THE STANDING SENATE COMMITTEE ON BANKING, COMMERCE AND THE ECONOMY
EVIDENCE
OTTAWA, Wednesday, October 8, 2025
The Standing Senate Committee on Banking, Commerce and the Economy met this day at 4:15 p.m. [ET] to examine and report on Canada’s housing crisis and the challenges currently facing Canadian home buyers, with a particular focus on government taxes, fees and levies.
Senator Clément Gignac (Chair) in the chair
[Translation]
The Chair: Honourable senators, my name is Clément Gignac. I am a senator from Quebec and chair of the Standing Senate Committee on Banking, Commerce and the Economy.
I would like to welcome everyone with us today, as well as those listening to us online on the sencanada.ca website.
Before continuing, I would ask my colleagues to introduce themselves.
[English]
Senator Varone: Senator Toni Varone, Ontario.
Senator Galvez: Rosa Galvez, Quebec.
Senator Loffreda: Welcome to our committee. Senator Tony Loffreda, Montreal, Quebec.
[Translation]
Senator Henkel: Thank you for joining us today. Danièle Henkel from Quebec.
[English]
Senator Yussuff: Hassan Yussuf, Ontario.
[Translation]
Senator Forest: Éric Forest, from the Gulf division, Quebec.
[English]
Senator McBean: Marnie McBean, Ontario.
[Translation]
The Chair: Honourable senators, today we are continuing with our first special study on Canada’s housing crisis and the challenges currently facing homebuyers, with a particular focus on government taxes, fees and levies.
I would like to welcome our guests representing the Canada Mortgage and Housing Corporation, or CMHC: Mr. Mathieu Laberge, Chief Economist and Senior Vice-President, Housing Insights and Ms. Nadine Leblanc, Interim Chief Financial Officer and Senior Vice-President, Policy.
Thank you for accepting our invitation. I believe you have some opening remarks, after which we will proceed to questions.
The floor is yours. Thank you.
[English]
Mathieu Laberge, Chief Economist and Senior Vice-President, Housing Insights, Canada Mortgage and Housing Corporation: Honourable senators, it is an honour today to be here on the traditional unceded territory of the Algonquin Anishinaabe people.
[Translation]
Canada Mortgage and Housing Corporation has been helping Canadians to access housing for over 80 years. We have helped millions of Canadians access home ownership through our mortgage loan insurance. The availability of this insurance also stabilizes the market, giving lenders confidence to keep lending, even in hard times.
Currently, far too many Canadians are struggling to even find a place to live, let alone at a price they can afford.
Last December, the Department of Finance introduced new rules that include a $1.5-million price limit for high-ratio insured mortgages and 30-year amortizations for all first-time buyers and buyers of new builds. These new regulations are helping more buyers enter the market. But we also need to be careful to balance these demand-side measures with boosting supply.
Our research shows that the single biggest driver of the housing crisis is a severe housing shortage. Yes, housing starts in the first half of this year were at near all-time highs, and we’ve seen weaker demand recently in Toronto and Vancouver’s condo markets. But the fact remains that Canada needs to build more homes over the next several years — and by the millions.
To restore affordability to 2019 levels — before the pandemic — Canada must double the number of homes it builds each year over the next decade. This won’t be easy, but it is possible. Based on current resources being devoted to construction — funding and labour — Canada should be building around 400,000 homes a year.
[English]
How do we get there?
First, financing is a major barrier for developers. We see this in the strong demand for our housing programs and mortgage loan insurance. Last year alone, through our multi-unit mortgage loan insurance and the Apartment Construction Loan Program, CMHC backed close to 90 percent of all purpose-built rental construction in Canada. This kind of government investment is essential. With more funding, the Apartment Construction Loan Program, ACLP, could do even more. To build at scale, Canada needs much more private investment too. For example, could more venture capital, pension funds or private wealth funds invest in construction funds or real estate investment trusts?
Another challenge builders face is regulation, delays and development costs at the municipal level. Our research is clear. More land-use regulation means lower housing affordability. That’s why we created the Housing Accelerator Fund. Some 241 municipalities have signed on to use this federal funding to cut red tape and fast-track housing. We also launched a Housing Design Catalogue with standardized designs to help builders streamline the process, cut costs and speed up housing delivery.
Beyond financing and municipal reforms, we need to boost productivity across the housing sector. This starts with a modernized workforce that’s skilled with assembly lines and robotics. With 700,000 skilled trades workers set to retire by 2028, this task comes with a real sense of urgency.
It also presents an opportunity to adopt new technologies and less labour-intensive ways of building. In Canada, we’re still building homes the way we did 60 years ago. As a matter of fact, a McKinsey report from a few years ago found construction is the second-least digitized industry. Only agriculture and hunting rank lower.
There are innovative approaches available to us which other countries have been using for decades. Take modular and prefab housing, for example. It’s just 1% of Canada’s housing stock. If we look at Sweden, close to 80% of homes have at least one component built offsite. That shift didn’t happen by accident. In the 1960s, Sweden used government subsidies to create baseline demand. Now, it’s a widely adopted private-sector solution.
We can also learn from Sweden when it comes to mass timber high-rises. Close to 20% — one in five — of its high-rises are built with timber. Here in Canada, it’s less than 5%, with the notable exception of B.C. Using timber is greener, faster and cheaper, and an opportunity to broaden domestic markets for Canadian wood in the context of trade uncertainty.
Finally, we can also learn from other countries when it comes to financing community or social housing. The Netherlands and Denmark both have social-housing models that are not-for-profit but also self-financing, falling somewhere between the non‑market and market housing models we have in Canada.
Mr. Chair, fixing the housing crisis will take systemic change and all hands on deck. It will take continued measures to help Canadians access the market and measures to boost supply. It can be done. Governments, developers and investors are realizing what’s at stake and are ready to act. This is a moment of opportunity that must be seized.
Thank you for your time.
[Translation]
I’ll be happy to answer questions from members of the committee. Thank you.
The Chair: Thank you, Mr. Laberge. We will now move on to questions.
[English]
Senator Varone: Thank you for being here today. You’re an important element of what it is we’re studying.
I wish to pick on two elements. One is banking products, and the other is deep research CMHC has done and has been good at doing.
In October 2023, Bob Dugan appeared before the committee. The comment by Mr. Dugan back in October 2023 was that when you look at places like Toronto and Vancouver, we estimate that 80% of the cost of new units is the land the unit is founded upon. I found that curious until I went back and looked at the pro forma the developer uses. Most of them embed in the land cost the government charges, everything from all the soft costs, being development charges, land transfer tax, parkland dedication, you name it — the land transfer tax, provincial and municipal portions. When you creep up to that 80%, and if you’re talking about a million dollar townhouse or condo, he suggested, back then, that $800,000 was land and embedded costs. Out of that 80%, do you have the calculation of what is truly the land cost, meaning the dirt, versus what the government charges are?
Mr. Laberge: The quick answer to your question is that we don’t have it yet. We are doing analysis of the pro forma of developers across the country. That’s something we hope to progress on in the next couple of months.
I would add a caveat to what you’re referring to. The land value is also a matter of supply. In a very land-constrained market like Vancouver, you would obviously expect the pure percentage of land value and overall costs to be higher because they are essentially entrenched between mountains and the sea, and the land is very scarce. In other municipalities across Canada — I would say the vast majority, not of where the population lives but the vast majority in a number of municipalities — there is not as much of a constraint because there is some urban sprawl, which is another determinate. Land is more available.
That is something we’re currently looking at. I don’t have actual results, to respond to your question, to discriminate between taxes and other charges versus pure land.
Senator Varone: In a dynamic economy that we have throughout Canada, where supply and demand are always interacting, no one in Canada has the ability to roll back Keynesian economics in terms of supply and demand. When you have that issue at play, the dynamic costs — meaning land and construction — float with the marketplace. It’s the government charges that don’t float. They are static. They are one level. They don’t reduce. They are what they are at all times. The question I have, again relating to that 80%, in today’s case — as it was two years ago — what is the percentage of the government charges vis-à-vis your 80% calculation for land?
Mr. Laberge: That varies a lot across municipalities.
Senator Varone: One was Toronto.
Mr. Laberge: Toronto?
Senator Varone: He focused on Toronto and Vancouver when he made that comment, so I would like that answer based on Toronto and Vancouver.
Mr. Laberge: Yes, we’re working on that.
One of the challenges that is occurring when it comes to development charges is the current research that is public, not by CMHC but by external researchers, is focused on a few areas — for example, Ontario — and they are not national in nature, or are irregular in nature. That’s something we’re looking at. What we see is that that is variable across the different markets.
One thing that needs to be said about development charges is that they grow over time. When you look at the purpose, what they are levying now is broader than initially earmarked revenues. They started as an earmarked revenue for a specific project and, over time, they grew for a much broader mission of the municipal missions. One of the challenges with that is you actually focus a cost on a more constrained tax base, which is buyers of new units or new homebuyers, while the missions funded with development charges are much broader and benefit the whole of the tax base. That’s the core of the issue. Adopting practices such as general consumption taxes, property taxes or a pay-per-use type of scheme would actually distribute the costs in a much broader tax base.
Senator McBean: Many Canadians, especially younger people and newcomers, are being priced out of home ownership and struggling to find affordable homes and rentals. I hear you suggesting that what needs to happen is we need to be building 430,000 to 480,000 new homes. Yet I read in the paper in Toronto that it’s not uncommon for new homebuyers to be defaulting on these new homes that are being built. Even the developers are having to sue them, because there are no buyers. I’m concerned there is going to be a volume of homes — it’s great we have them — that are unaffordable. How is the CMHC adjusting its policies to ensure that affordability and not just total housing numbers remains the central focus of the National Housing Strategy?
Mr. Laberge: I can comment on the macroeconomic side, and my colleague Nadine can answer on the policy side.
What you’re describing is exactly bang on. It seems to be counterintuitive that we have an apparent oversupply in Toronto and Vancouver and yet CMHC is still saying we need more supply. What we need to acknowledge is there is a cyclical component. What was happening is builders, developers, were actually building at the pace of fundamentals, which is mainly demographic driven, up to very recently. Those demographic parameters have been changed with changes in policies for immigration. Once a project is started, what is delivered today may have been started five, six, seven or eight years ago in Toronto and Vancouver. That is what is currently creating the bulk of supply we are seeing.
Nevertheless, we still need to, over the longer term — beyond the current cycle — supply the market with what is needed. One of the determinants of the current oversupply is also a mismatch between what is needed versus what is being built, with small one-bedroom or studio units, while we’re welcoming families of multiple children. There is a mismatch. That has to come back to the longer-term trend where we see much more supply needed.
Nadine Leblanc, Interim Chief Financial Officer and Senior Vice-President, Policy (Canada Mortgage and Housing Corporation): On our current programs side, we deliver on the parameters provided by the government in terms of the eligibility criteria. The affordability is embedded in the eligibility of our programs. They have to meet that affordability, and that affordability is preserved. We monitor that affordability level throughout the life of the mortgage that is with CMHC. There is a level of preservation.
In terms of new tools coming for the National Housing Strategy, the responsibility for the policy setting is with the housing and infrastructure department, so I would defer to them in terms of the broader National Housing Strategy and tools.
Senator McBean: If we look at how you’re saying you’re protecting the mortgage, and yet people who were buying properties to build — this is what we’re seeing right now in places like Toronto. They had a plan to buy a place. The property has gone too low, and yet they are not being given a mortgage for the value because the value of the place is more expensive than what they can afford. Is there no way that there is some understanding of that? Is the system so inflexible that it hasn’t been able to catch these people? We have seen this market coming upon them, and yet it’s that moment when their build is complete that there is no mortgage to help them secure their spot. They are losing their down payment and being sued for hundreds of thousands of dollars because now they are defaulting on a contract. Is there nothing in there for these people?
Ms. Leblanc: There are a few tools on the program side. On the programs we manage for rental and developers, we do adjust our funding to the cost of construction, as an example. We always adjust. As it takes time to build, we adjust, even for the tariffs, as an example. We do adjust the funding accordingly.
On the more home ownership programs we have, I think you’re referring to consumer hardship. CMHC has many tools to support the consumer in times of hardship, even in default or before, prevention default. An example of that is deferral of mortgages. We do work with the lenders through our insurance program to ensure we support the homeowner to not default on their mortgage. That’s what CMHC is offering. Lenders also have a guideline to follow from the consumer protection of Canada that requires them to protect the consumer from falling into default and make sure we support them through the hardship. That’s at CMHC.
Senator McBean: Thank you.
Senator Fridhandler: I was interested in you talking about prefab housing. I’m from Calgary. I have noticed lately in the press that there have been a number of significant projects with prefab housing supported by ATCO, amongst others. Does CMHC have any specific programs that you’re incentivizing the prefab sector to see things come on stream? That would include anything from training to support for prefab developers. The same way as you incentivize affordable housing construction, do you have special programs to incentivize prefab developers to bring those projects online?
Ms. Leblanc: I’m familiar with the projects going on in Calgary. I can validate that the construction time is reduced by half, if not more, from using the prefab or modular techniques.
We do have a few programs that support innovative techniques. We have the Innovation Fund that is still open for funding. We have the Rapid Housing Initiative under the Affordable Housing Fund. We also have the Apartment Construction Loan Program that has a specific carve-out of $500 million for developers of prefab and modular or other innovative techniques. We have seen robotics, as an example, that came into CMHC. I know that’s going to be a big focus of Build Canada Homes as being a primary objective of its mandate. I can’t speak to that, as that would be our infrastructure colleagues, but I know there is a big focus right now in the federal government overall to stimulate that type of industry to do a lot more.
Senator Fridhandler: Relative to your efforts as an agency to stimulate development and the building of homes, do you deal solely, principally, with developers and homeowners, or do you enter into broader, blanket arrangements with municipalities to incentivize certain activities on their part?
Ms. Leblanc: Municipalities do have access to some of our deeper affordable programs, like Rapid Housing, as an example. That’s funding for new construction.
We also have the Accelerator Fund. I’m not sure if you’re familiar, but this is a program that incentivizes municipalities to look through their processes and innovate to stimulate affordable housing, different types of innovation in the housing space. We do have agreements with municipalities to change the way we look at housing.
Other than that, that’s pretty much the tools we have at CMHC. I know inside of our lead department they have more around infrastructure as another lever of accelerating housing.
Senator Fridhandler: When you use these levers, are you using them for trade-offs relative to charges imposed by the municipalities, or you don’t look for trade-offs and are just incentivizing a specific activity?
Ms. Leblanc: Through the agreements of the Accelerator Fund, as an example, all different programs have different conditionality. The Accelerator Fund, as an example, has a conditionality of growth, acceleration and change. We monitor these based on the conditions of every agreement on a life cycle of every year. The payments of the agreements are tied to meeting those conditionalities.
Senator Fridhandler: When you say “change,” does change include waiver or reduction of municipal development charges or fees?
Ms. Leblanc: Through the Accelerator Fund, we don’t fund the waivers of DCs, as an example.
Senator Fridhandler: My heartless, general question is, I lived in Alberta in the early 1980s when interest rates were 17% to 20% and foreclosures were rampant. In fact, that was a major thing. Yet, I look today and the market has adjusted or it is cyclical. There is only so much government intervention before you allow basic economics to take their course and clear out people that couldn’t afford what they bought. Again, I’m apologizing for being heartless on this. How much government intervention do we expect we need to keep going to support an artificial platform?
Mr. Laberge: I can comment on the market phenomena and how it works.
Our current analysis is showing what was really alluded to in my opening remarks, keeping in mind the balance between demand side and supply side interventions. Purely demand side interventions, by supporting demand, actually put upward pressure on prices and may over time, if not very targeted or counterbalanced by appropriate supply, actually erode affordability. That’s something we are all aware of in basic economic principles. That responds a bit to the cyclicality that you’re referring to. That’s what we are seeing in Toronto and Vancouver at the moment in the condo segment of the market.
Taking a step pack, looking at the market as a whole, we have to acknowledge that other segments are doing relatively well, such as the purpose-built rental market segment where we are seeing continued increased supply for several years. Vacancy rates are going up and rent growth is moderating over time, so affordability is gradually being restored.
Senator Loffreda: Welcome to our committee.
I would like to speak about the Housing Accelerator Fund that you mentioned a few times. According to the most recent CMHC annual report, December 31, 2024, 215 agreements have been signed under the fund, committing nearly $4.19 billion over four years to support the creation of more than 114,500 additional housing units.
The report also notes CMHC’s continued efforts to work with new and existing partners to unlock greater investment and impact across the housing ecosystem, particularly by incentivizing local governments to remove barriers that slow the pace of development. That’s an important point, obviously.
What specific improvements or innovations have been implemented through the funds so far? How is CMHC assessing the effectiveness or success of these local reforms? Everything is in the follow-up, right? If it’s not followed, we don’t progress. Can you quantify the impact in real terms? Can you point to how much faster, on average, the construction of a home is today in these participating municipalities compared to before these agreements were in place, or is it too early yet to do that?
Ms. Leblanc: Thank you for the question.
There are a few markers that we see already. Today actually, we just issued a podcast about the successful stories we have seen already to date. I say already because it will be the first cycle where we request the municipalities to report on the results. We are just in the cycle right now, and so hopefully we are in a position to publish the measures soon.
An example of the adoption of measures that we’ve seen as successful is fourplex and sixplex as of rights. We’ve seen quite some success in Edmonton, for example, or Alberta, with waivers of parking to densify. That’s one example we’ve seen. In Toronto, we’ve been working quite closely with the city to accelerate the permitting and the zoning because there is still some time between the permitting up to the funding and occupancy. We are seeing some good progress in the acceleration of permitting. We do have some success stories that we’re starting to see already.
In terms of tangible, we will have the results. It is just that the reporting is starting now. We do have, as I mentioned, conditions in the agreements and ways of negotiating, if we’re not seeing the results, to adjust in midstream of this program.
Senator Loffreda: Thank you. I’m looking forward to seeing the podcast you released today. Are you starring in that podcast?
Ms. Leblanc: No, I am not, but we do have some colleagues on it.
Senator Loffreda: Good.
I would like to turn our attention to CMHC’s Rapid Housing Initiative, RHI, August 2025 evaluation. This evaluation aimed to assess whether RHI is on track to meet its intended outcomes which identify the lessons learned to inform the delivery of affordable housing programs and provide evidence-based policy advice to support housing infrastructure and communities in Canada in its efforts to increase the supply of affordable housing, which we all want to do.
The continuing need for a program like RHI is evident, and I would like to acknowledge the achievement of exceeding the original target of 7,500 units, which is encouraging. Kudos for that. That said, the evaluation outlines several ongoing challenges, some which we have already discussed. You did mention that 700,000 skilled workers are set to retire in 2026. That’s a huge number. Can you speak to other specific barriers that the program is currently facing? In particular, the report highlights economic pressures such as skilled labour, which I mentioned, global supply chain disruptions and sharply rising construction costs. How are these factors impacting the implementation and the outcomes? How do you foresee them overcome? If we run out of time, maybe on round two we can continue the discussion.
Ms. Leblanc: I would agree that the Rapid Housing Initiative overall was quite a success in terms of speeds of delivery and the outcomes we are seeing. It is one of our deepest programs in terms of affordability, supporting shelters and transitional housing. It is 100% contribution based, so we can leverage a lot more of the funding to go deeper in terms of supports to a vulnerable population.
We still have an ongoing funding stream that’s open right now. We are supporting a lot of shelters. There are a lot of demands. One of the lessons learned is that it is oversubscribed, and proponents who are coming in — it’s an application base, as you can imagine. The prioritization is very difficult for which ones we fund versus not because they are all good, social-outcome driven projects. We are trying to allocate as much as we can the funds that we have to the most needs out there in Canada.
At the onset of this program, we were in the midst of the pandemic, so we were looking for speed but it was hard to get started. Speed was an eligibility criteria. Over time, I think you will see that we provide a lot more flexibility for that, because speed in the North is certainly not the same as if we are looking for speed elsewhere in Canada, and the factors of the workforce as well as materials for construction. There are lots of lessons learned. We can come back to it, if you like, because I see I am over time.
Senator Galvez: In your introductory remarks, you mentioned a multitude of challenges and an emergency and urgency to deliver good quality homes is in a very short time, but I want to attract your attention to four points that you didn’t mention and I think are important.
The Insurance Bureau of Canada has clearly stated that we cannot afford to keep building for yesterday’s climate and that there is an urgency to build homes that need to be balanced with the long-term considerations of making this housing resilient to the now-changing climate in Canada. You know the risks of natural catastrophes.
First, are you coordinating with NRCan or the people who are in charge of the building codes who will take care of where we can build and where we should not build because of flooding areas or forest fires? Are you coordinating with how to build these new homes energy efficiently? That’s one question.
The other question is about the permitting and municipalities. Where I live in Lévis, they were giving lots of permits, and a lot of condominium buildings started to appear. But then they stopped. The municipality said, “You cannot continue building because we haven’t put in place the infrastructure of water, wastewater and electricity.” Now the municipality is being sued because they cannot continue the building. Are you coordinating with the municipalities to keep up with the other services that they must afford?
My third point is about insurance. There are places where insurance now is becoming unaffordable. The premiums are high. Are you coordinating or communicating with them?
Ms. Leblanc: It is the concern of the hour when we are thinking about the climate and the changes we are seeing there. Collectively, as a country, we need to look into doing a lot more in this space.
In terms of CMHC-specific, there are a few tools we have. One is more in the area of retrofitting and updating our housing to adapt and be more resilient to climate change. We have one that is about to close that was more to the consumer, the homeowner, and we have one now that is geared more to the rental space.
In terms of building in areas that are at risk, CMHC is working with Public Safety, as an example, the Department of Finance and others to look at the flood risk in Canada. You have seen all of that as part of Budget 2023 and again in Budget 2024 around the flood reinsurance program. That’s something that CMHC is looking to develop with others. I’m saying “flood,” but a similar study and development of programs is needed for catastrophic risks: earthquakes, fires and even wind storms. We are working on that specifically.
I don’t know if you want to add anything else on the building codes, because that’s another area of work.
Mr. Laberge: In my team at CMHC, I have a team of engineers, urban planners and architects who work closely with the National Research Council of Canada and other federal partners, as well as provinces and territories, on the National Building Code. Part of that work is obviously to assure affordability in the face of the current crisis, but also sustainability when faced with climate change. There are continuous discussions about that. We have a new round of discussion on that upcoming. That’s an area of close collaboration on this specific topic you mentioned.
The other point I wish to raise, when it comes to the permitting issue you raised, for me, it goes back to the earlier discussion around financing. Our estimate is that to close a supply gap, the financing needed is more than $1 trillion, and that’s not including the enabling infrastructure. We’ve been saying for a while now that no government, let alone coordinated governments across Canada, can meet the commitment. We need the crowd and private-sector financing to ensure we have the proper houses but also the enabling infrastructure that goes with them.
Senator Yussuff: Let’s start with the GST/HST rebate the Prime Minister talked about during the election. This is supposed to be for new purchases. When he came to the Senate, the Finance Minister said — I am not sure this is a finished conversation — that it is based on when the person actually purchased the property versus delivery. As you know, purchasing and delivery are two separate things. You may purchase something today. The builder may trade this out. I don’t remember the Prime Minister making a public statement about purchasing and delivery was two different dates, and you are going to get the rebates or you are not going to get the rebates. What is the interpretation of the department in how they are going to deal with this issue? It affects many people who thought they were being given an opportunity to do something? In Toronto, there is a huge crisis. We have inventory, but the market is not moving, and yet we have this arbitrary decision made by somebody that it is on the purchase date, not on the delivery date.
Ms. Leblanc: If you are referring to the GST measures, I would refer you to the Department of Finance officials. They are appearing after us. The question would be better placed for them.
Senator Yussuff: We will bring it back up.
Now, in the rental housing market, which is the area we’re trying to deal with because of the affordability crisis, given the tools you have, you had to try to move the sector faster to provide more affordable rental housing. Given the time frame that most of these measures have been implemented, do you have any metrics to tell us how this is happening, and where is it happening better versus other jurisdictions across the country?
Mr. Laberge: What we see across the country, especially in large urban centres, is that there is an uptick in purpose-built rental housing. There is a shift when you look at the composition of multi-unit housing starts in Canada. It used to be predominantly condominium housing starts. That has shifted for three or four years now toward purpose-built rental. That’s what we’re seeing in terms of the moderating outcome, improving outcomes on the purpose-built rental market with vacancy rates increasing and rent growth moderating as a result of what you are describing.
We do publish a wealth of statistics on that for different markets. A shameless plug: We have a rental market report coming this fall with the freshest results. The results we have right now have been out for almost a year. I would see our upcoming report being very informative about that matter.
Senator Yussuff: My colleagues asked you about this, but I will pursue it again because I want to see if we are making any measurable and significant shift in the thinking around municipalities. As we know, many of the fees in the municipalities charge vary across jurisdictions. One of the bigger challenges builders have said consistently is that this is a real impediment to them keeping their efforts up in the market. Is there any measurement to date suggesting municipalities are taking a different approach to how they are charging these fees or not using it as a way to raise funds to do things they need to do but are finding other ways to get around it? If we don’t tackle that measurably, we will be in the same place no matter what the federal government does in terms of its program. Do you have any metrics that can give us some indication? Are we making progress? Are we still trying to figure out how to get the municipalities in the same place?
Ms. Leblanc: We spoke about the Accelerator Fund earlier. Metrics are coming. It is really on the growth measurement. Are we growing faster, accelerating the growth? These will be measures that will go public as part of the results of this Accelerator Fund.
In other programs where we work with municipalities, in the Affordable Housing Fund, we see up to five partners on major projects all the time. That’s how many partners you need to build deep and affordable. What we often see from municipalities is waivers of development charges. We also often see donation of lands. We see more and more of that. We see municipalities having programs that mirror the capital programs we have, so we are able to stack in terms of making housing more affordable. Those are things we see tangibly on the ground from delivering on our Affordable Housing Fund.
Now directly, with the agreements with the municipalities on the Accelerator Fund, as I mentioned, metrics will come out after this first cycle of reporting.
Senator Yussuff: I heard you say there are waivers, but there hasn’t been a wholesale shift in thinking that, rather than waivers, get rid of some of these fees? They have been the biggest impediment in builders getting into the market and building as fast as we want them to build. They are using waivers rather than simply rethinking their approach as to how we got into this challenge in the first place?
Mr. Laberge: What we have right now in terms of hard facts is market intelligence. It’s to the effect, as Nadine was relaying, that there are waivers and in some cases the decrease of this across the country but not an overall shift in the paradigm. That brings a broader question the municipalities are not able to solve by themselves. If you look at the past, the mix of revenues by municipalities was composed of a much more diverse source of revenues including property charges but also federal and provincial funding. We’re working on bringing more transparency to that field.
[Translation]
Senator Forest: We know that a balanced market has a vacancy rate of 3%. The rate in Canadian communities is often below 1%. The town of Rimouski, where I come from, has a vacancy rate of 0.008%. It was catastrophic at some point. The situation had resolved by the time I began my term here, but unfortunately, the problem is back.
Some of the pressure comes from regulations, particularly municipal, environmental, the National Building Code, and occupational health and safety regulations. A lot has to be done, but this is not necessarily within your purview.
The Federation of Canadian Municipalities estimates that each new start requires new infrastructure if construction does not take place on available land, and that the cost of new housing is $100,000. We recognize that a municipality that intends to develop some 100 new sites will incur a considerable increase in its debt burden. Of course, in future, the municipality will collect tax revenue, but this revenue will also be allocated to supporting other services.
Has any consideration been given to drawing up an inventory — or asking municipalities to do so — of available land and the types of housing that could be developed on that land, taking into account existing urban development plans?
Mr. Laberge: When it comes to a specific inventory, that is not something that we do within my team. As you well know, things are decentralized. However, what we have done, and this addresses part of your question, is a study on local regulations in cities across Canada. That was in 2022. We have started work on a new cycle and it will be delivered in the next few months. However, we have clearly seen that increased regulations have a negative impact on affordability for the rental market and home ownership.
I can give an example of the leaders in this category. We look at municipalities like Edmonton, which makes a conscious effort each year to ensure that the regulatory burden does not escalate. The city has the highest number of housing starts per capita in Canada. We looked at Edmonton to build our estimates on Canadian construction potential, based on the resources at our disposal.
There are other examples, such as the city of Kelowna in British Columbia, which has adopted building information modelling systems to reduce red tape considerably by ensuring that an application within one city can be integrated across the different departments within the city. This is not the case everywhere. This can be replicated in other cities to foster inter‑municipal alignment.
Senator Forest: The city of Rimouski is now issuing building permits within nine days.
Given the significant cost of infrastructure, does your program provide investment support for new infrastructure for roads, aqueducts, sewers or major infrastructures? New builds will require new waste water treatment plants. Does the program provide any support for municipalities?
Ms. Leblanc: The CMHC does not have an infrastructure program. We had one after the 2008 crisis, but for now, we do not have a program that provides direct support for infrastructure expansion. However, our infrastructure department looks into that on an ongoing basis, but I cannot speak to their program.
Senator Forest: Is there any way of coordinating with the Housing, Infrastructure and Communities Canada program?
Ms. Leblanc: As a matter of fact, that is why the CMHC is now under the responsibility of this department. It is expected that going forward, future tools will include better integration. It is still early days. That is also the case with Build Canada Homes.
With regard to your question about land, the goal is for Build Canada Homes to look at the federal level and all levels of government.
Senator Forest: We need to start by properly coordinating all programs in our backyards before demanding it of others.
At the moment, housing starts often include condos and two‑bedroom apartments, whereas demand lies in three- and four‑bedroom apartments. We would like to bring families to our downtown cores and stop people from having two or three cars parked around the same building. Couldn’t the aid be adjusted according to the type of housing being built? All too often we see three-bedroom rental apartments occupied by a young professional living on their own. That does not address community needs. Is there a way to have more significant assistance when building homes tailored to customer needs?
Ms. Leblanc: You have raised an important point on adapting to customer needs. The parameters are set out in government programs. Future policies will fall under the department of infrastructure. Our more commercial programs, such as the mortgage loan insurance program, are currently under review to align incentives to customer needs.
Senator Henkel: I have been wondering about something in the last few moments. Indeed, this study is intended to support the basic need for housing, both in affordable housing and cooperatives, which I would like to discuss, and ultimately provide housing for all Canadians one way or another. Do you have any collaboration with leading universities to identify cutting-edge tools so we stop working the way we did 60 years ago, as you so eloquently put it earlier? We should allow innovative start-ups to build faster and better on flood-free areas. Is that something that you are already doing?
Mr. Laberge: Well, the answer is yes, absolutely. Indeed, we are trying to fast-track our collaboration with academia. We have established a number of service and acquisition tools over the past few months to increase our use of researchers, scholars in academic institutions and esteemed research centres. We have tripled the number of qualified suppliers from academia for some of these tools. We intend to do more of this.
It should be noted that section 9 of the CMHC’s incorporating statute provides the corporation with a research budget. In our strategic plan, we hope to increasingly put more of this budget to drive academic research, because research on the housing market and best construction methods is quite sparse in Canada. To answer your question, absolutely.
Senator Henkel: Are you doing that across Canada or with specific universities?
Mr. Laberge: Across Canada. We issue invitations. We are very agnostic. We welcome contributions from everyone. These vehicles serve not only as procurement tools but also as platforms for generating ideas and for dialogue between my team and academic teams.
Senator Henkel: Thank you.
The environmental cost of demolition is often glossed over. Does the CMHC currently incorporate carbon assessment in building life cycle to encourage renovation rather than construction?
Mr. Laberge: I will let my colleague talk about carbon cycle inclusion in programming.
We have had a number of demo projects looking at the reuse of construction materials. I should note that the concrete currently used in construction has a very high environmental footprint.
Maximizing the reuse of the building envelopes, structures and materials contributes significantly to a positive environmental impact. It is one of the things we have studied, and we have reports that are publicly available. I can forward them to you.
Senator Henkel: Do you encourage municipalities and builders to renovate instead of demolishing systematically?
Ms. Leblanc: In terms of studies, this is something that we are still exploring. Funding for CMHC programs is running out, but we have a great renovation program.
I agree with you that we need to preserve existing housing stock that was built in the 1970s, but is now approaching the end of its life cycle.
We have seen a strong demand for this program, underscoring the need to keep looking into housing renovation and repairs, especially social and community housing, where substantial investment has already been made.
[English]
Senator Varone: Would you agree with me that major urban centres across Canada are facing a private market housing crisis?
Mr. Laberge: We’re facing a housing crisis across the board — private, affordable and social.
Senator Varone: Here is the real question. In July 2025, CMHC through its mortgage insurance circular, increased your fees substantially. How do you justify that?
The Chair: The answer will be written because we are running out of time.
[Translation]
Senator Galvez: As you said, you have been in this sector for 90 years. Isn’t it time you had a new mission and new tools?
[English]
Senator Loffreda: Back to the Rapid Housing Initiative, maybe you could elaborate on some of the barriers and hurdles we are faced with. But the 12-month completion timeline did limit the number and types of projects that could be considered for funding.
I would like to focus on some of the feedback communication between the CMHC and the project proponents, particularly regarding reporting requirements. This project was a success, but the report notes there was regular communication, approximately every three months during the construction phase, but it was suggested that CMHC should engage more frequently with proponents during the reporting stage to help identify issues earlier. I was surprised at this. We’re not suggesting skipping due diligence. That’s not the suggestion here. Could you speak to this finding in more detail, or in writing? How could you balance the need for oversight and accountability with the need to minimize administrative delays that could slow down the construction and delivery, as I mentioned?
[Translation]
Senator Henkel: Statistics Canada projects that an estimated 2.2 million mortgages, or 45% of mortgage stock, will face interest rate shock in the coming years.
Does the CMHC have any plans, such as subsidized loans or guarantees, to mitigate systemic risk for at-risk households?
Senator Forest: I think the CMHC was an invaluable and very steadfast partner in affordable and social housing in the 1970s. You have not participated in the program for a considerable time.
Earlier on, I think you noted that the CMHC should consider renovation programs for that stock that, incidentally, was more responsive to family needs. There were significantly fewer dwellings that did not meet our needs.
The Chair: The CMHC published its report in June. The Parliamentary Budget Officer, or PBO, released a study on housing stock in the summer.
However, the PBO study referred to 290,000 housing starts over the next 10 years to balance demand and supply. You have alluded to 430,000 or 460,000. As I understand it, the goal is to bring affordability to a reasonable level.
This would bring the vacancy rate to 13%, which is unheard of. It would also lower prices.
Can you respond in writing to reconcile both reports? Housing is the most important household asset. This would cause shock and could have an impact on consumption.
Ms. Leblanc: Thank you for the invitation. We would be happy to answer your questions in writing.
The Chair: Thank you very much. We will take your remarks, including your written ones, into consideration.
We will continue with our second panel.
I would like to welcome witnesses from the Department of Finance. We are joined by Ms. Brigitte Desroches, Director General, Economic and Fiscal Policy Branch; Mr. Matthew Boldt, Acting Senior Director, Housing Finance, Financial Sector Policy Branch; Mr. Mark Walsh, Senior Director, Savings and Investments Section, Tax Policy Branch; and Ms. Amanda Riddell, Director, Real Property and Financial Institutions, Tax Policy Branch.
Do you have some opening remarks? If not, we will go to the question period directly.
[English]
Senator Varone: Welcome.
I asked this question of the PBO and they pointed me to Finance to ask it again, so I will. The question relates to Bill C-4, Part 2, the HST rebate for first-time buyers, and the estimated cost being $400 million in the first year. Industry throughout Canada has gotten together and examined what the cost would be with respect to extending it to all buyers in the private market sector. The numbers are between $1.6 billion to $2 billion annually. My question is, given the fact that the industry is in crisis, layoffs have started and cranes have come down, has Finance examined the potential of this market going into Armageddon? What would the cost be when all the workers from the job site are now on your payroll through unemployment insurance and taxation revenue stops because there are no more builds in the industry? Have you looked at that delta, or can you look at it?
Amanda Riddell, Director, Real Property and Financial Institutions, Tax Policy Branch, Department of Finance Canada: My section is responsible for the first-time home buyers measure. I will speak to the tax aspects of the question, but you have an economic aspect to that question as well. I will have to defer to Brigitte for that portion of the answer.
With respect to Bill C-4, Part 2, the intent of the First-Time Home Buyers GST Rebate is to help target relief towards people who are trying to enter the housing market rather than people that had potentially been in the home market for quite some time and have benefitted from the rise in the housing prices over time. For the amount that you’re quoting in terms of the additional cost, I’m assuming that’s the incremental cost, not the total cost. That’s in the right range if you were to expand it to all homes. But again, whether you go for a narrower First-Time Home Buyers GST Rebate or the broader rebate, there are different policy considerations with each of those. The government, in this instance, decided to go towards the narrow rebate targeted toward people who are trying to enter the housing market.
Senator Varone: Let me reframe the question by way of starts. The industry has estimated that your First-Time Home Buyers GST Rebate will create about 15,000 new starts, whereas if you extend it to the whole of the private sector market group, you can add a zero to those starts. It’s about 100,000 or 115,000 new starts across the board. Isn’t that enough to suggest that when you’re facing Armageddon again in this industry, that’s enough of an incentive to deal with the HST once and for all?
Ms. Riddell: Again, there is a bit of a difference in terms of what we think this will apply to. We think this measure will apply to 47,000 units annually at maturity. That’s quite different than some of the other numbers that are being put out, for example, by the PBO or industry. We’re at 47,000 annually, at maturity. We think it will apply to a material number of homes, enough to cause first-time home buyers to perhaps choose a newly built home rather than a used home which isn’t subject to GST. Hopefully, that extra demand will stimulate a supply response from the construction industry. This measure hasn’t been introduced yet. It will take some time for these effects to filter through into the market to see what kind of impact they will have.
In terms of where the market is, the state of the market at the moment and where things are headed, I’m going to pass to my colleague. Thank you.
Brigitte Desroches, Director General, Economic and Fiscal Policy Branch, Department of Finance Canada: We’re mindful of the risks that come from the labour market, as you mentioned, especially when it touches on spillovers. This is something that the Department of Finance monitors. We monitor the risks. But in aggregate for the overall economy, the risks are relatively moderate for the government economic outlook in fiscal. But this is definitely something that we monitor very closely.
Senator Yussuff: I have a different version of this question. Obviously, the intent is to get people into the market, to give them the option to do it. The rebate is significant on a million‑dollar property.
Unless I’m completely wrong, as I understand it, the department is used to give the minister some guidance on the purchase of the property, not the delivery. Of course, purchase and delivery things you don’t control in the context of the sector. You are supposed to get it in 2023, but there are delays so you get in 2025. Why are you penalizing the person who is well intentioned as a first-time home buyer just because you use a definition that — the Prime Minister didn’t say that? I listened to him publicly. This is not what he said. He said first-time home buyers. You now have an interpretation that is not consistent. What are people supposed to think? Who makes this decision? How do you get to this arbitrary decision? That doesn’t make any sense. I’m still a first-time home buyer. I’m looking for relief to get into the market, and the department is putting up barriers to prevent people from doing so.
Ms. Riddell: This question gets asked quite often. I will take a bit of time to go through exactly what our thinking was in this respect.
When there is a tax change of any kind, there is always going to be a line drawn. There are going to be people who fall on either side of the line who are maybe not happy with being on the wrong side of that line. When we’re making a decision as to where to draw that line, there are some things that we looked at. In the case of the First-Time Home Buyers GST Rebate, this measure has a dual purpose. The first purpose is to incentivize first-time home buyers to consider a new build rather than, for example, an existing home. In turn, that additional demand for new homes is intended to help spur construction of new homes. With people who have already entered into contracts, that’s not going to have that impact. From a policy perspective, if you’re going to spend taxpayer dollars, you want to make sure it has an impact in encouraging the kind of behaviour you’re looking to encourage.
Second, this is also the fairest approach. By drawing the line at May 27, the announcement date, you’re treating all buyers who entered into an agreement prior to that date the same way. If you were to pick a closing date, what would happen is some people who entered into agreements prior to May 27 would get that rebate and some would not, by no fault of their own but based on some arbitrary closing date. As you were saying, it can change, and the buyer doesn’t have a lot of control. The fairest approach is to ensure that the rebate applies where people knew about the rebate and entered into an agreement with that rebate in mind.
Lastly, this is consistent with past practice. This is typically what we do with GST changes. When you make a change, you make it so that the new measure applies to people when they are entering into a new contract and onward, prospective.
I hope that helps.
Senator Yussuff: The issue is not going away. We’ll hear about it politically.
Let me ask a question about the foreign home buyers restriction that is on there. Obviously, we’re dealing with a collapse of the housing industry. In the condo market in Toronto, we have a lot of stock and nobody is buying anything. Does it seem to make sense to maintain it given that an impending crisis seems to be emerging where we’re sitting on a whole bunch of inventory and nobody is entering the market? Reducing that restriction would allow the market to at least move those stocks off and try to get the industry moving and starting to build things. Does the department give serious consideration to understanding that this will have an impact? If we don’t get those units sold, there is going to be a bigger problem for us to deal with because those contractors who built the units would say, “Why would I continue in the market when I have inventory sitting here?”
Ms. Riddell: That is a really good question. Unfortunately, I can’t give provide a response because I am not the lead on that measure. If you would like to have it answered by someone in our department, we could do a follow-up.
Matthew Boldt, Acting Senior Director, Housing Finance, Financial Sector Policy Branch, Department of Finance Canada: Actually, it is the Minister of Housing and Infrastructure who is the responsible minister for the prohibition on foreign ownership. That department would need to answer that question. They have the responsibility for that provision.
Ms. Riddell: Thank you.
Senator Loffreda: Welcome to our Banking Committee.
We are all familiar with traditional benchmarks like the so‑called golden rule that the middle-class family should not buy a home that costs more than three times their annual income, and also the 30% rule that suggests no more than 30% of income should go to housing costs, including rent or mortgage payments. But for many Canadians today, those guidelines feel increasingly out of reach. In fact, it seems those days may be long behind us.
Does the government still use benchmarks like these to assess housing affordability in Canada? Or have those benchmarks evolved in light of current market realities? Given that Canada continues to have one of the highest levels of household debt related to income among developed countries, how is that factored into the government’s understanding of what Canadians can truly afford?
If you have any insights that can help us understand the current trends on the market realities of the housing market, that would help, too. One of the witnesses before the committee last week indicated that the CMHC is projecting housing starts to decline by approximately 4%, they stated, annually over the next couple of years. We heard that both housing sales and preconstruction sales are in steep decline, especially in the Greater Toronto Area. It was reported that they are down by as much as 90%. One of our witnesses shared that. Maybe you can elaborate on those issues. Thank you.
Ms. Desroches: I will start. There is a lot to unpack in that question. Thank you very much.
Senator Loffreda: If you have to consult each other, that’s a good sign that it’s a good question.
Ms. Desroches: For sure. I will start on the economic side, and Matt can add some mortgage underwriting specifics.
On the first question, affordability, you are right that a lot of different factors go into measuring that. There is a broad range of indicators that we look at. Home prices is one of the key factors that will determine how affordable a house is. There is also income, as you mentioned, that we have to compare it to. Also, there is another important factor, which is interest rates.
When you look at broad measures of affordability, you can see that, over the last couple of years, for instance, home prices have declined. They remain very elevated relative to pre-pandemic prices, but they have declined, and income has been increasing. If you compare some wage measures, for instance, to growth of home prices, we see that income of Canadians is growing faster than some measures of home prices and inflation in general. This is important because it is the general price level in Canada that also matters for how Canadians can afford their everyday spending. Interest rates have been declining. That has also been helping to improve. In some markets, some regions in Canada, we do see improvement in affordability measures, even though in places, obviously, like Toronto and Vancouver and some as well in Quebec, we don’t see that. So, yes, we do look at a very broad range of measures.
Do you want to say a few things?
Mr. Boldt: Mortgage underwriting standards are also important for helping households with managing debt serviceability on their mortgage. The Office of the Superintendent of Financial Institutions supervises mortgage lending by all federally regulated institutions. They establish ratios that lenders need to look at to assess the debt serviceability of a mortgage. That also includes the minimum qualifying rate, which is a provision that causes borrowers to have to consider that rates could increase and ask themselves, “Will I be able to service this mortgage if rates increase by a certain amount? ”We also include those same considerations for insured mortgage lending as well, and the Minister of Finance is responsible for some of those rules, and the minimum qualifying rate or the stress test is one of the tests to make sure that borrowers will be able to manage their mortgages.
Senator Fridhandler: One of the concerns that I have heard on the costs or affordability is the charges or levies coming from municipalities on land development or housing development. At the same time, municipalities say, “We can’t give up these revenue streams.” What policy thoughts do you have that might support municipalities if they give up revenue streams, i.e. the municipal finance bonds where the interest is free or other sources where they could generate more revenue that you might suggest to us?
Ms. Desroches: The officials responsible for development charges are not here today. We could convey your question, but this is not something that we could answer today.
Senator Fridhandler: Thank you. I would appreciate it.
The second thing is this: While I hesitate to look to our neighbours to the south for examples, we could talk about housing examples anyway. In the U.S., to certain levels, mortgage interest payments are deductible, but they are not in Canada. Again, that goes to affordability. What do we get here that’s equivalent to mortgage deductibility, and what might we do in this space?
Ms. Riddell: This is getting a little bit out of my area, so I won’t say much, but we do have a principal residence exemption that allows people to not pay any tax on the growth of their home.
Senator Fridhandler: But not on the affordability through acquisition.
Ms. Riddell: That’s right.
Senator Fridhandler: Is there anything else? I’m not hearing any creative ideas. I’m just hearing existing ideas. I guess that’s for you to talk to the policy-makers before you float them out here, but that’s what we’re looking for.
Mark Walsh, Senior Director, Savings and Investments Section, Tax Policy Branch, Department of Finance Canada: I’m from the personal income tax division at the Department of Finance. I would add that we also have various measures under the Income Tax Act that help Canadians gets into their first home. We have the home buyers plan, which allows you to take out up to $60,000 from your RRSP to put toward the purchase of a home. We also have the first home savings account, which was recently introduced, that allows a first-time home buyer to draw up to $40,000 lifetime, $8,000 per year. Again, these policies are intended to enable Canadians to move into their first home.
Senator Fridhandler: As a follow-up, we hear over and over again today, and historically, that things are focused on first‑home buyers. Lots of people move into a first home and eventually through their life acquire a second home. What’s the policy reason behind simply first homes? Ms. Riddell, you kind of addressed that in your first question, but it seems to be awfully limiting when we’re trying to create a dynamic market.
Ms. Riddell: We have heard this concern a lot. Professor Mike Moffat has been a witness at some committees, and he supports the idea of broadening the rebate to create more — not liquidity, but the idea of more movement in the home market and more demand. However, it is a policy decision for the government as to whether they want to introduce a larger, more expansive rebate. The policy considerations around a first-time homebuyer rebate versus a broader rebate are very different.
In this case, the government decided to go with a first-time homebuyer rebate, which is intended to target the relief toward people who are trying to enter the market rather than taking finite resources and allowing people to benefit from it who may have perhaps done quite well for themselves in the housing market already.
The Chair: May I interject with a follow-up? Following the comparison with the U.S., I know you release this report on an annual basis, the report on federal taxes, credits and insurers. I am sure you have all the information that if we want to attack the affordability, one possibility is mortgage interest payments would be deductible but for a threshold of $100,000 revenue, or less. Is that something you would be comfortable sharing with the committee? What the price tag be on an annual basis would be if mortgage interest payments were deductible for a family revenue of $100,000? When you talk about first-time buyers, some people are richer than others. Is it possible to have this information, or a simulation?
Ms. Riddell: That particular measure would be outside of my purview. I am in the sales tax division. I don’t want to push this off to the PBO, but I recall them being before the committee and offering to provide advice on that sort of thing should senators wish to put that question to them.
[Translation]
Senator Henkel: Welcome. Representatives of the CMHC, who have just left, confirmed that it is very difficult for small- and medium-sized businesses to secure funding. This is one of the major problems that hinder growth in the construction sector and the increase in affordable dwellings and homes. Could the department work with the CMHC to launch, for instance, a pilot microfinance program exclusively for small and medium enterprises involved in green or modular building, in order to support innovation and sustainability and reduce the sector’s carbon footprint?
Mr. Boldt: I would like to say that a new program or new policy to support the sector would fall under the Department of Housing. They would take the lead to develop this type of program. Although we have more specialized expertise in this area, the Department of Housing takes the lead to develop new policies and programs.
Senator Henkel: Thank you. Would you be able to recommend such a new program to the Department of Housing to foster collaboration? We are currently looking for solutions to fast track housing construction, for all the reasons we are familiar with. Further to my previous question, can you explore the possibility of making a strong recommendation for this type of pilot program, particularly for those interested in pursuing innovative, green and sustainable initiatives?
Ms. Desroches: We can discuss it with them, but as Mr. Boldt said, it’s their expertise —
Senator Henkel: Absolutely, but at least we will know that when we are done here, someone may suggest it.
The Parliamentary Budget Officer’s analyses show that in 2021, nearly 631,000 households could not be formed due to the lack of attainable housing. That number is projected to climb to 714,000 by 2035, a date that is fast approaching. It will inevitably have a ripple effect, such as purchases that never happen, homes that remain vacant, children not conceived, and a cascade of economic consequences, such as purchasing a washer and dryer.
What tangible economic and social impacts do you anticipate from this suppressed household formation? Additionally, since your role also consists in providing expert advice to the government, have you shared this kind of information and recommendations with the government, to support it in making decisions that address our current reality?
Ms. Desroches: You are alluding to a period that saw strong population growth. There were many newcomers and significant population growth, and this came with a lot of limitations and housing shortages. Yes, it has an economic impact. It is true that the households that could not be formed could not purchase a refrigerator, for example, but we have not seen a very significant increase in savings. It may well be that some households spent money on other areas and are planning to purchase a home later. There is some element of the right time there, where these households may be formed now that population growth has slowed down and housing supply is on the rise. There may be some catching up with some of the programs for first-time buyers we talked about. That’s one of the areas we are looking into. For instance, is there some pent-up demand that will result in an increased, steady demand for housing?
Senator Galvez: Thank you for your presence here today and for answering our questions.
[English]
We were talking earlier with CMHC. I was worried about the situation that we cannot build houses as we used to do, because there are tornadoes here in Ottawa that take the roofs off houses. There is flooding in areas. There are forest fires. We need to build better, more responsibly and more sustainably, including energy efficiency in new buildings. Central to that is finances. I understand you have some tax tools you have applied. That’s good. But insurance and banks, through their mortgages, are essential to this.
You mentioned OSFI. Yes, OFSI is responsible for regulating the insurance and the banks. OSFI is not doing much with respect to the climate. They are just in the process of evaluating. Everybody else is saying it is important. We can see it everywhere around the world. What is your coordination with OSFI in order to build better the new 400,000 houses per year for the next 10 years that we need to build?
Mr. Boldt: I can speak about how the Department of Finance coordinates with OSFI. We work closely with OSFI, the Bank of Canada and other financial sector agencies like the Financial Consumer Agency of Canada and the Canada Deposit Insurance Corporation. We work closely with them.
Senator Galvez: Are these risks considered right now?
Mr. Boldt: It would be best for OSFI to speak to this directly. There are a lot of discussions about sustainable finance. I know, senator, you have been an important leader in work in that area. I know those are issues that are discussed and that OSFI has integrated some climate considerations into its supervision work, but it would be best for OSFI to speak to that directly. Thank you.
Senator Galvez: Again, like my colleague, Senator Henkel, I would like you to pass on the message. Thank you.
Mr. Boldt: Okay.
Senator Galvez: I believe there are other ways of helping. I wonder if you have looked around. This crisis was in Europe first. I have seen it in Ireland. They did so many things, including allowing people to construct modular homes in their backyards, multiple houses, becoming energy independent with solar panels. We are not seeing any of that here. What is in your toolbox to attain the goals that you have expressed?
Mr. Boldt: One thing I would point to — and I know more details are still forthcoming — but the new Build Canada Homes agency and supporting the modular housing industry, I think that’s been discussed as a really important element of what that agency is going to do.
[Translation]
Senator Galvez: Thank you.
Senator Forest: Thank you for being here and for clarifying some of our concerns.
You said earlier that some of the many factors you take into consideration include the increase and appreciation in rental costs and average household income. Am I right that rent increases have significantly outpaced average household incomes?
Ms. Desroches: Absolutely. Housing prices and rent have been higher than average income. The example I gave earlier had to do with inflation in general. For example, one measure was to look at the average cost of living, and income and wages have risen faster than inflation.
Senator Forest: What would be the percentage increase in rent prices or average mortgage compared to household income?
Ms. Desroches: Obviously, that depends on the time frame that we are looking at. During the pandemic, there was strong population growth, and the cost of rent and homes grew faster than wages. While housing prices have fallen by around 18% since the peak of 2022, they are still at 40% above pre-pandemic levels. That clearly shows that prices have increased a lot more.
Conversely, more recently, over the past year, lower interest rates have enhanced affordability across a number of markets.
Senator Forest: So, on average, the increase is 40% in the average cost —
Ms. Desroches: For housing prices.
Senator Forest: — of homes, and the increase in average family income was 10%?
Ms. Desroches: The historical average for wage increases is approximately 3% a year. We would have to see about a calculation over five years.
Senator Forest: If we compare the increase in average house prices to average family income, are we talking about 10%, 15% or 30%?
Ms. Desroches: Could you repeat that, please?
Senator Forest: If we compare the 40% increase in average housing prices to average family income, what number should we use for comparison?
Ms. Desroches: The cost of housing has grown by approximately 40% since before the pandemic, and if we calculate the increase in wages, which is around 3% over this five- or six-year period, we would probably be looking at a ratio of two to one. I would need to verify the exact figure, but it aligns with historical averages.
Senator Forest: Okay.
Earlier, it was pointed out that to build homes, we need land, roads, aqueducts and waste-water systems. The Federation of Canadian Municipalities estimates that the cost of new housing is approximately $100,000 per unit to support infrastructure, and this drives up municipal debt. Municipalities are a level of government that cannot run deficits. Perhaps some other levels will draw inspiration from this since they do deliver services. Do you have any programs that help municipalities take on this responsibility to provide basic infrastructure services to free up land to build housing?
Ms. Desroches: I am not aware of any. Department officials that deal with municipal development levies are not here today. We could put our response to this question and the earlier one on this subject in writing.
Senator Forest: I was told that some initiatives have been rolled out and I was eager to hear about them. Could you send us that information in writing as well?
Ms. Desroches: Yes. We will find the right person to address these questions.
Senator Forest: It would be better to have that in writing.
The Chair: Last Monday, the Department of Finance released a document that distinguishes operational spending from capital investment. The document states that all measures to grow housing stock would now be categorized as capital investment and not operational spending.
Am I to understand that the $13 billion announced on September 14 for Build Canada Homes will be categorized as capital investment and not as operational spending? The Prime Minister talks about austerity and investment. Which category will any housing-related spending fall under?
Ms. Desroches: Obviously, a large proportion of these housing projects will fall under the investment category because the goal is to increase capacity across the country.
[English]
Senator Varone: If one accepts the premise that development charges, land transfer taxes and parkland dedication fees are all just one form of taxation or another, HST is applied to all of it. One of the most disturbing notions for Canadians is being taxed on a tax. The Large Urban Centre Alliance has written a brief asking Finance to consider allowing the lower-level taxes to be taxed directly to the purchasers to avoid HST being applied to that level of tax. Any consideration?
Ms. Riddell: In terms of how the GST applies currently, it is a core feature of the GST that it always applies at the final price. The reason for that is it applies to so many things. If vendors were required to back out certain costs, it would make administering the GST very complicated. The compliance burden for vendors would be quite high and costly. Similarly, consumers want to know what tax they are paying and want to be able to calculate it easily. That’s why the GST always applies on the final price. The final price includes everything from the profit margin, construction inputs, labour, et cetera, and development charges if those are also included in the final price. In terms of the structure of the GST, that’s the way it is. But you are suggesting that it be charged outside so that the HST/GST not apply.
Senator Varone: Your relief of burden is a burden to Canadians. Tell me how you weigh that.
Ms. Riddell: The GST often applies to taxes that are embedded in the price of a good. For example, most financial services are exempt services. That means there is generally not GST charged when the supply is made, when the financial service is provided. The banks are not allowed to claim input tax credits to recover the GST they pay on their inputs. There is tax built into the cost of financial services.
Senator Varone: There is no taxation on a resale.
Senator Loffreda: In your most recent departmental plan, Finance Canada does note its ongoing work with other government departments and central agencies to implement Canada’s housing response, including providing advice on potential measures to improve the availability and quality of affordable and social housing.
Given the number of partners and stakeholders involved in this effort, can you clarify what specific role Finance Canada plays in the broader housing ecosystem? Can you speak to what role, if any, the department anticipates playing in relation to the newly announced Build Canada Homes initiative and shared successes or best practices that you are accentuating moving forward that could improve the affordability crisis we are facing?
Mr. Boldt: Thanks for the question.
You are seeing parts of the department’s work on housing here. Our colleagues from tax policy provide advice on the tax measures. Brigitte is from our economic shop, and her shop considers the macroeconomic impacts of what is going on in the housing market. I am from the financial sector policy branch. We look at the mortgage market and the Minister of Finance’s role in the insured mortgage market. The other role that we play, our traditional central agency role, is playing what we call the challenge function on the Department of Housing and Infrastructure that leads the development of these measures.
We are preparing for the budget 2025 right now. The Department of Housing brings proposals of new ideas that they want to bring forward for funding, and the Department of Finance provides advice on those ideas. Similarly with Build Canada Homes, that’s led by the Department of Housing and Infrastructure, and that minister is the responsible minister, but the Department of Finance plays that sort of central agency advice function as those proposals come through the system.
Senator Loffreda: Are there shared successes or best practices? Are you accentuating any of those?
Mr. Boldt: I think that would definitely be part of it. As the department brings proposals through, they are typically pointing to experiences in other jurisdictions. We’re going through that information with the department and trying to bring some of our own expertise to bear to support that analysis. The Department of Finance is a relatively small department, so we’re trying to bring advice as we can as larger departments bring their proposals forward.
[Translation]
Senator Henkel: An additional $15-billion envelope was allocated to the Apartment Construction Loan Program in Budget 2024. What guarantee has the department put in place to ensure that the fund does not only benefit large businesses that have access to tenders, but also small- and medium-sized businesses? In the construction sector, obviously.
Mr. Boldt: Is your question about the Apartment Construction Loan Program? Unfortunately, we are not the experts on this program in our department. I would suggest a follow-up.
Senator Henkel: Thank you very much.
Is the department planning to introduce some tax mechanisms? Small- and medium-sized businesses account for 98% of the construction sectors with less than 99 employees. In light of this, are you planning to have deferred tax or financial mechanisms, such as staggered tax credits or progressive incentives, to enable small builders to consolidate their operations before they face immediate performance pressure, like other builders?
Ms. Desroches: That question is outside our purview. I would defer to a different department.
[English]
Senator Fridhandler: Back to deductibles for people in the housing market, a very major inequity in Canada is that renters don’t get favourable treatment like owners, yet we have the contradiction now of trying to address the culture of ownership to shift the culture to more acceptability of living in a rental for your life and not owning a home. You’re not giving renters any deductibility like you would give an owner on capital gains exemptions. There is an absolute major contradiction in policy in trying to achieve a movement to a culture of rental from a culture of ownership. Your tax policies don’t support that. Can you comment on where that might go?
Ms. Riddell: Over the years, there has been interest in making sure that people can access home ownership. There have been a lot of policies directed at that particular objective.
Recognizing that there is a need for more affordable rentals, in 2023, the government introduced the purpose-built rental housing rebate, which provides 100% GST relief on all purpose‑built rentals, meaning over four units in a building or more than 10 suites. There is no price limit on those. The government is trying to provide some support to ensure there is sufficient supply in that area of the market as well, to help keep rents reasonable.
Senator Fridhandler: But not directly to individuals like an individual owner will get on a capital gains exemption?
Ms. Riddell: At the moment, there is not that, no.
[Translation]
Senator Forest: As you well know, municipalities can claim 100% rebate of the GST. This reduces the cost of infrastructure, which is a strong measure that the government has introduced. In your opinion, are there other federal taxes, fees or levies that need to be assessed for relevance and elimination, which would be a significant boost to investments that municipalities must make to put up the new homes?
[English]
Ms. Riddell: If we’re taking a broad step backwards, as a tax policy person — and I’m quite faithful to the tax system — we’re looking for something that is simple, easy to administer, very broad-based and very low rates. Ideally, that’s what you’re striving for, so we tend to look at how not to make holes in the tax system as opposed to how to create exceptions, which introduces complexity. When you have some sectors that have no tax on it, necessarily, the rate has to go up in other sectors to make up for the lost revenue. I don’t know if that directly answers your question, but the general aim is to try to create a simple, fair and low tax rate system.
[Translation]
Senator Forest: Coordination with the CMHC would be needed for infrastructure already in place in your areas. That’s the message I want to put across.
[English]
Senator Yussuff: This may require a simple answer or maybe not. You may not have it.
The CMHC Apartment Construction Loan Program is obviously financed by the department with money up front to CMHC. Can you tell me, is that sufficiently capitalized to ensure that they can keep doing what they are wanting to do? Of course, this is the one place where the affordability question for those who are living in rental spaces needs to be accelerated in regard to those who are building in that sector.
Mr. Boldt: We can’t give our own views there, really. I think the government has set the allocation for the Apartment Construction Loan Program, and it would be the Minister of Housing that would have to bring a proposal to seek a larger allocation, if that was something —
Senator Yussuff: How is the uptake on the program, based on your knowledge?
Mr. Boldt: I would have to check to get detailed statistics. It’s not my specific area of expertise, but I think it’s fairly well known that that program is very well subscribed.
Senator Yussuff: If you could find that information and provide it.
The Chair: We will be going in camera, so I will thank our witnesses. It’s three weeks until the budget is available. Having worked in the finance department of my province, I know this is probably the most crazy time for you, so we appreciate your presence today. I think there are some questions on which you can return an answer and provide more information.
[Translation]
Colleagues, we are going to suspend the meeting briefly while we go in camera.
(The committee continued in camera.)