only would you be looking to expand housing supply, but you were looking for measures specifically to curb or moderate demand for housing.
Were any of those measures in this document or is that separate?
Mr. Fraser: When you say “this document,” are you referring to the Fall Economic Statement?
The Chair: Yes.
Mr. Fraser: Yes, sure. The ones we have seen in the Fall Economic Statement are mostly on the demand side. Though there was not a specific strategy outlined in the Fall Economic Statement, there are some measures that have flown under the radar. Minister Miller is looking to establish a trusted partner model with post-secondary institutions who use the International Student Program. In order to get preferred access to study permit processing, this will require universities and colleges who benefit from the program to make investments to provide housing, among other things, that will entitle them to the program.
The Chair: Is there anything specific on immigration numbers?
Mr. Fraser: On immigration numbers, there is not anything in the Fall Economic Statement. I should say that the permanent residency numbers, to me, are not a challenge. We have challenges around the significant increase in the numbers coming through our temporary programs, which are driven by demand and not levels set by the federal government.
The Chair: We will come back to that later. Now we move to our deputy chair, Senator Loffreda.
Senator Loffreda: Thank you, Minister, for being here with us. Welcome to our committee. Jon Love of KingSett Capital, a well-respected real estate expert, told our committee the following:
I think for affordable, it needs three things. One is that the programs that different municipalities have to waive or moderate development charges. Second, the CMHC Rental Construction Financing Initiative program, which is a really well-put-together program. . . .
He took a deep dive into the CMHC mandate, to expand their mandate to improve affordable housing. Third, labour is needed.
What are your comments or thoughts on that? How is the government approaching those dilemmas or challenges?
Mr. Fraser: Thank you very much. I completely agree with the assessment that you have just laid out. It sounds like that is somebody with whom I should spend some time on the phone. There are other challenges that I would identify in addition, but I think those are healthy starting places.
Development charges are not the same across Canada, but they do increase the cost of building. Some communities use them to great effect to build out the infrastructure that is necessary to allow housing developments to proceed. I have seen challenges in other parts of Canada where there have been dramatic increases that I think will stifle home building and potentially eat away at some of the progress that we will see as a result of the GST measure that we put in place — in particular, for purpose-built rentals.
We have development charges, or DCs, included in our best practices under the Housing Accelerator Fund, and some recommendations on how communities can address those. We are now examining ways in which we can tie conditions to other federal transfers to different jurisdictions — including, specifically, the Canada Community-Building Fund — which will look at whether communities should benefit from federal programs if they are also dramatically increasing development charges in a manner that is going to stifle home building, which we need to avoid.
Second, CMHC financing programs are well understood by the industry and create a unique opportunity for us to dramatically scale home building, particularly as we’re dealing with a higher interest rate environment. Just last week, in fact, we released more than $4 billion in low-cost loans that will be paid back to the federal government in exchange for commitments from developers that they are going to offer apartments designed to be rented at and below the rate that the market would actually bear. By driving down the cost of rentals in exchange of providing low-cost financing in a high-cost environment, we can increase the pace of building across Canada.
Third, on your concern in regard to labour — this will quickly become the bottleneck. If we have a perfect policy framework from a financial point of view, from supports for non-profits to market homes, we are going to hit a ceiling in terms of our productive capacity. Training will be a big part; immigration has a role to play. But we need to invest in innovation.
We’re looking at different options now for providing security for people who are going to make those investments so they are not concerned that they are going to run into a situation where, because real estate is a boom and bust cycle, they are going to go bankrupt after making that big investment in a factory. There are some projects we supported before. Landmark Homes in Western Canada provides an opportunity. There are some neat private sector developments, including in my own constituency, that will see a dramatic expansion in factory-built homes in this country. If we can use innovation to grow the productivity and still embrace skills development and immigration to the degree necessary, we can remove this obstacle to home building.
The Chair: Thank you.
[Translation]
Senator Bellemare: Welcome, minister. It’s a pleasure to have you.
We are in a housing crisis, as you rightly pointed out, and we can’t vaccinate our way out of it, like with the COVID-19 crisis. It’s a multi-faceted problem that calls for multi-faceted solutions. You listed the challenges, and I think everyone the committee heard from on housing affordability was on the same page with respect to the labour problems, financial problems and so forth.
My main question is this: How are you going to put the right measures in place? A top-down approach won’t cut it. You can’t implement a program to identify solutions to every problem across the country.
I think it’s time to establish a permanent advisory committee on housing. That’s a recommendation we heard from witnesses, and I’d like to hear your thoughts. The committee would be made up provincial, federal, labour and business representatives, all working together to find and, most importantly, implement solutions to each of those problems. Implementing solutions is a problem as well.
Are you able to take the lead and set up a committee like that? Who has the ability to bring all those stakeholders together?
Mr. Fraser: Thank you for your question.
I think it is possible to establish a committee for those reasons, but I think it’s preferable to create other bodies to tackle each of those problems. For example, I don’t think it’s appropriate to involve every person in every conversation about every solution.
To address the challenges around the economy’s productive capacity, I think it’s important to involve people with expertise in housing construction. To address financing problems, we need to bring those in charge of housing construction lending on board. It is also important to consider those who will be using the programs.
[English]
The path forward is, rather than having one single body tasked with identifying solutions and implementing them, to identify different tables designed to tackle the different challenges that we experience. If we are able to bring the voices to the table in a focused way, that would be very helpful.
[Translation]
I think it’s equally important to involve the other levels of government. The federal government can use federal funding and regulations, but it can’t tackle the national housing crisis without the help of the provinces and municipalities.
If we work together under a similar structure that brings together the key voices to find solutions to each of the problems, I think that would be a good idea.
Senator Bellemare: Creating a permanent round table is one solution to address problems in the long run, especially in relation to labour, which impacts provinces, the workforce and businesses.
Thank you.
[English]
Senator Marshall: Thank you, minister, for being here.
I’m not interested in talking about anything theoretical. When you gave your opening remarks, it sounded like you have a plan in your mind. I’m interested in hearing more about your plan, how you are going to execute it and how you are going to deliver. It is not all about money. There is lots of money — billions of dollars — but you did identify other issues like labour. There are problems with the municipalities and provinces, et cetera.
I would like to know how you are going to implement your plan. At the end of it, one of the problems I have with what is happening now with housing is that you don’t really see the end product — how many houses are going to be built.
Once you spend billions of dollars, people like to be able to see the hundreds of thousands of houses that you say are going to be built. I’m interested in hearing about your plan and how you are going to execute it. Somewhere along the way, are you going to demonstrate to Canadians that your plan has worked or is working? Could you talk about your plan for your plan?
Mr. Fraser: Sure. I have said this in public before, though you may be hearing it for the first time at this table: We’re working on developing a comprehensive plan that will have a suite of federal measures designed to address the national housing crisis. There will inevitably be measures that other levels of government will put in place.
When it comes to implementation, we have to appreciate that the federal government is not going to be constructing the homes as mentioned.
Senator Marshall: I realize that. “The suite,” that’s a good term — “suite of measures.”
Mr. Fraser: That’s right. We will be dependent upon private sector developers — and non-profit actors in the non-market space, in particular — who will actually build these things so we can put the policies in place to support them.
I’m not going to wait for the magic date when all of the measures are ready before we release them publicly. That is why you will have seen a consistent pattern over the last few months of us announcing new policies as soon as they are ready. A good example would be the GST removal. When we had that policy set in September, we put it out there. When we have the Housing Accelerator Fund ready to deploy, we are doing it one city at a time, as fast as we can possibly go. The same is true for some of these new measures that would have been shared in the Fall Economic Statement yesterday. As we have policies that will be part of the final comprehensive plan, we will release them one by one because we cannot afford to wait for some magic communications opportunity. We have to move.
In terms of what success looks like so that people can see the homes that are built, at an individual level, it is solved when you get a home. At a systemic level, there are certain metrics that I believe we can use to identify success.
Right now, one of the challenges I see is for someone who is renting. If they are displaced today because their rent has gone up or something else happens, it is really hard for them to find another place in the community where they live for the same price they were paying before. There are lots of people in Canada who have rents to pay that they can afford right now, but the units that are available on the market are largely unaffordable for a majority of people. I believe that I will have succeeded in the rental challenges that we’re having if a person can actually move from the place that they are living now into another available unit on the market at the same price that they are paying. That is when we can tell that supply and demand have actually balanced out.
On the home ownership piece, if you are adult working in Canada, you should be able to buy a home. That is my belief. That is, if you want to. Not everybody wants to buy a home. That is okay. Renting is a great choice for a lot of people for a lot of reasons. I think we can do more to encourage people to think about living in a complete community where they rent. I rented for a significant period of time in my life. It was exactly what I needed at that time. I’ve got a different living arrangement now.
There is also a moral imperative. I said if you have a job, you should be able to afford a home. If you cannot work, you should have a home too. Governments should work together to provide it for you.
In a country as wealthy as Canada, it is very difficult to accept that people go to sleep without a roof over their head. These problems are solvable. One of the challenges that I cannot believe how hard it is for some people to grip is people who live without a house are not homeless because of their ancestry or because of mental health or addictions or because they live in poverty. They are homelessness because there is not enough affordable housing in their community. People do not choose homelessness. I do not feel that I have solved the national housing crisis if I am in a city going to an appointment for work and there are people living on the street. If we can address that challenge, I feel like we will then be in a position to say we have solved the crisis — that is, if we are also able to provide affordable rent at the price people are paying right now, and if people working jobs can afford to get into the market if that is what works for them. If those three things happen, I will be happy.
The Chair: We are over time, so I will put you on the top of the next list. I will ask everyone to keep preambles and answers short. Thank you so much.
[Translation]
Senator Gignac: Welcome, minister.
This week’s economic statement included a list of all the measures the government had taken, so I do want to applaud your government and recognize its efforts to solve the housing crisis.
The crisis is due to an imbalance between supply and demand. As I see it, there is an elephant in the room, and we don’t talk about it enough. It’s the increase in immigration level numbers. I know it’s a sensitive subject, so let me be clear: all of us here believe that immigration is a source of wealth creation. However, the pace of immigration has increased significantly.
Over the past 12 months, Canada’s workforce has grown by 850,000. That’s a record. It means four more people in the workforce for every housing start. Historically, the ratio was 2 to 1. Now, we are at 4 to 1.
Do you agree that we can’t just speed up the pace of housing starts overnight? Don’t you think it’s time to adjust immigration levels temporarily, for two or three years, to give supply a chance to catch up to demand?
I have another question after that. Thank you.
Mr. Fraser: Before I can answer, I have to go to the House of Commons for a vote.
[English]
I don’t want to be rude.
The Chair: Please go ahead. You gave us warning. We’ll stop the clock.
[Translation]
Mr. Fraser: Thank you for your question, senator.
In order to find a solution that works, it’s important to understand the problem.
I believe it is possible to grow the number of housing units across the country so that Canada can reap the benefits of population growth and economic growth. You raised a key point.
However, I don’t think the problem is due to immigration levels, or permanent residents. The level of immigration is a decision the federal government makes every year.
In my view, we need to keep including people with essential skills to foster economic growth, and increasing our capacity to welcome and accommodate newcomers to Canada to ensure their success.
Temporary immigration programming is a challenge because the federal government doesn’t set thresholds for that, especially in the case of foreign workers and international students. I think there is an opportunity for program reform, but I have to work with other levels of government, as well as the organizations and employers who use the programs.
Did you have another question?
Senator Gignac: Not since the Second World War have we seen such a disparity: the inflation index, so the consumer price index, has gone up 3% over the past year, and rent prices, or the rent index, has gone up 8%. We haven’t seen a gap that large since the Second World War. Some 37% of Canadian households are renters. There is a housing shortage.
Don’t you think you should also consider the problem from a temporary labour standpoint? Everyday Canadians are paying the price because we don’t have the capacity to absorb the influx of temporary workers. The people who come here aren’t all plumbers or carpenters. Shouldn’t there be quotas?
[English]
The Chair: You have a minute to answer.
Mr. Fraser: Just for speed, I will speak in English, if that is okay.
I would not agree it would be a good idea to limit our ambition on the permanent residency program. Many of the people, close to 40% who are already here, are working. That is challenging.
For the temporary programs, yes, we should be reforming them, but the federal government does not control those numbers. The provincial governments select the institutions under the international student program, for example. There are institutions exploiting students and abusing these programs, and they are not doing a service to the students who come here or the economy, and we need to work with provincial governments to crack down on them.
Regarding the temporary foreign worker programs, we have to make sure that we are not inviting employers to depress Canadian wages, and we need to focus on people who will contribute essential skills. We can create programs to be more focused on who comes to solve the social challenges that we’re dealing with. This is a great opportunity for reform. But the federal government cannot do it alone when dealing with demand-driven programs rather than levels that we set.
The Chair: Excellent.
[Translation]
Senator Gignac: Thank you.
[English]
Senator Petten: The Canadian Home Builders’ Association in Newfoundland and Labrador indicated that the string of government funding announcements to spur the construction of affordable homes during the housing shortage has actually slowed down progress, as they want to learn more about the programs before they continue to build. Did the federal government work with the provincial governments? It seems that there was a big announcement in the province, and now they are saying, “Well, maybe we should wait.”
Mr. Fraser: I have had this conversation with the Premier of Newfoundland and Labrador as well. We need to be better coordinating our programs with different levels of government; however, I think some of the frustrations around affordable housing in particular were driven by the Rapid Housing Initiative, which was designed as a COVID response to get projects built quickly when we were dealing with capacity issues in existing housing developments and shelters where people could not be close to one another and we needed to rapidly increase the rate of construction. We were dealing with a situation where the federal government put a lot of money on the table, but we didn’t have the opportunity to coordinate with provincial programming, so we were both working on the same projects.
Going forward, I would really like to land in a place where we’re actually coordinating our projects so we’re supporting the same ones and allowing us to work strategically to identify where the greatest needs are and to move forward.
If we’re dealing with some of the challenges for builders, not just governments aligning their programs — though builders will benefit if governments align their programs as well — there are unique opportunities to scale existing programs that are well used in the industry. In particular, the Apartment Construction Loan Program, previously the Rental Construction Financing Initiative, or RCFI, and MLI Select are very well understood by the industry. They use them. They know them.
Scaling programs that the industry knows and appreciates is a great place to start. By simplifying the programs and allowing builders to tap into those programs for a multiplicity of projects from a portfolio approach where we have a trusted partner is a great opportunity that we’re working on to simplify so we’re not requiring 10 applications for 10 projects. If it is somebody we trust and they have a pipeline they are going to build, I want to move to a circumstance where we can potentially support all 10 projects with a single application where that makes sense. At the same time, we better coordinate programs across levels of government so there is one-stop shopping for the person who is going to build the home.
[Translation]
Senator Miville-Dechêne: Welcome, minister.
There may be another factor contributing to the housing crisis, one that’s underestimated. I’ll explain what I mean.
A year ago, Statistics Canada revealed that 29% of Canadian households are one-person households. In 2016, one-person households became the predominant household type for the first time in Canada’s history. Living alone is most prevalent among older adults, with 42% of people aged 85 and older living on their own.
Since 1981, the share of people aged 35 to 44 living alone doubled, going from 5% to 10%. In Quebec, 19% of people live alone.
In 40 years, the number of people living alone grew by 158%, which is three times faster than overall population growth.
When two people live alone, they need two places to live, but if those two people lived together, they would need only one. That’s pretty straightforward, and it can impact the supply of housing.
Has your department studied how the growing prevalence of living alone is impacting the housing supply? In a society where so many are struggling with loneliness and social isolation, are there any programs to support shared living arrangements?
Mr. Fraser: Thank you for your question.
[English]
I may want to have Bob introduce if there are any specific studies on this that CMHC has looked at.
To offer a bit of context from my perspective: I’ve thought a lot about this. My mom grew up in a family with 10 kids in rural Nova Scotia. That was pretty common for a Catholic family in rural Nova Scotia.
Rodger, your family is not too different.
I grew up with six kids in my household. I have two kids. This is a pattern that we are watching play out right across Canada. We do see different demographics. Particular newcomer communities tend to have larger families who live in one arrangement.
I worry a bit about the social engineering aspect of this conversation. I want to allow people to consider what kind of family they want to have and then try to have the market respond. If we create incentives that are agnostic to family design but promote building quickly, I think the market is going to be better at identifying the solutions than the government ever will be.
To the extent that we can reduce taxes on home builders and create low-cost financing opportunities, the market will find a solution. I don’t have the ability — or the data, frankly — to solve this at a community level. We can get good national and provincial data. Housing markets exist in communities; it’s not one national housing market. If we can create market tools and incentivize widespread construction, I think we can incentivize the solutions.
On the study, Bob, I don’t know if you have anything to offer on specifics that we might have.
Bob Dugan, Chief Economist, Canada Mortgage and Housing Corporation: At CMHC, we construct measures of core housing need and try to identify certain types of vulnerable households that are more prone to or have a higher incidence of core housing need — single-parent families, those kinds of things.
Senator Miville-Dechêne: I’m talking about single people.
Mr. Dugan: Yes. I was just giving that as an example. We try to identify where we see higher incidences of core housing need so we can determine what different vulnerable populations are out there, but no studies that look at solutions for single-person-family households.
Senator Miville-Dechêne: I’m obviously thinking about that, because we always talk about immigration as a factor. Obviously, it is one. But we have our own people who more and more are living single. That’s also a factor in the housing crisis, isn’t it? Have you studied that? Has anybody?
Mr. Dugan: I hear what you’re saying. If two people are living in two households instead of two people living in one household, it takes up more units. I fully appreciate the point. Regarding the social engineering, I don’t know what the solution is.
The Chair: We can’t make people live together.
Senator Miville-Dechêne: That’s not what I want to say. I’m talking about a social factor that increases —
Mr. Fraser: Senator, if I may, I actually think this is an issue worth exploring more deeply. There are two patterns that I’m anecdotally being made well aware of in my conversations.
As people live longer, we see more seniors who survive their spouse. It’s a real challenge, particularly for low-income seniors. The opportunity, from a housing point of view, is that if we focus on programs that build more seniors’ apartments that accommodate people in that situation, we’re actually going to free up a family home, and it’s much cheaper to build a seniors’ apartment than a new single-family home. It’s a cascading effect that could be very positive.
The other social trend I worry about affects young people. Many people have told me that they are choosing not to start a family — where they otherwise would — and choosing not to get married or do X, Y, Z with their lives because they’re afraid of not being able to afford a place to live. This challenge, if we don’t overcome the general affordability part of it, will be exacerbated by having a greater demand on the housing market because fewer people are living together. It may be an opportunity for parliamentary committees to study, and I would welcome feedback that you or other committee members may have.
Senator C. Deacon: Thank you, minister, for being here. It’s great to see my MP at the Banking Committee.
You spoke about the need to change how we build. The building industry tends to be a very traditional industry. It’s often hard to get contractors, builders and others to take on new technologies and approaches.
One that has amazed me recently is a company in southwest Nova Scotia that is building homes out of former single-use plastics, JD Composites. They build according to boat-building approaches. There’s still hesitation for people to use this approach. There have to be changes to the building code and you have to build comfort among consumers and builders.
Is there a program that could be developed? Do you see an opportunity through various types of insurance that give confidence when you’ve tested out a product or approach as being effective? They can put up a home in three days. The panels are fibreglassed together. It can go very quickly and it doesn’t mould. There are a whole lot of benefits, but there’s hesitation.
Have you thought about that element of the challenge — namely, hesitation among consumers and builders to accept something that’s brand new? Thank you.
Mr. Fraser: Yes, I have. It’s actually one of the most exciting opportunities. As I mentioned during my opening remarks, we won’t solve the problem if we keep building homes one at a time.
There’s been incredible innovation in home building over the last number of years. However, in my view, at its core, it’s the industry that is most like the way it was 100 years ago. We don’t build cars the way we did 100 years ago, and home builders would rightly point out that we don’t build homes quite the same way we did 100 years ago. But we haven’t figured out how to do it on an assembly line, in a factory — putting people to work in good-paying jobs, by the way — to come up with these new solutions. We need to give confidence to investors, consumers and the people who will pursue a career in this field that will be viable.
There are things we can do that I’ve been thinking about.
First, we should constantly be looking at opportunities to revise the building code, which is not mandatory, but provinces tend to adopt the National Building Code and we can work with provinces to implement it in a binding way.
Second, we can work with organizations like the Canadian Standards Association to demonstrate that this is going to work, this will be safe, we’ve tested it and there are not huge liability concerns.
Third, we can deal with this by trying new things, supported by the federal government. There are different options that I’m considering right now, and I’ll need to work with my colleagues in government to identify the best path forward.
We support innovation in all kinds of sectors. We have a strategy for the ocean economy in Nova Scotia. We could have a strategy for home building.
One of the things we should look at is how we can leverage the strength of the Regional Development Agencies, who know where the opportunities are in their markets to achieve scale.
Other people would suggest that maybe investment tax credits could be an opportunity, or maybe something through the Strategic Innovation Fund. But given the local and regional nature of housing markets and the local knowledge of government agencies in terms of who the players are if we want to achieve scale quickly, my sense is that Regional Development Agencies have a big role to play in identifying those scalable business opportunities that will create wealth and solve a big social problem at the same time.
Senator C. Deacon: Thank you.
Senator Yussuff: Thanks, minister and Mr. Dugan, for being here.
In terms of the challenges we face in the housing market right now, there are a multitude of issues. I’ll try to focus on affordability, homelessness and something that I think is in the Fall Economic Statement: co-op housing.
Throughout history, co-op housing has played an important role in showing people a way to get a roof over their heads and to do it with a lot of collaboration, with communities taking leadership, unions investing funds to make it possible, and with the Canada Mortgage and Housing Corporation playing a backstop to do that. It almost seems like we tried to do everything to kill the co-op housing approach and now we’re trying to revive it.
The second point I want to make is that, while it’s nice to talk about housing, in a big city, the one where I live, two buildings went up in my neighbourhood not far from where I live. The average price for a single-bedroom apartment is $3,000. I don’t care who you are in the city of Toronto; how do you afford to live in a $3,000 single-bedroom house in the city?
This is a real problem. A lot of young people are struggling with low income. Could you talk about the things you’re doing to try to help these families and how we can revive some of the traditions we used to have in the country around co-op housing? How do we get moving with this and bring in collaboration?
The last point I’ll make is on the labour front. I worked with you when you were the immigration minister to give more people a pathway to become permanent residents to work in the construction industry if they wanted to help build homes faster and help the construction industry move a bit faster. How do we get those people to continue to come forward and give them a pathway to get their permanent residence in a country?
Mr. Fraser: These are excellent questions. How much time do I have to answer these questions, Madam Chair? I will do my best but I’m sure I won’t do them justice because you’ve touched on three very important topics that I want to address.
First, on co-ops, the answer is not complicated. We fund co‑ops through tax measures and direct financing. Yesterday, the Fall Economic Statement indicated our commitment in excess of $300 million to finance co-ops directly, which will be rolling out at the beginning of next year. This is welcome news. Co‑ops provide wonderful, reliable homes with a predictable ability to maintain a low cost compared to what exists in the market. There are parliamentarians who grew up in co-op housing, including my friend and Olympic gold medallist Adam van Koeverden, who is proud to have been raised in a co-op and is now serving in Parliament.
Regarding your second question around the average cost of a one-bedroom, it’s too much. Rent has to come down if we’re going to provide a level of affordability. The way we will be able to bring rent down is to build way more units for rent. This is a supply and demand piece. The cost of rent is not simply a reflection of the cost of construction. When you look at homes built more cheaply 30 or 40 years ago, they’re still being offered at a high price when they come online and are made available today. The way we need to do this is by creating financial incentives to grow supply. That’s why we’re moving forward with the GST measures specific to purpose-built rentals and why our Apartment Construction Loan Program is focused on apartments built for rental. You tend to see lower monthly rents for apartments than you do for condos that are rented. Our focus on supply is really on apartments that are designed to be rented. We’re also incentivizing zoning changes to build more rental capacity supply in communities. If we do this, we will not just reduce the cost of renting for people but create an opportunity for people to use the money that would have gone for rent to save for a home. That will address the demand side of the question when people look to build or buy a home and exit the rental market. There are a number of ways that bringing down rent helps improve things across the entire ecosystem.
Lastly, on your labour question, there’s some real success, although I think we can do more to scale it, through the Out-of-Status Construction Workers Pilot program with the Canadian Labour Congress and the Greater Toronto and Hamilton Area, or GTHA. However, there is also a new opportunity that I believe will prove to have been a good decision — namely, the established category-based selection permanent residency focus on key areas like health care, agriculture, transportation, tech and the skilled trades for the people who have the skills we need to build more homes. This is the focus we tried to adopt when I was the immigration minister. It’s a focus Minister Miller wants to continue to deal with. In the Fall Economic Statement, there was a short piece on permanent residency opportunities for people who have the skills we need in the trades, particularly with a focus on those who can build more homes.
The Chair: Under the wire by a couple of seconds. That’s great.
Senator Ringuette: First, I have been in the Senate for 21 years and attended nth number of committee meetings. This is the first time that a minister has come in front of us without notes and can explain what the portfolio is about. Kudos to you.
Now for my two questions. First, trade certification is at the provincial level. Most of these provincial regulations require three certified electricians or plumbers for every trainee. That has to change because it removes the ability for young people who want to get into the trades but who have no position to do their training. I hope you’re looking into that when you speak with the provinces.
My second question is about the $1 billion in social housing has been announced. That is great, but I hope that most of that will be rent-to-own so that young people can acquire capital and assets instead of building capital for institutional investors.
Mr. Fraser: Thank you for the questions. It’s very kind of you to open the way you did as well. I appreciate it very much. I’ve always been of the view that if you can’t explain it without notes, you probably don’t understand it well enough.
On the trade certification piece, it’s a challenge because, as you correctly pointed out, we have different standards in different provinces, and provinces and regulatory bodies jealously guard, often for good reasons, the qualification standard. They’re more protectionist than I would like them to be. I think we should broaden the ability for people to qualify in the trades. I don’t think we have to compromise on the quality to do so. We have to embrace new opportunities to qualify people more quickly, including both domestic workers and newcomers arriving in Canada.
There are things we can do, and incentivize through the tax system, in particular, around labour mobility in between provinces. We need to work at our tables on interprovincial trade as well because there are many interprovincial trade barriers that we need to knock down to spur economic growth. I think if we do a better job of aligning our standards and then incentivizing labour mobility opportunities, we can both grow the supply of skilled workers and make it easier for workers to move between jurisdictions. Trades people tend to work on projects. Often, people are subcontracted out for this job or that job. We need to provide an opportunity for somebody who’s willing to move, like many of the people I grew up with from Nova Scotia who moved to Alberta for a short period of time and did the fly-in and fly-out work, where necessary. That works for a lot of families, but not for everyone. We should create that opportunity. By convening at the tables we’ve established on interprovincial trade barriers, we can make progress and then scale that success by actually creating opportunities for workers to work in different jurisdictions when we better align standards.
On the $1 billion investment, this builds on many previous multi-billion-dollar investments in affordable housing over the last few years. That particular program is not going to be designed for rent-to-own. That doesn’t mean we can’t do other things on rent-to-own, but that particular program is designed for organizations that will run housing projects that will, in perpetuity, maintain units as affordable housing. For people across the ecosystem who move into affordable housing, the hope is that they don’t remain in that building forever. When they get their feet under them and establish success, they will be able to move from an affordable housing unit to some housing in the market.
Separately, I do think there are opportunities for us to pursue programs where we create an opportunity for people to build equity, though they may start as renters. We’ve received a handful of interesting proposals over the course of my short time as the minister responsible for housing that we’re looking at now and I’m trying to engage with. However, figuring out the right way to design a model where a person, typically a young person, can build equity when they can’t muster that down payment will be key.
In addition to creating a scenario where people can pursue a rent-to-own-type model, creating an opportunity for people to save money for when they eventually want to make a down payment must be part of the solution as well. We have created the First Home Savings Account. The early signs are that it is successful. About a quarter million people have signed up over the last few months and created a new account. I’m looking forward to seeing the data as to how much people can save and put into those accounts. When you see 250,000 disproportionately young people open up a Tax-Free Savings Account for the purpose of a down payment, it’s a good thing.
Bob, on the rent-to-own piece, do you want to explain some of the things we’ve done in the past, just to address the senator’s question?
Mr. Dugan: That’s a short list. I haven’t been involved in the rent-to-own stuff.
Mr. Fraser: I’m happy to follow up personally by email after the meeting if you want more detail.
The Chair: Thank you very much. I have five names here and we have less than 10 minutes. Before we continue, I want to hear from Mr. Dugan on the $15 billion for the low-interest loans for housing through CMHC. Already, there’s some criticism that it moves way too slowly and it will take a long time for that to get through the system. Can you explain briefly how that will work?
Mr. Dugan: I’m not a program person. I’m here as a chief economist. I talk more about the economics of housing and that sort of thing, so I’m not intimate with that —
Mr. Fraser: I think I have a decent answer. What’s important to understand about that particular program is there’s money in it already. The signal we sent to the sector yesterday with the recent Fall Economic Statement is that there’s going to be money for a long time. The importance right now for an investor who’s looking at that next project and thinking about applying for a permit is if they don’t know the financing is there, they might not move forward with the project.
Even last week, more than 11,600 units from projects offered through that program will be unlocked as a result of $4 billion in loans that have been advanced.
It’s the one thing I could point to that is actually going to produce the largest number of homes of anything in my suite of programs that I have access to. It’s going to offer on a continuous basis and we’ve now locked in support for a longer period of time so that there will be a seamless transition as we top up that fund.
Senator Loffreda: Alternative approaches are available, yet solutions remain evident. We have to increase supply and lower costs. Given low unemployment and increasing interest rates, it would be difficult to do that. We’ve discussed innovation, but what about productivity? Are you looking at any policies or ideas to improve productivity in order to improve housing affordability?
Mr. Fraser: There are three particular categories, which I’ve mentioned briefly today.
First, we have to train people. We have to develop the skills that are necessary. We can do that through a range of different programs. We have transfer agreements with provinces and skills development. We’ve worked closely with different organized labour movements to develop the skills we need so they can scale their training opportunities.
Second is looking at immigration where we can’t find Canadian workers to fill these gaps and focusing on the skills the economy needs. We work with Employment and Social Development Canada, or ESDC, to identify the specific occupations that are in greatest demand, and with private sector employers and organized labour to understand their needs.
Third is innovation. We’re not going to solve the crisis if we don’t build more homes and factories. There are exciting technologies that will benefit from different kinds of building codes and municipal reforms, but we’re also contemplating how we might be able to foster a culture of investment in factory-built homes — specifically, modular panelization, 3-D printing and mass timber.
I’m intrigued by the notion that Senator Deacon has pitched around new technologies that are also sustainable and easier to maintain, so eventually there will be new technologies that emerge. But if we focus on innovation, immigration, skills training and development, I have faith that we can blow through the record of home building starts that we’ve seen historically in Canada.
[Translation]
Senator Bellemare: Thank you, minister. I appreciate your goodwill, your sensitivity and your understanding when it comes to this issue.
In hearing from witnesses, we found out that 250,000 housing starts is merely enough to keep the current level of available housing stock. As we listen to you, we are finding out that you are doing a lot of work with the provinces.
Do you have a real plan to address the whole problem of governance, a plan that delivers lasting results and includes the provinces and key stakeholders in the conversation?
Mr. Fraser: Yes, I think it’s possible to create a permanent mechanism or body, but I do think it’s very important to establish different structures to tackle different problems.
[English]
My sense is that we need buy-in from other players and participants. Some are advocating for this, particularly in the industry in the non-profit sector. Provincial governments would like to have conversations but not necessarily establish a permanent structure in every province. It may vary, and it’s hard to bind future provincial governments to decisions taken by previous provincial governments. My sense is that establishing a regular and perhaps permanent structure on each of the constituent problems that make up the challenges we’re facing is a good idea, but I don’t know that we want to have too many chefs in the kitchen by including everybody in every conversation about every problem.
Establishing permanent tables is a great idea. We do have the opportunity for regular federal, provincial, and territorial — or FPT — meetings. In particular, merging the housing and infrastructure departments federally creates an opportunity for us to have a single conversation with different levels of government about how we will coordinate our programs, so we’re not just building storage units for people to go to bed at night but complete communities where people can thrive. If we can establish a permanence to the structures, both between governments but also between the federal government and players in the housing sector, I think it would be a good idea that will prove fruitful in the years ahead.
Senator Marshall: How many homes are you estimating will be made available as a result of the change in rules governing Airbnbs? I just need a number.
Mr. Fraser: The estimates are in the range of 30,000, a little better than that.
Senator Marshall: In a one-year period?
Mr. Fraser: No, not necessarily. It’s hard to predict. That number comes not from our assessment of the recent measures but from a study out of McGill in 2019. I think it was about 33,000. I can’t remember the specific number.
Senator Marshall: Can you remember the time frame?
Mr. Fraser: It’s hard to predict. I think it would happen fairly quickly. New York put measures in place to crack down on Airbnbs. Within 30 days, a vast majority of the units that were listed on Airbnb made their way into the market.
We haven’t tried this before in Canada on a wide-scale basis, so it’s hard for me to predict. I’m optimistic that if municipalities and provincial governments advance measures that the tax measures we’ve put in place will apply to, the turnaround would be fairly quick.
Senator Marshall: I’ll take the number and track it. Thank you.
Mr. Fraser: Yes, me too.
[Translation]
Senator Gignac: First, I want to join my fellow senator in tipping my hat to you. I also want to say what an excellent chief economist you have. I know him well.
In March 2023, the government launched a $4-billion fund to build 100,000 new homes. The transfer of that money comes with conditions. Are they the same conditions that were imposed on Quebec, as part of the negotiations for the $900 million it received? Is it an asymmetrical agreement, or do the same conditions apply right across the country in order to access the funding?
Mr. Fraser: The conditions aren’t the same when it comes to different communities, not just in Quebec, but also in other provinces. For example, Brampton’s situation is different from Kitchener’s or Halifax’s.
We signed an agreement with Quebec for $900 million. We are working with our counterparts in the provincial government to identify shared priorities.
Quebec is also the only province that matched the federal government’s investment. The Quebec government also proposed reforms to the bill.
Getting credit for the reforms under the agreement is not what’s important to me. Real systemic change is what’s important to me. Systemic reforms are directly responsible for the creation of 23,000 more housing units. The Quebec government has used provincial and federal funding to build 8,000 affordable housing units. This agreement with la belle province is tremendous and historic.
[English]
Senator C. Deacon: Again, thank you, minister. I’d like to echo what many of my colleagues have said. Your answers are direct and clear.
In terms of the foreign buyers of non-residential recreational properties and the ban that’s in place, do you know how effective it’s been and is that something you see continuing in terms of adding units to Canadian residences?
Mr. Fraser: It’s difficult to assess with certainty because there are a multitude of factors that will go into whether you’re actually seeing the market free up. My assessment is that it has had an impact. I can’t tell you the exact number of units because with the number of foreign buyers that would have been coming out of these changing economic circumstances that we’ve been living through, it’s hard to know what the baseline would have been with certainty in such a dramatically dynamic environment.
Before we make a final decision to extend or not extend, I do want to get a rigorous assessment. Bob, I don’t know if you have actual estimates on this particular issue, but I’m happy to defer if you do. If not, we can follow up with the senator.
Mr. Dugan: No. I would just echo the comment that it’s true that we don’t have a counterfactual, so it’s very difficult to estimate the amount.
Senator C. Deacon: I think it may be more of an urban myth than a reality. I question its effectiveness. I think it’s great that you are looking for the data as well. Thank you.
The Chair: Thank you very much to all our senators and particularly to our witnesses today, the Honourable Sean Fraser, Minister of Housing, Infrastructure and Communities — and there are a whole lot of other things we’ve added on there today for you as well that you are going to respond to. Our thanks again to Bob Dugan, Chief Economist at CMHC. That brings to a close this session.
(The committee adjourned.)