THE STANDING SENATE COMMITTEE ON BANKING, COMMERCE AND THE ECONOMY
EVIDENCE
OTTAWA, Wednesday, November 5, 2025
The Standing Senate Committee on Banking, Commerce and the Economy met with videoconference 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 Toni Varone (Deputy Chair) in the chair.
[English]
The Deputy Chair: My name is Toni Varone, a senator from Ontario and Deputy Chair of the Standing Senate Committee on Banking, Commerce and the Economy. Our esteemed chair, Senator Clément Gignac, is unable to be with us, and as such, I will do my best to be in his stead.
I welcome members of the committee and our witnesses both in person and virtually, as well as all those watching us online. I want to acknowledge that the land on which we gather is on the unceded, traditional territory of the Algonquin Anishinaabe Nation.
Before we hear from our witnesses today, I would like to start by asking our senators to introduce themselves.
Senator Loffreda: Senator Tony Loffreda, Quebec.
Senator Fridhandler: Senator Daryl Fridhandler, Alberta.
Senator Yussuff: Senator Hassan Yussuff, Ontario.
[Translation]
Senator Ringuette: Pierrette Ringuette from New Brunswick.
[English]
Senator McBean: Senator Marnie McBean, Ontario.
Senator C. Deacon: Senator Colin Deacon, Nova Scotia.
Senator Wallin: Pamela Wallin, Saskatchewan.
Senator Marshall: Senator Elizabeth Marshall, Newfoundland and Labrador.
Senator Martin: Hello. Yonah Martin from British Columbia.
The Deputy Chair: Thank you.
We continue our special study on Canada’s housing crisis and the challenges currently facing Canadian homebuyers, with a particular focus on government taxes, fees and levies.
I want to welcome our first panel witness, Mr. Matt Gemmel, Executive Director, Policy and Public Affairs from the Federation of Canadian Municipalities. Welcome to our committee, and thank you for appearing before us today. I invite you to deliver your opening remarks. You have five minutes.
Matt Gemmel, Executive Director, Policy and Public Affairs, Federation of Canadian Municipalities: Thank you. It is a pleasure to be here. The Federation of Canadian Municipalities, or FCM, as I think you know, is the national voice of municipal governments in Canada. We represent 2,000 municipalities of all sizes in every province and territory. I want to thank you for inviting us to present as part of your study. There is no greater priority for municipalities than housing affordability.
Municipalities are on the front lines of the housing crisis, and we recognize that our role alongside the federal government and provinces and territories is vital to addressing it, and that’s why municipalities have been taking concrete action to address this issue, whether it is through modernizing zoning, increasing density, improving permitting times or using municipal land to build non-market housing. But we know that much more needs to be done.
We welcome recent announcements by the federal government and are especially encouraged by the focus of the new Build Canada Homes, or BCH, agency on non-profit and non-market housing. Increasing the supply of non-market housing is critical to improving Canada’s housing system and improving affordability.
[Translation]
Prioritizing modern construction methods will also help accelerate the delivery of the housing units that are so badly needed across the country.
[English]
We are pleased with the focus of Build Canada Homes. However, we’re confident that Build Canada Homes on its own will not achieve the federal government’s goal of building 500,000 housing units per year, which is roughly double the rate of housing construction currently.
In order to meet this goal, there needs to be a significant investment in housing-enabling municipal infrastructure including roads, water, waste water facilities, public transit, parks and all infrastructure that it takes to build a community.
Yesterday’s federal budget acknowledged the critical role that municipal infrastructure plays in building housing and growing the economy. However, the infrastructure funding announcement mostly repackaged existing funding, and those commitments are not commensurate with the scale of the need and will not meaningfully increase the pace of housing construction.
I want to step back for a moment, though, and look at the role of municipalities in building housing and the tax structure that municipalities currently have. The reality is that municipalities in Canada have very few tools to generate revenue to fund, maintain and improve public infrastructure. Property taxes generally make up around half of all municipal revenue and 90% of revenue from taxation. Canada, in fact, has one of the highest reliances on property taxes of any country in the Organisation for Economic Co-operation and Development, or OECD. As Canada’s population and economy grow, municipal revenues from property taxes do not grow in the same way that sales or income tax revenue does.
Another fiscal tool that is used by some municipalities across the country, of course, is development charges, which I know you have been hearing about in your study. These are essentially fees that housing developers pay up front to cover some of the costs of the infrastructure required to build new homes and neighbourhoods. These fees have different names across the country, and I want to emphasize that how these fees are applied and the rate of these fees vary greatly from one province to another. There are some provinces that don’t have these fees at all.
From a tax policy perspective, development charges, or whatever they are referred to as, are a good source of revenue for three reasons. First, they are directly connected to the cost of growth-related infrastructure, which is determined under provincial legislation. Second, they provide municipalities with a predictable and stable source of revenue that is linked to actual cost and construction cost increases, so they grow related to construction price inflation, which other sources of revenues do not. Third, they enable municipalities to price externalities or higher public cost related to lower-density development, also known as sprawl.
I want to be clear. FCM does acknowledge that development charges contribute to the overall cost of housing construction, and we recognize that in some jurisdictions, notably in the Greater Toronto Area, or GTA, and Metro Vancouver, development charges have been increasing significantly in recent years.
It must be noted, at the same time, that development charges are just one of many factors that contribute to high construction costs, including land, labour, materials and borrowing costs, which have all risen steadily in recent years.
[Translation]
The share of all taxes that go to municipalities is less than the share that goes to the federal and provincial governments.
[English]
Yesterday, the federal budget committed to provide $12 billion over 10 years to incentivize municipalities to reduce development charges. This commitment is a recognition of the importance of development charges as a source of municipal revenue and the need for federal investments in housing-enabling infrastructure. It is critical that the federal government doesn’t apply a one-size-fits-all approach and that there is flexibility for each province and territory to recognize provincial differences when it comes to development charges.
What municipalities and developers both want is predictability. Municipalities are open to reducing development charges where they are already high if they are replaced by other sources of revenue. I’m happy to speak more in the question-and-answer period about some of the recommendations that FCM has, to ensure that there are long-term predictable sources of revenue to invest in the housing-enabling infrastructure that the country needs.
The Deputy Chair: Thank you very much for your opening statement, Mr. Gemmel. Now we’ll proceed to questions. Colleagues, you have five minutes for your question, and that includes the answer as well.
[Translation]
Senator Henkel: Hello, sir. Thank you for being here.
In a recent press release, you pointed out that building 500,000 housing units per year will not be enough unless the essential infrastructure keeps pace. How can municipalities support those two areas, namely housing and public infrastructure, when their funding is already limited?
Do you think that tools such as the Canada Community-Building Fund should be strengthened or altered to facilitate that?
Mr. Gemmel: Thank you for the question.
[English]
When it comes to municipal infrastructure, there are a lot of challenges facing the country, frankly. There is a stock of existing infrastructure that has already been built over the years that requires maintenance and renewal. I just want to set that context. Even though we need to be investing in new growth infrastructure to enable new housing, municipalities are responsible for operating and maintaining all of that existing infrastructure. The estimate of the cost of renewing and replacing aging infrastructure that is in poor condition is in the range of $270 billion, so it is a massive task for the whole country to catch up and modernize that infrastructure. At the same time, we need to build new infrastructure to expand and grow.
At the end of the day, what municipalities are seeking is a new partnership with the federal government and the provinces and territories to shift the burden away from property taxes and development charges towards other sources of growth revenue, so more of a revenue-sharing model.
Our chief recommendation would be to move more towards a model like we have with the Canada Health Transfer and the Canada Social Transfer, where federal revenue, primarily from income tax and sales tax revenue, is transferred in a predictable way with an annual escalator over time.
The model we currently have in place that’s closest to that is the Canada Community-Building Fund. It was slightly rebranded in yesterday’s budget, but we will use that name. For a long time, it was known as the Gas Tax Fund. It was introduced by the Liberal government and improved by the Conservative government under former Prime Minister Harper. That is the most predictable source of revenue for municipalities. We would like to see that increased and indexed so that it is linked to economic growth. A model like that would give municipalities the ability to plan long-term and invest in the infrastructure that is needed to build more housing.
[Translation]
Senator Henkel: The goal of 500,000 housing units per year could lead to the tremendous densification of existing urban areas, placing greater pressure on existing services in areas where there may be little land, not only for housing, but also for the necessary infrastructure such as schools, sports and cultural facilities. Do you think the National Housing Strategy should address land use planning in order to support the growth of small and medium-sized municipalities as well instead of focusing on large urban centres?
Mr. Gemmel: Thank you.
[English]
Helpfully, there has been a lot more focus in public debate around housing in recent years about density and land use. FCM’s view is that municipalities are best placed to make land‑use planning decisions. It is within municipal jurisdiction, and they have the information regarding the municipal infrastructure, the territory and the considerations around land use and community planning to be responsible for zoning and planning decisions.
However, there is a strong policy rationale to moving towards increased density in certain contexts and certain communities. Over the long term, over the life cycle of infrastructure investments, it is more cost-effective to have higher density and would result in less taxation overall for municipal infrastructure.
However, and I think you noted this correctly, adding density doesn’t mean that there is no infrastructure that needs to be built. I will give you the example of sewer capacity. If you are adding 500 units to an existing neighbourhood, there are 500 more toilets that are flushing, and that additional volume of water not only needs to move through the pipes but also be treated.
There is an investment in increasing the capacity of existing infrastructure even in a context of infill —
The Deputy Chair: Thank you, Mr. Gemmel.
Senator Loffreda: Thank you, Mr. Gemmel, for being here with us. I’m going to read an excerpt from yesterday’s budget about the new Build Canada Homes agency, and I would like to hear your thoughts on whether you believe the government can realistically achieve its goals.
Here’s the quote:
Federal dollars invested in Build Canada Homes will be leveraged to attract private capital, investors, and builders to expand the housing supply. We are putting the conditions in place to catalyse maximum investment while mainstreaming advanced methods of construction, with the potential to cut building timelines by up to 50 per cent, reduce costs by as much as 20 per cent, and lower emissions by approximately 20 per cent during construction.
I would like you to elaborate on the following: Do you think these targets are achievable? What specific conditions and policies would need to be in place to make these outcomes a reality?
Mr. Gemmel: Thank you very much for the question. FCM welcomed the Build Canada Homes initiative when it was announced earlier in September. As I mentioned in my opening remarks, the most important thing for us is that there is a focus on non-market, non-profit housing. Canada currently lags behind other OECD countries in terms of the percentage of our housing stock that’s non-profit or community housing. We think that Build Canada Homes is the right model to increase over time the percentage of our housing stock that’s non-profit. We support that goal.
The model of leveraging public land, including federal, provincial and municipal land — municipalities are keen to use, where they can, municipal land to build affordable housing — is the right one. Leveraging modular, prefabricated construction techniques is an important part of that as well. It will go some way to reducing construction times. That’s an ambitious goal, but it will help. Just today, FCM offered a webinar to our members on what they can do to change local rules and regulations to enable modular housing, to ensure that all orders of government are moving in the right direction in the private sector to enable modular housing to result in faster timelines.
Our biggest concern is that Build Canada Homes, while we think it has the right focus on non-market housing, on its own, is not going to reach the federal government’s goal of doubling housing construction. That’s a very ambitious goal. From our perspective, the key missing ingredient is increased long-term federal infrastructure funding, and provincial and territorial infrastructure funding as well, to be able to reach that pace of infrastructure investment.
Senator Loffreda: Thank you. In yesterday’s budget, the government also stated that, after softening earlier in the year, the housing market has stabilized with home resales, and new housing has started picking up once again, although activity remains uneven across regions. It further noted that housing affordability has improved for both renters and homebuyers supported by government actions such as investments and purpose-built rental construction, low immigration targets and new supports for first-time homebuyers. From your association’s perspective, do you agree that housing affordability has, in fact, improved for both renters and prospective buyers, and what more can be done to continue that trend?
Mr. Gemmel: The first point I would make is that we sometimes think of Canada as one housing market, but it is actually many different regional housing markets. Affordability measures are quite different in different markets, as you have probably heard during the course of your study. Housing affordability has improved marginally in some markets, but there is a long way to go. We want to see policy interventions in all elements of the housing continuum, from addressing homelessness and homeless encampments through deeply affordable, supportive housing with wraparound health and social supports and non-profit community housing co-ops, to purpose-built rental and private home ownership. There are policy interventions that all orders of government can make throughout the housing continuum to improve housing affordability over the long term.
Senator Loffreda: Thank you.
Senator Wallin: Last night I read with interest the assessment of the budget in terms of housing that came from Mike Moffatt from “The Missing Middle,” who has been a witness here for us. He said that when reading it he was even more disappointed than he expected to be. In Build Canada Homes, the promise is fiscally half of what was offered. Development charge relief was diluted. The multi-unit residential building, or MURB, incentive was missing, and the focus seemed to be the shift from housing supply to reducing housing demand through scaling back immigration. Do you agree with those four assessments of the budget?
Mr. Gemmel: Thanks for the question. I will try to go through them in order.
On Build Canada Homes, we did note that the amount of money in the budget was less than what was announced in September. We noted that with concern. We’re still waiting to see the full picture of that. It was $7 billion, roughly, that was announced in the budget.
Senator Wallin: Is that as opposed to $12 billion?
Mr. Gemmel: Yes. We are still waiting to see whether there is remaining funding. Our expectation is that there is still a commitment to $13 billion in funding through BCH, but it is not all implemented in this budget. We are waiting for a confirmation from the government, but if it is a reduction to $6.2 billion, that’s very concerning. The challenge is such that even the $13 billion was, though important and welcome, far from what was needed.
In terms of development charges, I will just speak about that for a moment.
Senator Wallin: Time is limited.
Mr. Gemmel: Sure. It is something that Professor Moffatt speaks about frequently. I recognized in my opening that in some jurisdictions, development charges have increased rapidly. Our members are open to reducing those development charges over time in those communities where they are high with alternate sources of revenue. The federal government does that.
What is critical for us is that there is not a one-size-fits-all approach. The regimes are so different in Saskatchewan versus Quebec versus Nova Scotia, and the election commitment from the Liberals in the spring was, across the board, a 50% reduction for five years. That was very problematic from an equity perspective. It was also problematic — we heard this from developers, and you may have heard this from the housing development community — because a five-year commitment does not provide the kind of predictability that developers need to assemble land and make business decisions. Municipalities and developers are on the same page calling for a long-term approach to reduce development charges where they are high, over time, with alternative revenue sources to invest in the infrastructure.
Senator Wallin: Is MURB being missing in action an issue for you? Do you think it is impactful?
Mr. Gemmel: That’s not something that we are looking for in the budget.
Senator Wallin: Let’s go on to the question of scaling back demand by dealing with immigration. There is some reduction in numbers. Has that been a big issue for you exclusively in Toronto and Vancouver or do you see it in other places as well?
Mr. Gemmel: Yeah, it’s fair to say that getting immigration levels right is a challenge for the country and something that we’re collectively grappling with.
Our view is that, even two or three years ago, when immigration levels and population growth were at historic highs in recent memory, the problem is that we have not been keeping up with the supply of infrastructure, whether it is municipal infrastructure, health care, education or — notably — housing. It was not so much the immigration levels that were the issue, but the investment to ensure that immigration is successful for everyone. The concern, as has been commented on by many people, is that reduced immigration levels are going to make it harder for us to build the housing that we need. So we are concerned about — even outside of housing construction — labour shortages, especially in certain regions of the country. Finding workers is a particular concern right now for our members in Atlantic Canada, for instance.
Senator Wallin: Thank you for being so quick.
Senator Dalphond: You have noticed the PBO numbers regarding the need for additional housing and that the number is about 50% lower than the number of the CMCH. Through our previous witnesses, we finally understand why.
CMHC’s strategy is to create a surplus in the market large enough that the prices of residential units will go down. Then they become more affordable. The government’s approach is to instead finance the BCH. That will focus mostly on attending to needs that are not met by the market, the people who are without a roof, people who cannot afford to be in a normal market and so on.
What is the position of the municipalities? Do they want half a million new houses per year, or do they want to keep the market at a certain point where the price of housing in general stays the same, including the price of real estate? Because if you keep it a surplus, the price of real estate will go down. Your main source of revenue is taxes, municipal taxes, based on real estate values. Aren’t you in a difficult position here? You want to reduce taxation assets, which means you have to increase the rates, which means you will be very unpopular in your cities.
Mr. Gemmel: Yes, thank you for those questions. I have a couple of points. First, it may seem like a convenient answer, but in terms of the question around whether the objective is to build more non-profit housing or increase the market supply, we would like to see both. We need do both. There is clear evidence to suggest that the level of housing construction was below the level of population growth and that contributed to high housing prices, but there are other factors, including speculation and investment for financial gain in the housing sector, including foreign investment, though it is largely domestic. We think over time, we have to grow the proportion of non-profit, non-market housing to ensure affordability for the long term. We also need to increase the pace of housing construction. It needs to be better tied to and coordinated with population growth.
We do agree with CMHC to a certain extent that increased supply will help moderate market prices. In terms of the dynamic with municipal property taxes, the business model for new tax revenue from development is not a good business model right now. There is not a profit margin for municipalities. There is a net cost. For every new resident that moves to a community, there is a net cost that goes to invest in the infrastructure. This is one reason the development charges have increased, especially in Ontario and B.C., as much as they have: to pay for that growth.
The family who moves to that community is paying income tax, sales tax and payroll tax, but the municipalities are not receiving that. They are just receiving the property tax and the development charges. It falls short of the total cost of that infrastructure. That’s a fundamental reason we are saying we need a new model to pay for growth. It is a losing business proposition now for municipalities. The revenue is not keeping up with the costs, especially in a high-population-growth scenario.
Senator Dalphond: Do you suggest municipalities not tax real estate that is owned by cooperatives and those who are providing apartments to people who cannot afford the real market, or are you taxing them on top?
Mr. Gemmel: Some municipalities will provide lower property taxes or reduce development fees for non-profit or non-market housing, but typically the rates are the same and they still receive revenue. The challenge is that whether it is for-profit or non-profit, it doesn’t matter. Whether it’s an apartment or private home, the cost of the infrastructure is the same, and it has gone up dramatically. The amount of revenue municipalities receive from property taxes does not cover the costs of the growth.
Senator Dalphond: If you provide a roof to some people so they’re not on the street, your police don’t have to interfere, your ambulance service doesn’t have to interfere and your social workers don’t have to interfere. I’m not sure why you say it’s fair to tax cooperatives and those providing a roof to those who would otherwise be on the street at the same rate.
Senator Marshall: Thank you for being here this evening.
Can you talk more about the development charges? We’ve been hearing from other witnesses that they vary quite a bit as you go from municipality to municipality. One witness said Calgary has a good system. Why is there no consistency between municipalities? What is the role of the federation in establishing some sort of consistency? Does the federation ever do special initiatives to look at how to structure something in such a way so that, say, for example, municipalities with a population of over 1 million would use this formula, and then, say, 500,000 to 1 million would use another? If you are looking for additional billions of dollars of funding from the federal government to help as a substitute for these excessive development charges, how will you allocate it among municipalities unless you have some commonality?
Can you talk about that? What is the role of the federation in that? Have you ever done anything to look at those inconsistencies?
Mr. Gemmel: Sure. That’s a terrific question. Thank you.
First, the fundamental reason the development charges look so different across the country is that they are determined by provincial legislation. It is not like other areas of public policy, like health care or justice. We have 13 different systems in Canada, and it is like that with property taxes and development charges.
There could be an effort to reform and have more consistency across the country. That would require coordination between the provinces. At FCM, our board of directors includes the presidents of all the provincial, territorial and municipal associations. There are 19 of them. We try to coordinate that kind of discussion, sharing information on how property taxes and development charges are collected, what best practices are and how there could be reforms, but ultimately, it requires a province to amend legislation to bring those changes into being. It is somewhat complex.
That’s the fundamental reason why they are different but —
Senator Marshall: To just clarify, even within each province, there would be differences, would there not? Calgary wouldn’t necessarily have the same formula as Edmonton.
Mr. Gemmel: That’s true.
Between provinces, another reason there is so much difference is that municipalities are mandated to do different services. In Ontario, which is the most notable example, a lot of health and social services have been downloaded to municipalities. They are paying from property tax for child care, public health and emergency services that other municipalities aren’t paying for. That’s part of the reason why development charges have increased so much in Ontario specifically.
You’re right, though. Even within provinces, cities have made decisions about how to set rates for property taxes versus development charges, and there are differences. Municipalities have another option, which is borrowing. They can debt-finance infrastructure. In some cases — and this is not a bad model — debt financing can be paid back through utility rates, water rates and sewer rates. That’s a model that more municipalities are looking at. In the case of Calgary and Edmonton, that accounts for the biggest difference.
Senator Marshall: I was looking at the $5 billion and thinking, “How will you divvy that up across the country?” Thank you very much.
Senator Martin: Thank you for your testimony. I homed in on the range of development charges that we have heard about. In an advocacy paper entitled Making Canada’s Growth a Success, the Federation of Canadian Municipalities states that “In Quebec, development charges account for less than 1 percent of local government own-source revenue . . .” so I was curious about why development charges are so low in Quebec. Rather than using development charges, how do Quebec municipalities fund new infrastructure projects in their region? It is a contrast to Ontario and B.C., as you’ve already cited.
Mr. Gemmel: That’s right. Thank you. In Quebec, municipalities receive more infrastructure funding from the provincial government than municipalities in other provinces do, especially for water and sewer infrastructure and road infrastructure. The model is not perfect, but the Government of Quebec, in response to advocacy from the two municipal associations in Quebec, brought in legislation two years ago to modernize municipal finances. A number of changes were made — and I won’t go into all of them — but we feel that’s a model for other provinces to follow.
It is not perfect, but it does provide more options for municipalities to levy taxes in different ways. One example would be a new ability to bring in a vehicle registration tax that municipalities didn’t have before. There is more ability to set different rates of property taxes on different types of properties.
Most municipalities in the country under provincial law can’t set progressive tax rates, so you can’t set a higher tax rate based on the value of the property. It is a flat tax. If the value of the property is higher, you pay more tax, but there isn’t a higher tax bracket like there is for income tax. Quebec allowed municipalities to set different rates based on the type and class of property, with more variation. We welcome that change.
Senator Martin: Are provinces in discussion with municipalities to look at the different models or changes that could happen for that particular province?
Mr. Gemmel: There is not as much discussion as we would like. From FCM’s perspective, we would like to see a more robust discussion between the federal government and all the provinces about municipal finance reform. Really, nothing short of a conversation about how we fund the growth of the country will be sufficient. Consistent with the current moment, trying to remake the Canadian economy and diversify trade requires infrastructure. The housing goals we have been discussing require strong municipal infrastructure. How will we collectively pay for that infrastructure if not through property taxes and development charges? There is a consensus that they are too high.
Senator Martin: Looking at what Build Canada Homes can do more effectively, we can look back at what has failed in the past for successive governments. We are in this crisis because of decades of issues. In your view, why have successive federal housing programs across current and previous governments produced limited results despite significant investments?
Mr. Gemmel: There are multiple factors. I mentioned a few of them. Population growth has exceeded supply. Especially in recent years, there has been a combination of high interest rates, high material costs and high labour costs, which have increased the cost of construction. You have seen a tendency towards investing in housing for financial gain, whether it’s individual Canadian families or on a corporate level, both domestic and foreign. All these things have contributed to high housing costs.
If you look at Canadian investment over time from the 1970s to now in non-profit non-market community housing, we’ve under-invested since the 1970s — in the past 40 years — and we have under-invested compared to other peer countries. So that’s a fundamental reason as well.
Senator Martin: Thank you.
Senator Yussuff: There are a number of questions, and I’m trying to figure out which one is the best to ask you to provide some thoughtful data for our work. Does the FCM collect data that they could share in regard to the system as to how infrastructure is funded from one province to another across the country? Yes, development charges are key, but they are not consistent. Every province has a different model. We could learn something from that. Quebec has an interesting one. Saskatchewan is another example.
Is there any data that you guys collect that you could share to at least give us some insight as to the differences that exist across the country?
Mr. Gemmel: Yes. We have an internal report. We have not released it publicly yet, but we could share it with the committee as part of your study. It is an inventory of what municipal tax powers are province by province. In addition to that — and this report don’t touch on that — there are different provincial infrastructure funding programs from province to province, and then there is the federal government’s role, which changes from year to year. Certainly, in terms of revenue sources available to municipalities, we could share that.
Senator Yussuff: That would be helpful because Canadians would be pleased to know the differences that exist and where the system is working better.
One recommendation or suggestion made before our committee is that a municipal bond could be a solution to help municipalities fund infrastructure that is always needed. We would need legislation to make that happen because in our jurisdiction that’s how they do it over a longer period of time. What are the thoughts of the FCM on considering that as an option?
Mr. Gemmel: I am glad you brought that up, Senator Yussuff. I wanted to mention it in my opening remarks, but I ran out of time. This is something we are looking at. In the United States, a big source of revenue for municipalities is the bond market. We consulted with our colleagues, the municipal associations in the United States, and the difference between Canada and the U.S. is that their federal government does not tax municipal bonds. Here we do.
The provincial legislation varies a little bit. Not all municipalities can offer bonds, but even where they can, the market is small because of the federal tax. At our most recent board meeting, FCM called on the federal government to remove federal taxation of municipal bonds to generate more revenue. To be clear, this is not a silver bullet, but as we look at increases in development charges in some jurisdictions, we need to look at all available options. More debt financing and more private financing, including through the bond market, is one way to increase funding for infrastructure.
Senator Yussuff: I live in Toronto, so I will talk about where I live. The challenges are many. We have a significant homeless population in the city. The city is struggling to deal with that in a way that shows we actually care for and wish to house people who don’t have an address and all the things that go with that. Yet, at the end of the day, these are the social challenges we are facing in this country. We are expecting municipalities to figure out how to solve these problems.
What has been the recommendation from the FCM on how to tackle this? It may be an ownership issue, but it’s a housing issue. These people don’t have regular housing to live in because they can’t afford to do that or they don’t necessarily have the same relationship to the rental market or what have you. What are your recommendations to deal with this issue?
Mr. Gemmel: Yes. Thank you very much. Certainly, all of FCM’s members are very concerned about the increase in homelessness across the country. It is not just a big-city issue anymore, if it ever was. It is an increasing concern for smaller cities and towns across the country, and municipalities have a responsibility to respond, but are really ill-equipped in terms of the current tax structure to be able to deliver housing themselves or to deliver the health and social services that are needed. It is a housing issue, but it is also a health care issue.
That’s part of the reason why we are glad to see that Build Canada Homes is focused on non-market housing. We think that layering together public land and modular delivery is a quick and more cost-effective way to provide housing to Canadians experiencing homelessness and to address homelessness encampments.
That was one of our key recommendations to Build Canada Homes. There is a set-aside of $1.5 billion for supportive housing, but the key is that the federal government will be there with the capital dollars, but the provinces have to be there with the wraparound health and social supports. Otherwise, it is not truly supportive housing. I think that’s key.
Senator McBean: It’s good to see you again. I am following you from one committee to another, or you are following me. You said that Canada has one of the highest reliances on property taxes in the world. Where are other countries — or municipalities in other countries — getting the money that makes up the difference? Perhaps it is bonds, or the answer may be more in line with Senator Martin’s question. On top of that, how can the Canadian government structure funding that they do give to municipalities to ensure that the municipalities use it to lower development charges?
Mr. Gemmel: Those are great questions. Thank you. On global comparisons, each country is slightly different, and obviously Canada’s federated model is different than those of some other countries that have more of a unitary system. In many peer countries, the federal government invests substantially more in public infrastructure, like transit, for instance, and it is not primarily a responsibility of municipalities. That’s part of it. But municipalities in some peer countries also have more taxation powers, either income tax or sales tax, which Canadian municipalities don’t have. So it’s a bit of a mixture.
We welcome a conversation about what reform might look like. We recognize that Canadians are feeling the pressure of rising costs of living, and sweeping new tax powers are not politically palatable. What we’re interested in is how we might shift the tax burden a bit from federal and provincial governments to municipal governments and/or look at revenue sharing that is long-term, predictable and linked to economic growth.
In terms of the accountability piece around development charges, I think that FCM’s view is that the federal government crucially needs to understand how different the development charges are in each province and territory. Our number one recommendation is this: Don’t have a one-size-fits-all approach. The approach taken in the budget is a step in the right direction in that they are going to transfer money to provinces and territories and then leave it to them to work with municipalities to reduce development charges where they are high in exchange for incentive funding. I think that’s about as good a model as we could have.
Senator McBean: On that, then, do you think that needs to be a requirement for a full itemization of development charges, municipal fees and taxes separate from the base cost of a home so that homebuyers have transparency?
Mr. Gemmel: There has been a lot of talk about transparency. Certainly in Ontario, the legislation around development charges lays out very clearly what municipalities can include in the cost. They have to do a development cost study. From my perspective, there is far more transparency around development charges than other property tax revenue that goes into general revenue and is reallocated. It is really linked directly to the costs.
I’ve definitely heard from developers that they feel like the development charges should be related to the pipes connected to the individual unit rather than broader infrastructure, but it is all connected. You need the parks, you need the community centres and you need the waste water treatment plants and the water treatment plants. It is not just about the pipes and the roads.
Senator McBean: I’d love to keep listening, but I want to get through my time.
It also goes on the homeowner to pay for that, for the length of the amortization of their mortgage. Do you think development charges and related municipal fees should be paid over the lifetime of the service rather than the upfront cost being added to the purchase price?
Mr. Gemmel: Yeah, I have heard a willingness from my membership to move more towards that model so that you don’t have a scenario where the new homebuyer is effectively amortizing that infrastructure on their mortgage at their lending rates but, instead, to spread that out over time, more like an addition to the property tax combined with the municipality debt‑financing more of that infrastructure. I think there is an openness to shift a bit more to that model.
Senator McBean: Thank you.
Senator Ringuette: This is very interesting, and thank you for being here and providing the information. Maybe I’m a little bit old-school, but the federal government transfers funds to the provinces for social programs, health care and post-secondary education among other things because, essentially, the municipalities are creatures of the provinces. For instance, in Ontario, you say — and it is true — there was a devolution of supplying services for social programs and so forth to the municipality. Has the required amount of money to supply these services from the province to the municipality been transferred, or is it that these charges become part of — we looked at the legislation in Ontario with regard to fees, and the list is almost unlimited. Can you explain it to me? Because I’m still trying to figure out why Ontario would have such a reliance on these development fees in comparison to other provinces. Is it mismanagement? I don’t know. Is it the devolution of provincial responsibility and the funds not following? I don’t know. What is your take?
Mr. Gemmel: Thank you for that question. Our assessment is really as you described: that there is a devolution of responsibilities without the funds or tax powers to go along with that. It is a particular issue in Ontario, different from other provinces, and it is part of the reason why municipalities have been more reliant on development charges and why those charges have increased faster in Ontario than in other provinces.
My colleagues at the Association of Municipalities of Ontario have been leading this work as they advocate to the provincial government in Ontario. They have been advocating in recent years for a full evaluation of those services that have been downloaded and either to re-upload them to the province or to adequately fund them. I don’t have the numbers at hand, but the amount of provincial responsibility — regarding health and social services — that municipalities in Ontario are providing that is paid for on the property taxes is staggering, and it is increasing as health and social issues get more complex, including homelessness, as we heard about earlier.
Senator Ringuette: So then my follow-up question is this: You recommended the federal government increase the transfer to municipalities by $2.5 billion, bringing it to a total of $5 billion, so what is your association’s recommendation to the provinces with regard to what they require?
Mr. Gemmel: Yes. I think on infrastructure, we would like to see a cost-shared provincial-federal-territorial program, but not one that is a five-year program where municipalities submit applications to the province and then the province reviews them and then submits them to the federal government. We’ve had a lot of programs like that over the years. They take a long time to deliver results for Canadians. They require a lot of bureaucracy, and then there is very little predictability for municipalities. We would like to see transfers through the provinces to municipalities, and provinces would cost-match that. We’re not looking solely to the federal government to fund infrastructure. There is a role for provinces and territories there, but there is also a role for them regarding health and social services. That’s across the country, not just in Ontario. As you noted, the federal government provides funding through the Canada Health Transfer and through the Canada Social Transfer. Meanwhile, municipalities, through first responders, which is inefficient and not meeting anyone’s needs, are on the front lines dealing with the issues.
Senator Ringuette: Thank you.
Senator C. Deacon: Thank you, Mr. Gemmel. You have been very clear with your answers, and that’s always appreciated. It is not always the case.
I want to ask about the role of the Canada Infrastructure Bank because, in the budget, its direction seemed to be related to major projects and First Nations housing. I’m not saying that is a bad thing. It just seemed more narrowly defined than I would have expected. I care a lot about development charges because I think it is an intergenerational problem of significance. First‑time homebuyers are, I think, being unfairly burdened, and it’s been a big driver of housing price increases in this country that are really harmful to the future of our society. There are folks who have liabilities that they are going to be paying for over a generation that purely relate to this business model of the municipalities. I’m just wondering about the role of the Canada Infrastructure Bank and how it can be of assistance, because it was within its mandate to be working in this regard. We have to find ways to get rid of these development charges, and I have to believe that the federal government can play a national role.
Mr. Gemmel: Terrific. Thank you for the question. FCM has been working closely with the Canada Infrastructure Bank over several years. Its mandate has evolved, as you probably observed. Initially, it was for large infrastructure projects. Maybe the biggest municipal transit projects may be eligible, but we are talking $100 million and above.
We have worked with them, and they have changed their structure to be able to fund smaller projects and bundle those together so it is more applicable to municipalities.
They now have a mandate — it is not new; it is about two years old — to fund housing, enabling infrastructure. We think that can play a role. Municipalities can borrow already at fairly competitive rates, typically through their different provincial borrowing agencies, so it is a question of whether the Canada Infrastructure Bank can provide competitive rates.
When it comes to debt financing, there are rules that vary province by province that impose debt ceilings regarding how much debt a municipality can take on relative to its tax base. There may be an argument that those limits should be increased, or increased in certain contexts, but there is a trade-off there.
One of the features of fiscal federalism is that municipalities can’t run deficits by law. So most of the borrowing happens at the levels of the provincial and federal government. Do we want municipalities to borrow more? That’s a debate. I think our members are open to it. Specifically, in the context of water and sewer infrastructure, that could be repaid through rates and user fees. There is a role for the Canada Infrastructure Bank there to play in funding housing-enabling infrastructure.
Senator C. Deacon: Thank you.
Senator Fridhandler: Let me ask a naive but simple question. You have made a number of remarks relative to who pays here. You have talked about perhaps shifting the tax burden. You have talked about provinces controlling the development charges, or DC, regulatory environment, and cities controlling the zoning and planning environment. But at the end of the day, I don’t get where the shift to the feds for financing all this should arise. Am I missing that property tax has a limit to what you can institute, or shouldn’t the municipalities — I don’t want to speak against the municipalities — exercise the taxing requirements to build their infrastructure, however they see it? They are on the ground. I don’t know what your thoughts are on that.
Mr. Gemmel: Thanks. Certainly, there is an argument that municipalities could increase property taxes. There is a political reality around that locally, of course. There are also issues around equity. For instance, property taxes that landlords are paying are passed on to renters. Is that how we should be paying for growth infrastructure for the country, on the property tax base? There is also an important question regarding what municipalities are paying for on the property tax. Regarding infrastructure, there is a fair argument around that. If they were only paying for infrastructure, they would have more room to increase it. But they are also paying for emergency services. Police budgets are typically the largest line item in a municipal budget outside of capital costs.
However, as we have said, they are also increasingly paying for complex health and social services and responding to homelessness, mental health issues and addiction. So there is a lot that we are asking of the property tax. Is that the best source of taxation? Should it increase to cover all of those things? Or should we be looking more to sales and income tax to cover those social services and those redistributive kinds of programs? It is an open question. Our view is that municipalities either need new tax powers or we need to look at sharing income and sales tax revenue from provincial governments and the federal government.
Senator Fridhandler: Thanks. I just want to echo Senator Yussuff’s request that if you have a study that could give us data that shows comparative DCs and other charges on development and housing across the country, it is something that I don’t think we have heard, and it would be very important and helpful to our report.
On the Build Canada Homes project and the non-market and affordable housing, we have spoken about a bit of a gap on what that fund will accomplish versus requirements. There is no expectation for that fund to drive every bit of the requirements. Is there anything happening outside of that fund? Is the Build Canada Homes gap with respect to what is required 100% of the delta, or are there other people doing things in the market?
Mr. Gemmel: Certainly, from our view, Build Canada Homes is not meant to — or we’re certainly not expecting it to, on its own — doubling housing construction. It has really been designed to — and we think appropriately — focus on just that non-profit, non-market segment of the housing spectrum.
So what else is happening? In the budget yesterday, the federal government announced what looked like a $51-billion infrastructure plan, which received some headlines. It sounds like a lot of money, and it is. The challenge is that about 80% to 90% of it is funding that was already planned and had already been announced. In the case of the Canada Community-Building Fund, which is a transfer through the provinces of $2.4 billion a year, $27.8 billion of that $51 billion is through those annual transfers. Municipalities were already counting on it.
It is critical funding. It is going to go towards putting the pipes in the ground that will build more housing, but it was the same amount of money two days ago as it is today. It is not going to build any more housing than we would have built otherwise. There is the $12 billion for incentives to help municipalities reduce development charges. We welcome that. Again, it is not going to build necessarily more housing than we were before. It is going to reduce development charges where they are already high and marginally improve affordability.
The Deputy Chair: Senators, unfortunately, we are out of time. Mr. Gemmel, thank you very much for your participation today. Your testimony and insights have been very much appreciated, and I think we could have used at least an hour more of questioning.
Mr. Gemmel: An hour goes by quickly.
The Deputy Chair: Yes, it does.
Senators, we will now continue our special study on Canada’s housing crisis and the challenges currently facing Canadian homebuyers, with a particular focus on government taxes, fees and levies. I wish to welcome our second panel of witnesses, representing the Association of Construction and Housing Professionals of Quebec, Ms. Isabelle Demers, Vice President —Strategic Development, Public Affairs and Innovation; and Mr. David Goulet, Chief Financial Officer.
Welcome to our committee and thank you both for accepting to appear before us. I would also invite you to deliver your opening remarks. You have five minutes to do so. Ms. Demers, the floor is yours.
Isabelle Demers, Vice President —Strategic Development, Public Affairs and Innovation, Association of Construction and Housing Professionals of Quebec: Thank you so much.
[Translation]
Ladies and gentlemen of the committee, thank you for inviting me here today to discuss the housing crisis, an issue that affects millions of Canadians.
My name is Isabelle Demers, Vice-President, Strategic Development, Public Affairs and Innovation at the APCHQ, the Association des professionnels de la construction et de l’habitation du Québec. With me is David Goulet, our Chief Financial Officer.
Founded in 1961, the APCHQ represents and supports more than 28,000 businesses in the residential construction and renovation industry. It serves as a driver of social and economic development by promoting sustainability and quality in housing. It is also the largest voluntary membership association in the construction industry in Canada.
[English]
We are here because of the historic housing crisis affecting the entire country. We are facing the first generation since 1971 that may not have access to home ownership. This is happening while the retirement-asset gap between homeowners and renters is 5 to 1. This concerns the Association of Construction and Housing Professionals of Quebec, or APCHQ. The risk of individual and collective impoverishment should equally concern legislators.
Households that remain in the rental market are delayed home ownership due to affordability issues and increased pressure on the affordable rental market. Rental and mortgage costs are rising and housing starts are stagnating, yet housing needs persist. According to CMHC, Quebec alone will need to build 1 million new homes by 2035. To restore affordability, this means doubling annual housing starts. The urgency of the situation calls for coordinated and coherent action among all stakeholders and levels of government.
[Translation]
To this end, the APCHQ advocates a three-pronged approach: increasing overall supply, facilitating access to ownership and maintaining and improving the existing housing stock through renovation.
[English]
Of course, this is complex. The sector faces challenges such as skilled labour shortages, rising construction and material costs, aging rental stock and infrastructure and lengthy administrative delays.
[Translation]
This crisis is further exacerbated by the very structure of the industry, which reinforces an approach to management that is piecemeal or in silos, as though a million homes would be built with one hammer at a time. Consider for example the lack of consistency in the interpretation of the building code, which results in a lack of standardization and therefore of predictable usage, which limits scale-ups, as well as processes and expectations that differ from one city to another or even from one postal code to another, right across the country, not to mention the fact that there is strictly speaking no benefit for renovation, even though the most affordable housing is housing that is already built.
[English]
Let us review some measures and recommendations. To increase supply, enable small businesses so they can adapt, grow and better perform. Reward innovation, a driver of productivity, especially among smaller players. Spearhead the industrialization of the construction processes to provide predictability and scalability supported by harmonized codes and regulations. Simplify — over-regulation and complexities must be reviewed. Also improve programs people appreciate that have outdated criteria such as APH Select and MLI Select. Everyone loves them. They need to be improved or updated. Continue massive investment in water infrastructure. Building is not enough. Buildings must also be connected.
[Translation]
To increase access to ownership, since people should have the choice to rent or own, the APCHQ recommends relaunching the CMHC First-Time Home Buyers’ Incentive by improving the eligibility and reimbursement criteria; continuing efforts to replace the minimum qualifying rate, known as the stress test; making the Home Buyers’ Plan or the First Home Savings Account intergenerational; and amending Bill C-4 to make March 20 the effective date of the GST rebate for first-time homebuyers.
[English]
To preserve affordable housing through renovation, we need to link the benefits of renovation, housing retention and quality of life with energy gains, reducing waste and cost effectiveness. This is a win-win. Enhance programming that promotes short-term, high-volume action. Finally, we must act coherently and support Canada and its businesses. How is it that a major fund like the Public Sector Pension Investment Board, or PSP, invests 85% of its $26-billion real estate portfolio outside of Canada?
[Translation]
In closing, ladies and gentlemen of the committee, the housing crisis is certainly a collective challenge that demands political courage, vision, and consistent and concerted action by all orders of government and industry members.
The APCHQ is active and invested in building a future in which everyone has access to affordable housing that is sustainable and of good quality.
Thank you for your attention. My colleague and I are available to answer your questions.
[English]
The Deputy Chair: Thank you very much for the opening statement. Now we will proceed to questions from senators. Colleagues, you have five minutes for questions, and that includes the answers.
[Translation]
Senator Loffreda: Thank you for being here with us, Ms. Demers and Mr. Goulet.
In your pre-budget submission for the Carney government’s first budget, you make nine recommendations. I would like you to speak to your second recommendation regarding the role of the Canada Housing and Mortgage Corporation. You suggest that the corporation’s annual profits should be transferred into direct investments in affordable social housing.
With the creation of Build Canada Homes, you suggest that this new agency could lead to the reworking of CMHC’s mandate. Could you elaborate on that idea and tell us what changes or adjustments should be made at CMHC?
Ms. Demers: Thank you for the question, Senator Loffreda.
First of all, Build Canada Homes is something new. Its provisions and operating method are not yet fully known.
Something that seems important to us is to ensure that we can continue to support and develop construction projects. They must also be affordable construction projects. The existing programs at CMHC should be maintained or enhanced. If the Build Canada Homes mandate is expanded, we might also expect certain programs to shift to that organization.
As to your specific question regarding aspects that could lead to certain improvements, I will let my colleague David Goulet answer.
David Goulet, Chief Financial Officer, Association des professionnels de la construction et de l’habitation du Québec: Not knowing exactly what the new responsibilities of Build Canada Homes will be, it is hard to say what they should do that is currently done by the CMHC. We would of course like to see processes simplified in order to prevent duplication and not create problems for business owners.
The APH Select program was also mentioned, an insurance program that is widely used now to support the construction of rental housing units right across Canada. One of the issues with this program is that it was established a number of years ago. CMHC is still using Canadians’ salaries from 2019 to determine eligibility, even though we are now in 2025. The database they used at the time has since been updated. We have the data for 2022, but CMHC has not updated its program. We would like to better understand the reasons for that.
There have also been changes in energy efficiency ratings. This sends a contradictory message. Energy efficiency is very important. One should not have to choose between affordability and energy efficiency; rather, both should be encouraged. This is another aspect of practices that we think CMHC should review, at least for the APH Select program.
Since APH Select is a mortgage insurance program for rental housing, it seems more logical for it to remain with the CMHC since they already offer various insurance programs. As to other programs, however, we will have to see how Build Canada Homes operates to determine what should be transferred. The goal is once again not to double the workload for business owners and developers.
[English]
The Deputy Chair: I respectfully request that your answers be more concise.
Mr. Goulet: No problem.
[Translation]
Senator Loffreda: I like your nine recommendations. I would like you to speak briefly about your third recommendation, which is to make the first-time home buyer’s plan, or HBP, and the first home savings account, or FHSA, intergenerational so that parents could contribute to their children’s downpayments while reducing the financial penalties associated with those contributions.
Ms. Demers: Yes, that is one of our recommendations. A multi-pronged approach is needed: increasing supply, and giving those who want it greater access to ownership. One of the issues right now is that the downpayment needed to purchase a home has increased. Not many people would typically have that much money in their bank account. It is out of reach for many people. There are nonetheless some families or children and parents that have that much saved in a HBP or FHSA. Many people would like to contribute to those. According to fairly recent CMHC data, 70% of parents are already making contributions for their children. That is already the case. Why not create that structure and system through a HBP or FHSA? That would not take anything away from anyone and would directly help the children wishing to purchase a home.
[English]
The Deputy Chair: Thank you very much.
Senator Fridhandler: I have general question about which you might be aware. In the Quebec marketplace, does anyone build without support from the government? Is there a marketplace where people can afford to build required housing without subsidies?
Ms. Demers: That is a great question; thank you for asking it. Building is very costly everywhere in Canada, including Quebec. What the construction people say is that the math doesn’t work.
In order to build with all the costs, before, while building, and after, to put it to market, the projects are very costly. Some promoters build without subsidies, of course, and there are many. But some who need to build for an out-of-market project need help so that the math works.
Senator Fridhandler: A prior witness talked about what seems to be more support from the provincial government relative to municipal infrastructure. Can you tell us about that in terms of where the province engages in specific financing of municipal infrastructure on new development?
Ms. Demers: I’m not sure what the specific question is.
Senator Fridhandler: A previous witness said that the provincial government in Quebec supports infrastructure like water and water treatment in municipalities. In other provinces, they don’t get that support. So not everything is downloaded at the developer and municipal levels.
Ms. Demers: The structure is a bit different in Quebec than the rest of Canada for many things. The way the infrastructure is organized is that it is the responsibility of the municipalities, but it is also the responsibility in some instances of the provincial level. So the municipalities are funded through the taxation that they have.
Of course, if the taxation is not enough, then they need to readjust the budget. The reality is that there is a $47-billion gap in order to update the water infrastructure. There is no way that the municipalities will be able to fund this. There is also no way that the provincial level will be able to fund this by itself. That means that it will not be updated and some municipalities will not be able to provide space for new projects, new construction, because water is missing — water treatment is not enough — or the impact is that the cost is provided for and sent to the consumers, who, at the end, are the ones who are impacted and have to pay for it.
Senator Fridhandler: Do they, in Quebec, limit what municipalities can charge for property taxes? Or are there no limits and municipalities just don’t want to take the political heat of charging more to cover their costs?
Ms. Demers: Of course, we understand how difficult it is for elected mayors all across the province. There are 1,100 municipalities in Quebec, so there is also this issue of very large numbers of small municipalities that, of course, rely on a small number of constituents also. How can they raise the taxes so much? That is a difficult situation that they are sometimes put into.
Senator C. Deacon: Thank you, Ms. Demers and Mr. Goulet. I want to focus on the talent needed to build homes. There has been a shortage of those who have the skills to do essential work. No AI can build a house yet.
We have 900,000 currently unemployed or not-in-school or not-in-training youth under the age of 29 in this country. So 900,000 are languishing and certainly not saving to buy a house. They are not able to afford much. What is it that the federal government could do? I see a big gender difference in apprenticeship programs. Women who enter apprenticeship programs often enter an environment that’s not as conducive to more respectful employment, and males complete apprenticeship programs at twice the rate. Larger builders tend to have all the apprentices, and they keep them due to market power. The smaller, more innovative rural employers don’t necessarily get the same number of apprentices. What do you think the federal government could do to be doing a better job there? I know apprenticeship is a provincial issue, but unemployment is a federal issue.
Do you have any thoughts on that? It is tied into the whole challenge we are facing right now.
Ms. Demers: It is a great question, because it speaks to how the industry is structured, and how the industry is structured in Quebec is very different than elsewhere in Canada. APCHQ is also the labour representative. We speak on behalf of all the employers who work in the residential sector with the counterparts that are unions. In Quebec, to be unionized is mandatory. If you want to work in the construction sector in Quebec, you must join a union. There are five unions that can represent you, but you must choose one. Otherwise, you cannot work.
The way it is structured is as a closed market. It is a closed market because not everybody can enter the market. To enter the market, you either need to go through training, and then you get a competency card that allows you to do a certain trade. When there is a shortage of trades in some sectors or regions in Quebec, then you have the option to get in and jump into the industry, because employers will vouch for you and train you on‑site.
It is a closed market, so when there is need, then all the employers are fighting for the same workers because the number of workers is fixed.
When there are fewer needs or business is slower, employers are fighting less for the same trades and skills. That means it is not so easy to enter the market. It is not so easy for youth to join the market and become constructors and skilled labourers in the construction industry, because the way it is set up doesn’t allow for easy access.
At this moment in Quebec, we’re missing about 16,500 skilled workers. One of the issues is that 70% of the workers who work in the construction industry in Quebec are technically unskilled. It means they have learned their trade on-site. That’s okay. It doesn’t mean they are not good. It means they are not coming from the route of formal training.
How can the federal government help? There is one place where it can help, definitely, and it is in regards a sector that is not completely impacted by all this: the prefabricated buildings, the prefabs. The workers work in industries with factories, and they are not affected by that structure and system.
The Deputy Chair: Thank you.
Senator Martin: Thank you for your testimony. I had asked the previous witness questions about Quebec. I know you’ve answered that with Senator Fridhandler.
My question relates to the new powers that Quebec municipalities have received to accelerate permitting. These are often underused or misunderstood. What needs to happen to ensure these regulatory tools are effectively adopted to speed up housing delivery?
Ms. Demers: You are speaking about PL31, which is a power provided to municipalities in Quebec with over 10,000 constituents. Not many municipalities in Quebec are able to use it, because there are many more with under 10,000 constituents. That’s the first thing.
Second, you mentioned the fact that not so many use it. Again, it speaks to what was mentioned before. Sometimes when you want to use a power such as this one, it goes against what your constituents are asking for, so it takes courage.
Yet many mayors in Quebec in the past two years have used this power. It was used in Quebec City. It was used in major cities elsewhere in the province. What it provides for is if there is a project that doesn’t need any transformation in terms of zoning or regulation and it is all okay —
The Deputy Chair: It is as-of-right.
Ms. Demers: Yes, it is as-of-right. Thank you for the help.
If a project is as-of-right, you can go ahead and you don’t have to go through the lengthy process. If the project is not as‑of‑right, then you have to go through the lengthy process.
The issue is that zoning, in many municipalities, needs to be updated. For instance, if you have zoning that allows for flooring, and you would like to have a project with densification that goes up to six floors, then you are not as-of-right and would not be able to use the power.
Senator Martin: With this power, you also need modernization. You talked about whether it is harmonized codes.
Ms. Demers: Yes.
Senator Martin: You identified several problems.
Ms. Demers: Yes.
Senator Martin: Do all these things have to catch up?
Ms. Demers: It is catching up, and sometimes at a faster pace than others depending on the municipality.
We had an election. New mayors were elected last Sunday in Quebec. We’re really looking forward to seeing how this will be implemented in the next few years.
Senator Martin: Does this power also exist in other regions of Canada, or is this something specific to Quebec?
Ms. Demers: I believe it is specific to Quebec.
Senator Martin: You have these models that are working for you in this way. However, as you said, there needs to be improvement. In your testimony, at the end, you said it quickly because the chair said you had limited time. I heard you say an agency invests 85% outside of Canada. That’s a huge number. Would you explain further about that? I did not quite understand.
Mr. Goulet: The organization PSP has a global real estate portfolio. Its value is about $26 billion. If you go on their website, it is right there. For 85% of the portfolio, the value is outside of Canada, which shows they don’t invest a lot of money.
We have also checked for the Canada Pension Plan. We didn’t have specific numbers in terms of the portfolio value, but we did see a similar trend. We see portfolios related to the federal government are not actually investing much in terms of residential development in Canada.
Senator Martin: That’s an important point to note. Thank you.
Mr. Goulet: Absolutely.
[Translation]
Senator Dalphond: In your Bulletin de l’habitation Prévisions 2025–2026, you indicate however that construction figures are very good in Quebec this year. We will be breaking records. There is no problem with housing starts. Unlike Ontario which has seen a drop, housing starts are up in Quebec. How many workers did you say are needed?
Ms. Demers: We need 16,500 workers.
Senator Dalphond: If we had those 10,000 or 15,000 additional workers, we would break records.
Ms. Demers: I will ask David to complete my answer on certain aspects. Thank you for the question, senator.
First, the record for housing starts in Quebec is about 74,000. That is the absolute record for housing starts in a year. We would need to build 100,000 homes, which is still a significant increase.
Would we break records if we had more workers? We would break records if all the factors that go into housing starts could be accelerated. The number of workers is one factor, but obviously not the only one. Workers in Quebec’s construction industry cannot enter and leave the market as they would like. It is a closed market.
Once they are in the construction industry, they can work in the sector they prefer: residential, commercial, industrial, institutional or major public works. Depending on where the projects are and where the investments are made, workers follow their employers who may have projects in one place or another. Having more workers would not necessarily guarantee an increase in housing starts.
Senator Dalphond: That brings me to my second question. In the budget, specifically with regard to housing, we see that productivity has increased in all sectors except for construction, which has dipped. How does Quebec fare in that regard? Has productivity in construction been declining in Quebec for a number of years as it has across Canada? If so, what does your organization, which includes general contractors, suggest to make workers more productive?
Ms. Demers: We are very concerned about the drop in productivity in the construction industry. There are various factors at play. I am very keen on this topic, but I will try to be brief.
Senator Dalphond: You have two minutes.
Ms. Demers: The construction industry has not been forced to change its practices dramatically in recent years because everything was running smoothly. A gap has widened with other sectors which have had to modernize. The construction industry has not had to modernize as much. That is one aspect.
Another aspect is that the industry is made up of small players. That does not mean that those players should not innovate, but not all businesses can make the same kinds of innovations.
Various things are needed for the construction industry to adopt more effective and productive practices, including a work structure that allows greater flexibility, versatility and freedom of choice in management. The industry’s structure limits those aspects. That is one limitation.
Increased productivity is also needed, for example by adopting work practices that involve prefabricated materials, modernization and standardization. Not much standardization is possible right now because, even though there is just one building code in Quebec, its interpretation is arbitrary. There are 1,100 towns and cities in Quebec that interpret it in 1,100 different ways. That limits predictability. Without predictability, it is very difficult to invest the millions of dollars needed to keep pace and adopt automation or standardized production approaches. Those are among the challenges.
There are others, but I will focus on those. What can we do? We have to assist, train and help our business owners adopt more productive business practices and help them develop related technological and business management practices, and we need to come back to talk to you about these challenges.
[English]
Senator Yussuff: Thank you both for being here.
Quebec has a unique reality that’s somewhat different from the rest of the country. You have challenges, no question, but you have some different realities.
One of the things we’ve heard from witnesses who have come before the committee is for new builds, development charges outside Quebec are quite significant. In the Quebec, it’s quite the opposite. Despite that, you still have problems regarding building enough new builds to meet the needs of Quebec.
Given the lower costs on development charges in Quebec, you’re now identifying a myriad of issues that we need to tackle. Given the uniqueness of the challenges that we face, what are some of the positive things we can learn from Quebec? Obviously, having lower development charges is one, but what are some of the positive things we can learn from Quebec that other Canadian jurisdictions can benefit from in the context of what you’ve done very well?
You have a labour shortage — like everybody else — at the end of the day; not everyone adopts the code equally, and they don’t know how to implement it. But there have to be positive attributes in regard to Quebec’s desire to build enough affordable housing for its population that seems somewhat different than the rest of Canada.
Ms. Demers: Thank you for the question, senator.
Again, yes, it is structured differently than in the rest of Canada. And again, the fact that development charges are different than the rest of Canada doesn’t greatly impact the fact that it’s still costly to build in Quebec.
It used to be a market that was less costly; it was an El Dorado. Students were coming from all over the world because it was cheap to stay in Quebec. That’s not the case anymore.
There are a few reasons for that. For one, to buy land is costly. There is also the cost for everything else: materials, labour, et cetera. What works well — because you asked that question — is the capacity to do some projects that are not only private-private or out-of-market.
For instance, some projects have been really successful in scaling up because they’ve provided one project that was able to be implemented through the province. That helped.
Another thing that works is to try to have innovative ways for not-for-profit and for-profit to work together, trying to bring the best of their expertise together to find ways to make it work. This is something that has been successful so far.
[Translation]
David, are there any other examples of projects that have worked well?
[English]
Mr. Goulet: Obviously, there’s also a big partnership going on right now with public transit being built. We have the example of the Metro Blue Line being extended in Montreal. The builder, the public transit provider, is also partnering with developers to ensure there will be enough housing around each station. So they’re actually co-developing some of their own lots. That has been a very effective way to not only increase ridership, but also increase revenues for transit agencies as well as create housing where you actually need it, which is where you have services.
I think that’s a very good example. It is under construction right now so we have not necessarily seen the towers being built, but the partnership has been signed and formalized by the city as well. That’s a very interesting proposition.
We’ve seen the same thing in Quebec City around the tramway system. They are planning to massively increase density around these stations to ensure you will have enough revenues and have the buy-in from the population to ensure there is enough housing.
That’s a very good example. Other provinces are trying to go that way, but it’s not necessarily as formalized as we’ve seen so far.
Senator Yussuff: Quebec has a lot of smaller municipalities. It’s very diverse in that way. What are some of the things they’re doing that are unique and different, given their challenges are unique and different because they are not big cities in Quebec?
Ms. Demers: That is a great question. We have travelled all around the provinces to meet with hundreds of mayors. One thing that stood out is that the municipalities that are successful in diminishing the time to access a construction permit have always been able to put in place a great communication channel that is well linked with expertise from the constructors.
So the constructors, the promoters, are able to have conversation, to have bilateral dialogue, with the mayors. They are able to foresee what’s coming and have some visibility.
When you know what’s coming, you can plan accordingly. And if you plan accordingly and remove some of the steps before having the permits, then it takes less time and is less costly. From what we’ve seen, this is a great example of bilateral work.
Senator McBean: Ms. Demers, I think you said something at the beginning that was one of my favourite things of the entire study. I understand that there’s a shortage of supply for homes, but you said the most affordable home is the one that’s already built.
You also mentioned that you recognize there is a delay for people moving from the rental environment into home ownership.
We’ve heard elsewhere in this study that there is a delay in downsizing for seniors because they can’t move into new homes because they’re too expensive, so they might as well just stay where they are. And I see the chain is locked up; people are not flowing through the system enough.
Do you believe federal tax incentives, such as for purpose-built rental or renovation of existing homes, would meaningfully increase the supply in Quebec’s urban and rural areas?
Ms. Demers: This is one of my favourite topics, so thank you for asking. One of the issues that we face — and we have to understand the Quebec market and Quebec structure — is we have the highest number of renters in Canada. Yet we also have the oldest stock of apartments in Canada.
One of the impacts is that there is no incentive or benefit for renovating. If you live in your own house and you renovate, then you do it for yourself and you do some home improvement. You pay with taxed money and for taxed services, and maybe one day you’ll have a return on investment or your children will get the benefits of your renovation. If you are homeowners but you don’t live in the place — if you are a landlord and rent to others — the issue is that you invest in renovating, then there is no way you can have a return on investment unless you are very patient. The impact is that the stock is not renovated as it should be.
Yet we have done research, and it is interesting and fascinating to see that if we were to renovate houses and apartments in Quebec that were built before the 1980s, we would be able to stop the energy loss of the equivalent of two dams, which is incredible. We would be able to stop the loss of the equivalent of more than 800,000 houses’ electricity and heat needs per year. Yet we don’t see any clear programs that spearhead and accelerate this renovation. It needs to be done for economic reasons but also because those houses are the ones that are more affordable, and we need to keep people living in those houses in place. One of the reasons that we see that the movement is not done is there is not enough of all the options. Older people don’t want to move. They saw what happened during the pandemic, and they don’t want to move to long-term care homes either. They don’t want to move. It is very expensive for youth to find apartments. The chain is stuck. If we renovate, then we don’t lose any apartments or stock. This is something that needs to be accelerated. Do we have enough programs? No, not yet. Thank you.
The Deputy Chair: Thank you, Ms. Demers.
Senator Marshall: Could you give us some more information on the development charges? I know Senator Yussuff mentioned it briefly in one of his questions. One of the issues that keeps coming up with all of our witnesses is the excessive costs, especially in Toronto and Vancouver. I see your development charges are very low. Did you say earlier that the provincial government is subsidizing them? Why are your charges so low whereas in other provinces or other cities and towns, they are so high? Is your tax structure different? Are you picking it up through your property taxes? Please talk a little bit about that. Are you a member of the Federation of Canadian Municipalities? We did have a representative here. Could you just explain where you are getting your money?
Mr. Goulet: It depends. When we’re building a street to build houses on, regular suburban developments, yes; obviously, the developer has to pay for that kind of infrastructure, as in the rest of Canada. When it comes to infill sites, before 2018, that was not permitted in Quebec, so this is a new form of development. It is a new charge. That’s also why not a lot of cities have started using that, because a lot of the infrastructure already existed and they had to build it using regular property taxes. In the past, the Quebec government had specific funds, especially when it came to water treatment facilities. They had specific programs in the 1990s to pay for those. In a way, the cities didn’t have to pay for them. Now the problem is that these facilities need to be updated. Now the provincial government is not necessarily putting up the money to do so, so the cities have to start charging development fees to try to fund these new infrastructure projects or these renovations. At the same time, a lot more cities are now starting to charge development charges, especially for infill projects. It didn’t exist before for a lot of these developments.
Senator Marshall: Based on what you are saying, if the development charges are now low and you are saying now it is starting to shift, are you going in the same direction as Toronto and Vancouver and all of these cities?
Ms. Demers: That’s the risk.
Mr. Goulet: Yes.
Senator Marshall: I know the federation was going to ask or did ask the federal government for so many billions of dollars to replace these development fees that they are charging. Is that something that you are onside with?
Ms. Demers: We are not part of the Federation of Canadian Municipalities —
Senator Marshall: Oh, you are not members.
Ms. Demers: We are not a municipality. One thing that we argue is the fact that it is unfair to only put the burden of future infrastructure on newcomers because all the constituents have been able to access and use all the infrastructure. To put the burden of the infrastructure only on newcomers in a city or a neighbourhood is therefore unfair, and it is especially unfair because then it impacts the newcomers, who are new families who are often accessing home ownership for the first time. They are doubly impacted because of the high costs of the house and of interest rates and, again, because they are being charged for the development of the streets and other infrastructure.
Senator Marshall: Do I have time for a follow-up question?
The Deputy Chair: You have 30 seconds. With the grace of the chair, go ahead.
Senator Marshall: So does that mean that the objective now is to spread those costs with the property taxes? Is that where you are going?
Ms. Demers: No. We need to review how cities are financed. The way they are financed is through land expansion, and there was a time when it was not costly and easy to do. Now that is not the case. We cannot finance the cities the same way we used to since we have different needs today.
Senator Marshall: Thank you. That’s very helpful.
Ms. Demers: Thank you.
The Deputy Chair: Seeing that there are no other questions, I will use the chair’s prerogative to ask one.
The question is looking to compare the Quebec experience with the Ontario experience and even the British Columbia experience. Urban planning is the root of development. You always plan first; you engineer second. You don’t know what pipes you need until you have actually created your community plan, your master planning. Ontario has always been derelict in its planning. They are always chasing infrastructure money because they have never planned accordingly in terms of where they are going to put the intensification. What is the Quebec experience? That’s what I am asking. Are they planning accordingly and then doing the engineering, layering that on top, or are they following some of the bad examples throughout Canada?
Ms. Demers: The answer to your question — and thank you for this question — is yes and no. It depends on the cities. Again, there is what we call the autonomy of each city and municipality. Some of them are good planners and are able to provide some good provisions. Some are less good planners, and it is difficult for them.
Some of them are also stuck with zoning that is not as positive for them: They are not allowed to develop because it is rezoned green and so on.
One thing we are doing — I would like David to speak about it — is putting in place a committee, kind of a think tank, to better understand what the needs are in terms of infrastructure and where we can build in Quebec.
Mr. Goulet: Thank you. Indeed, we are working on this group and working with different organizations in Quebec, including the organization that represent all the contractors for major works, including roads and infrastructure.
We also work with the organization that represents the engineering firms in Quebec, as well as a number of other organizations and associations that help us understand what the issues are in terms of the way we’re building.
In some ways, we’re behind in terms of our practices — compared to European countries, for instance.
When we are comparing ourselves to other provinces, this is a Canada-wide and even a North America-wide issue. We’re still over-regulating. The code hasn’t been updated, or we keep adding rules instead of cleaning it up and rationalizing it. That is a big issue in general in Canada.
Once again, it depends on different cities. As we mentioned before, we have many smaller municipalities, so they don’t necessarily have the staff in-house to do the kind of research on these new technologies or innovations to try to solve their own issues. That’s a big problem as well.
From what I can see, in Ontario, you have fewer cities but there are still similar issues. I don’t think it is necessarily linked to the size or the number of municipalities but the capacities. Maybe we need to have more provincial investment or work towards that to ensure we have some kind of standardized procedures instead of always working one-on-one.
The Deputy Chair: Thank you. Colleagues, any further questions?
Ms. Demers, Mr. Goulet, thank you for your participation today. Your testimony and insight have been appreciated. Thank you.
Mr. Goulet: Thank you.
Ms. Demers: Thank you for having us.
The Deputy Chair: Colleagues, I see there are no further questions. With that, thanks to our witnesses for taking the time to appear before us today. It was a very informative panel and session. We appreciate your contributions to our study.
As mentioned, we will soon be getting into the writing phase of this report. We will ensure each of you receives a copy of the report down the road.
If you have further items to contribute with respect to your answers to some of the questions, please send them to our clerk. We would appreciate that.
Colleagues, thank you for your contributions today. Your preparation and thoughtful participation are always appreciated.
I want to take a moment to thank the staff who support our committee, our colleagues in our offices, the interpreters, the Debates team transcribing and editing the meeting, the committee room attendant, the multimedia services technician, the broadcasting team, the recording centre, ISD and our page Kate. Thank you all for contributing to this successful meeting.
(The committee adjourned.)