THE STANDING SENATE COMMITTEE ON NATIONAL FINANCE
EVIDENCE
OTTAWA, Tuesday, November 4, 2025
The Standing Senate Committee on National Finance met this day at 9:01 a.m. [ET] to examine and report on federal programs and initiatives to support the creation of housing.
Senator Claude Carignan (Chair) in the chair.
[Translation]
The Chair: Good morning, honourable senators. Welcome to all senators as well as Canadians following us on sencanada.ca. My name is Claude Carignan. I am a senator from Quebec and the chair of the Standing Senate Committee on National Finance. I would now like to ask my colleagues to introduce themselves.
Senator Forest: Hello, everyone. Éric Forest from the Gulf Division in Quebec.
[English]
Senator Marshall: Elizabeth Marshall, Newfoundland and Labrador.
Senator MacAdam: Jane MacAdam, Prince Edward Island.
Senator Kingston: Joan Kingston, New Brunswick.
Senator Ross: Krista Ross, New Brunswick.
[Translation]
Senator Dalphond: Pierre J. Dalphond from Quebec.
Senator Oudar: Manuelle Oudar from Quebec. I am replacing Senator Hébert today.
Senator Miville-Dechêne: Julie Miville-Dechêne from Quebec.
Senator Galvez: Rosa Galvez from Quebec.
Senator Gignac: Clément Gignac from the Kennebec division in Quebec.
The Chair: Honourable senators, today we continue our study on federal programs and initiatives to support housing creation.
We are pleased to welcome Kevin Lee, Chief Executive Officer, Canadian Home Builders’ Association, as well as Jeffrey Hudson Rankin, Professor and Research Chair, Civil Engineering, and Executive Director, Off-site Construction Research Centre, University of New Brunswick. We also welcome, from the Insurance Bureau of Canada, Liam McGuinty, Vice-President, Federal Affairs, and Margot Whittington, Manager, Climate Policy.
I used my discretion as chair to consolidate the two groups of witnesses. We needed to accommodate two groups for one hour each. One group withdrew, so I asked the Insurance Bureau of Canada to join the first group. We will have the option to go to two hours if there are enough questions and comments. This will give us more flexibility, and will help avoid putting pressure on our witnesses so we can have their full input. I now ask Mr. Lee, Mr. Rankin and Mr. McGuinty to make their opening statements. You each have a maximum of five minutes.
[English]
Kevin Lee, Chief Executive Officer, Canadian Home Builders’ Association: The Canadian Home Builders’ Association, or CHBA, represents over 8,500 member firms across the country in home building, land development and renovation, as well as the supporting suppliers and service providers in the residential construction industry. CHBA members are largely comprised of small businesses that build low-rise, mid-rise and high-rise homes for ownership and for rent.
CHBA has just released our third-quarter results for 2025 for our Housing Market Index, which is a leading indicator of the current and future health of the residential construction industry. It shows new record lows for housing start prospects for all forms of housing for ownership. The dismal scores point to still fewer housing starts ahead.
Housing starts for home ownership nationally continue to fall. In 2021, 70% of housing starts were for ownership — now only 50% are. In Ontario, starts for ownership year-to-date are down 30,000 units since 2021. This is from a lack of consumer confidence, currently, but also from increased construction costs and punitive taxation at all levels of government, despite the government’s stated need to build more homes to address Canada’s housing supply shortage. Simply put, we cannot double housing starts if Canada can’t afford to have Canadians buy homes.
The Canada Mortgage and Housing Corporation’s Fall 2025 Housing Supply Report reinforces this, stating:
. . . the drop in ground-oriented construction in high-cost markets may signal a lasting decline in homeownership rates and a prolonged slowdown in housing starts.
Since the purpose of this study is to examine the creation of housing, it is important to distinguish between affordable housing and housing affordability. Affordable housing typically means below-market-rate, government-subsidized housing. Housing affordability, conversely, is about market-rate housing that people can afford to rent or buy on their own. In the current housing crisis, the entire housing continuum is under stress.
We do need to support those in core housing need and provide rental stock Canadians can afford. However, Canadians also want and rightly expect that if they have a good job and work hard, they should be able to afford to buy their own home one day, and Canada can’t double housing starts if the country can’t tap into the investment power of individual Canadian families to buy their own homes.
The government needs to return the focus of housing affordability to market-rate ownership as well, since policy and market conditions are making this dream slip away.
That brings me to Build Canada Homes, or BCH, which will focus on government-subsidized housing. The development of more non-market homes is indeed important, but it is also critical that, in parallel, there be a major effort by this government to address housing affordability far beyond BCH to double housing starts in market-rate housing, where 95% of Canadians live. To put it in perspective, BCH has targeted 4,000 units in its initial tranche. That is good for government-subsidized housing, but it is less than 1% of the 500,000 units of all housing types the government says we need to build each year.
It is estimated that BCH can build as many as 45,000 more units on Crown lands moving forward. Again, this is good for government-subsidized housing, but that is less than 1% of the 5 million homes the Canada Mortgage and Housing Corporation, or CMHC, estimates we need to build over the next decade. Far beyond BCH, continued policy change will be required to reach the targets set by the federal government.
Momentum from previous federal initiatives — like the 2024 Canada’s Housing Plan — that were making important policy steps to support home ownership have stalled in 2025 as the government instead focuses on government-subsidized housing. The promised GST relief for first-time buyers, for example, remains unpassed, sidelining buyers and stalling construction over recent months. Immediate passage of Bill C-4 and expansion of GST relief to all buyers is essential, especially in provinces like Ontario, where some 64% of builders are currently laying off workers.
Local development taxes, which are up over 700% over the past two decades, also require urgent reform. The commitments to work with provinces and municipalities to reduce development taxes must be upheld and coupled with work to have municipalities move to alternate funding models in the future to replace development taxes that unfairly burden new homebuyers while benefiting the rest of the community.
Other required actions include addressing the stress test, which is, as of yet, an unfulfilled commitment. Not properly supporting the workers that are needed in the sector and only supporting unions and Red Seal trades remains a problem, as does the immigration system, which doesn’t enable bringing in the right people to build homes.
The continual changes to the National Building Code that make already good housing still more expensive must be ended. Affordability must be added as a core objective of the National Building Code. And while a move to more factory-built construction can help productivity, understanding and addressing the true barriers to more investment in this area is critical, and for that, I would point the committee to the CHBA’s Sector Transition Strategy.
These are just a few of the vital areas that need to be addressed to truly build much more housing supply, and without continued improvement in policy supporting market-rate housing, including home ownership, inability to buy will lead to much less housing being built, intensify pressure on rental and social housing and increase the wealth and inequity gap between the few who can access home ownership and those that can’t.
Thank you again for having me and for undertaking this study. I look forward to answering any questions you may have.
Jeffrey Hudson Rankin, Professor and Research Chair, Civil Engineering, and Executive Director, Off-site Construction Research Centre, University of New Brunswick, as an individual: Thank you for the invitation to appear as a witness today. I value the opportunity and am pleased to contribute in any way I can.
I will focus my opening remarks with a brief overview of my perspective and a few of the organizations I represent.
I am a professor of civil engineering and a research chair in construction engineering and management as well as the executive director of a research centre at the University of New Brunswick, or UNB. I am the current president of the Canadian Society for Civil Engineering.
My professional experience is in building construction practices. Early in my career, I was a member of the design and construction team that delivered the Confederation Bridge. Relevant to today’s topics, this project was one of the first Canadian public-private partnerships. It leveraged a manufacturing approach in design and construction and resulted in significant innovation to deliver a large piece of public infrastructure.
My PhD at the University of British Columbia, or UBC, focused on digital technologies in construction, and I have over 25 years in industry-driven research experience regarding the adoption and implementation of advanced technologies and practices. So my perspective today is as a construction engineering researcher.
The University of New Brunswick’s Off-site Construction Research Centre, or OCRC, was established in 2018 and has an advisory board of practitioners representing some of Canada’s largest developers, general contractors, designers and manufacturers in the building construction industry. The OCRC has worked with over 70 industry partner organizations on topics of off-site construction, including digital technologies, design, manufacturing and construction processes and building products.
The centre has ongoing collaborations with researchers and industry organizations across the country and internationally. The centre also supports the coordination of a working commission, within the UN-mandated International Council for Research and Innovation in Building and Construction, to share lessons learned around the world in off-site construction.
An example of the centre’s work at a national level is the Roadmap to Transform the Canadian Construction Industry through Industrialized Construction, Research and Innovation, published in April of this year in partnership with the National Research Council Canada, or NRC. The road map proposes 22 solutions to the barriers in the areas of policy and regulatory frameworks, procurement models, financial and insurance services, awareness and collaboration, capacity and capability for off-site construction and research and data sharing.
The road map has been referenced by many in the federal government, and we are acting on some of these proposed solutions. We are also conducting a more comprehensive exercise for housing supply in the Atlantic provinces in collaboration with the region’s construction associations, housing authorities and engineering schools in each province.
The Canadian Society for Civil Engineering, or CSCE, is a not-for-profit, learned society created to develop and maintain high standards of civil engineering practice in Canada with a membership of practitioners and researchers. The society is also a national focal point for approximately 50 university-based construction engineering and management researchers in Canada.
A task force of this group called Rethinking Construction in Canada was formed to offer a coordinated voice of researchers in the areas of procurement, digital transformation, robotics and industrialization within the construction industry.
The group’s response to the Build Canada Homes: Market Sounding Guide highlighted opportunities to support research‑driven innovation in areas of alternative forms of procurement and project delivery and innovative process and product methodologies and technologies to help overcome the inefficiencies of conventional construction approaches by accelerating innovation.
It cannot be overstated that what is required to deliver on housing needs for Canada and, more broadly, nation-building projects is a significant transformation in the ways we design, build and deliver infrastructure. In other words, it is complicated. However, based on our review of what has been released for Build Canada Homes and our interactions with those who have been involved to date, we are optimistic about many of the directions indicated. Both the UNB research centre and the Society for Civil Engineering have ongoing interactions with federal entities to provide support as the Build Canada agenda takes shape.
Assuming that the Build Canada Homes will act as a catalyst organization with advisory members, the Canadian construction engineering and research community can provide its broad and long-term view of planning, design, manufacturing, construction and infrastructure asset management. We will continue to support innovation, collect and analyze data to reduce uncertainty and risks, capture and share best practices, mobilize knowledge and support the transformation required.
Thank you.
The Chair: Thank you. Mr. McGuinty?
Liam McGuinty, Vice-President, Federal Affairs, Insurance Bureau of Canada: Good morning. I am pleased to be here today on behalf of the Insurance Bureau of Canada, or IBC. We are the national industry association representing the vast majority of Canada’s home, car and business insurance companies. Canada is becoming a riskier place to live, work and insure. We are seeing more, and more severe, natural disasters.
2024 was Canada’s worst year yet, with insured damages caused by natural disasters surpassing $9 billion. Over the past two decades, the average annual insured losses from natural disasters has increased by nearly 370%. For context, inflation over that same period was closer to 50%.
Last summer, extreme weather events resulted in approximately 220,000 insurance claims in the span of one month. For comparison, in the year prior, Canadians made 160,000 claims over the entire year. Canada’s property and casualty, or P&C, insurers have been aware of the impacts of severe weather events for years, sounding the alarm with governments, proposing policy solutions and pricing and managing natural disaster risks.
At the same time that Canada is facing increased risk from natural disasters, we’re facing a housing crisis. Failure to address these issues in tandem will cost Canada billions of dollars.
The federal government’s launch of Build Canada Homes to help construct 3.9 million new homes by 2031 is ambitious and welcomed. We agree that housing affordability is critical, but the most expensive home is the one we need to rebuild. A new home on a flood plain isn’t affordable if insurance premiums go through the roof. A subsidized rental unit in a wildfire-prone area is not affordable if families are forced to evacuate every year and lose their homes and possessions to a summertime blaze.
According to the Canadian Climate Institute, unless our housing policies change, Canada could end up building 540,000 new homes in areas at high risk of flooding and 220,000 new homes in areas exposed to severe wildfires. The result would be up to $3 billion in additional property damage and loss every year. This would also be an untold risk to the lives of Canadians.
What needs to be done? The federal government must take a leadership role in making Canada more resilient to a changing climate. That has been the message of IBC and organizations like Climate Proof Canada — a national coalition made up of insurers, municipal governments, Indigenous organizations, NGOs and research organizations.
Our core policy proposals are straightforward. First, we need to build in the right places and in the right ways. As the federal government prepares to rapidly build new homes across the country, we need to be intentional about protecting Canadians. This means that well-defined conditions should be attached to federal housing dollars. There must be no federal funding for new homes in high-risk flood plains or high-risk wildfire zones. In other words, there should be no short-term fixes that create long-term liabilities. We also need modernized national and provincial building codes that account for our changing climate.
Second, we need to create the conditions for smart housing development by investing in municipal infrastructure. Canada suffers from a staggering $270-billion infrastructure deficit. That’s the gap between the current state of infrastructure and the investment required to meet future demands. Municipalities own and maintain most of the country’s infrastructure, and they have limited funding tools at their disposal. The federal government should immediately boost the Disaster Mitigation and Adaptation Fund, or DMAF, which was designed to support public infrastructure projects to become more resilient to climate‑related disasters.
Third and finally, we need to empower Canadians to protect themselves. Natural disasters are going to occur with more frequency.
Canadians can better protect themselves by better understanding the risks they face. To that end, the federal government should immediately release its flood map portal and expand it to include high-risk wildfire and hail zones.
The portal will serve as a resource for Canadians to make informed choices about where they live. The portal is ready to go; it just needs to be launched.
Thank you for the invitation to speak with you today. We look forward to your questions.
[Translation]
The Chair: Thank you very much for your three presentations.
[English]
Senator Marshall: Mr. Lee, you covered a lot of ground in your opening remarks. I read your pre-budget consultation submission. There were many suggestions there. Most of them are within the control of the federal government, but I doubt that everything will be covered in the budget this afternoon. So you’ll be like us; you’ll be looking to see what’s in there. Can you give us an idea as to what would be at the top of your list?
Mr. Lee: Thank you for the question. It is a complicated, complex situation. There is no silver bullet. We have to come at it from so many different ways. We have created the problem in so many different ways, so we have to address that. To your point about what is at the top of the list, with the huge affordability crisis and the impact of the trade war also hitting consumer confidence, we need things that will have an immediate and lasting impact.
Two things come to mind right away. One is the exemption of GST and extending that to all buyers. It will be helpful for first‑time buyers as currently structured, but that is a small part of the market. We need to extend it to all buyers to incentivize construction, to allow move-up buyers to vacate their entry-level homes, as well as to allow older people living in family-oriented housing to downsize and create new construction and free that up.
The other big thing, and I alluded to it in my remarks, is development taxes in most of our larger urban centres in Canada have increased dramatically. In Ontario, over 30% of the price of a new home is tax now, most of which is development charges.
Addressing those immediately will have an immediate and direct impact on affordability. That’s not to say that municipalities don’t need to find alternate sources of money. Unfortunately, they have used development taxes to tax new construction in an unfair way with something that should be spread across the entire tax base.
We need to bring those amounts down, and we need to then work with municipalities to find other ways — and there are many — for municipalities successfully fund infrastructure without burdening new homebuyers. Those are a few of the top things.
Senator Marshall: So would you like to see Bill C-4 enacted as soon as possible?
Mr. Lee: Bill C-4 needs to be enacted immediately, and ideally extended to all buyers. Either way, it needs to be enacted immediately because the impact of it not being passed in the spring has been a holdup of new home sales, and therefore construction, all summer long, during a disastrous time.
Senator Marshall: Everybody is waiting. Mr. Rankin, you’re with the civil engineering group. The modular homes that everybody is talking about — or at least the government is talking about — I think you referred to it as off-site construction. What is the research saying about that? Will those types of homes stand up to Canadian winters? I’m thinking about comments from the insurance people.
Could you just give us an update as to the practicality of modular homes and off-site construction of homes?
Mr. Rankin: Sure. There is no change, essentially, in the codes and standards that are followed in terms of meeting those criteria. It is more about the process.
The other thing to clarify is that there are a range of automation or off-site techniques. When people refer to modular construction, they’re usually talking about a volumetric box, but there are other steps along the way where you can manufacture components of a house in a controlled environment.
In terms of general outcomes, it makes it a lot quicker in terms of speed of delivery. It provides a safer environment for workers. There are better abilities to control that process, which results in a higher-quality end product.
Senator Marshall: Are you saying that the final product of the on-site construction is as good as or better than the traditional way of constructing housing?
Mr. Rankin: It is as good, for sure.
Senator Marshall: You’re saying it would be as good or better.
Mr. Rankin: I would say better, but again, we’re all designing and building to the National Building Code and those standards for housing, so there’s no difference in that regard. However, there are better opportunities.
[Translation]
Senator Forest: People often say that a problem well-stated is a problem half-solved. My question is for Mr. Lee and Mr. Rankin. Since 2020, construction costs for single-family homes have increased by between 40% and 60%, depending on the region in Canada. In 2024-25, the increase was between 10% and 13%. What are the reasons for this increase? We know that the cost of building a new home can be estimated at about 50% for labour costs and 50% for materials. Why are we seeing this unmanageable surge in construction costs for single-family homes? If the cost were to remain accessible, we would not be in this situation. Is it the cost of materials or the shortage of workers that explains this significant increase?
Mr. Lee: In fact, it is all of it. It includes both labour and materials. After 2021, because of the pandemic, everything changed.
[English]
First, labour rates have gone up pretty substantially, and almost every material has gone up in terms of cost, for a variety of reasons. Through the pandemic, we heard a lot about lumber going up dramatically. That came down some but hasn’t returned to pre-pandemic levels.
Meanwhile, every other construction material has moved up in cost through supply chain issues, costs of labour and raw material inputs. The Housing Market Index we release every quarter shows that we’re up about $100,000 just in terms of materials on the average 2,500-square-foot house in Canada.
It has been exorbitant, and then you add on top of that the municipal development taxes that I mentioned earlier. They really are a problem. We have a Modular Construction Council at CHBA, where we focus on off-site and factory-built construction, but it affects all types of construction. As Mr. Rankin was saying, it is really just another form of construction. You have to think of modular housing not as a type of housing but as a type of construction because you can build anything off-site.
Either way, all of those costs have gone up and are really not coming down.
[Translation]
Senator Forest: Currently, in light of this reality of surging costs, is the construction industry doing research into improved construction techniques, ways to salvage materials and making ongoing efforts that would have a disinflationary impact on our costs?
[English]
Mr. Lee: The big challenge is that home builders, and even developers, are typically the assemblers of technology and not the developers of technology.
We really rely on the manufacturers of the individual componentry to come through with major cost savings. That said, all kinds of things are being done at all times to try to reduce costs in the construction. Obviously, the size of the house is the first thing that we have seen come down over time. You can change material, finishes and so on, which is also occurring.
The other big challenge is that the building code continues to make things more and more expensive to build. We can talk about improvements to building better houses in all kinds of ways, but we have to ensure that we balance affordability and those other good things that we are trying to achieve and ensure we do it the right way.
[Translation]
Senator Forest: Earlier, you talked about fees to municipalities. One of the main issues that exists is that municipalities only receive 7% of all taxes in Canada. Municipalities are responsible for building and managing the roads, infrastructure and community facilities to attract people to move there to live. How can we ensure that, if we take away these fees, the developer will not simply fill in that gap? At the end of the day, it is the developer that will benefit from these profits, so we are no further ahead.
[English]
Mr. Lee: I’ve heard that quite a bit; you are not the only person who has said that. I think that is a very unfortunate view.
Really, that’s what the market takes care of quite naturally. It is not like in places where there aren’t high development taxes that developers are charging more, because there aren’t development taxes. Right now, instead, what you have with high development taxes is falling housing starts. It is a yes-or-no type of equation. We need development taxes to come down so that those come out of the price of a home so that we can in turn build more housing.
Now, the solution, of course, if you really wanted to make that happen, would be to charge those development taxes not to the developer, because the developer doesn’t pay them anyway. It’s the homebuyer that pays those. The developer is only financing them. If municipalities really want to deal with this, charge all development taxes directly to the homebuyer, which, in turn, by the way, will then show Canadians how much municipalities are taxing individual buyers of new homes.
That would solve the problem. It wouldn’t have much of a different outcome, other than probably putting a lot of pressure on municipalities to find different ways of funding things. And to your point, municipalities do have a lot to pay for in terms of infrastructure, but it just should not be coming, as much as it is, on the backs of buyers of new homes. It should be spread across the whole tax base.
[Translation]
The Chair: We have some time for a second round. He is the former president of the Union des municipalités du Québec, similar to a union leader, who is before you, but for municipalities.
[English]
Senator Cardozo: I have a couple of questions. This is a really important discussion.
Mr. McGuinty, you talked about the government and society needing to focus on the problems of climate change. I get your point about building on flood plains, but I think you have a tougher role to say they should not build where there would be forest fires or wildfires, because you would be saying, “Don’t rebuild in Fort McMurray or Lytton,” for example.
That said, my question is more about how you make the argument these days when there seems to be a move away from talking about climate change, and we are, sort of, putting that on the back burner for now and focusing on economic growth, whatever that is, without looking at climate change.
Mr. McGuinty: Thank you, senator, for the question, and I will start with the first part of the question.
I think you are absolutely right. There is a more black-and-white delineation when it comes to flood plains, but when it comes to high-risk wildfire zones, there are simply more of them now than there were before. Two years ago, the size of the United Kingdom burned in Canada in terms of hectares lost.
I think the important distinction there is to make sure that we have mitigating measures in place if we are going to build in high-risk in wildfire zones, like FireSmart communities and fire breaks and the like. There are certainly mitigating steps that government can take.
Your second question is a good one, and it is one that a number of stakeholders are grappling with. When it comes to housing, our message is a relatively simple one: Costs are going to be paid somewhere along the chain, whether it is up front or by home insurance premium payers down the line. You are already starting to see it, especially in high-risk areas and natural catastrophe areas of Canada — Western Canada, especially. Home insurance premiums in some areas have increased by 50% year over year.
You’ve seen changes in coverage, reductions, frankly, and if trends continue — and I pointed to the research of the Canadian Climate Institute — those kinds of problems are going to be exacerbated over time.
It is about public policy decisions that weigh where we want to allocate those costs, but ultimately, they will be borne by someone, and that someone is almost always the consumer.
Senator Cardozo: Do you find it harder to have that discussion these days? There are many different areas, whether you look at social services or other areas, where you can say, “If we don’t do something now, the costs are going to be more down the road,” and people just don’t want to talk about doing this now.
Do you find that type of discussion difficult to have? Do you find it hard to make that long-term pitch?
Mr. McGuinty: I think there is certainly a zeitgeist right now that is focused on building. You’ve heard it from the federal government, but I think it is important that we and other stakeholders — I referenced Climate Proof Canada — continue to talk about the long-term ramifications.
I don’t think it is necessarily a difficult conversation. I think it is intuitive once people give it a little bit of consideration.
Senator Cardozo: In terms of making that pitch, I have not heard the entire discussion that’s taken place out there, but I haven’t heard this point made before. It is an extremely logical and reasonable point.
When you make that pitch to government, are people listening to you?
Mr. McGuinty: We were quite encouraged by a commitment in the federal Liberal platform from earlier this year that spoke to conditionality of federal funds when it comes to avoiding high‑risk zones. I think what we would be looking for now, and what Climate Proof Canada would be looking for, is some form of formalization of that commitment, whether it is in the budget or afterwards.
This is not just a federal government issue. This is a land-use planning issue. This is a building code issue. All levels of government need to come to the table, which is why we have called for a whole-of-society approach when it comes to fostering resilience.
Senator Cardozo: Mr. Lee, you talked about immigration and how you can better get the right kinds of people in. Have you been able to get many workers in through immigration in the past number of years, and are you concerned about the cutbacks in immigration right now?
Mr. Lee: No, we have not been able to get the right kind of workers to build homes through the immigration system. The way the point system works in immigration is it really lends itself to highly educated, highly qualified people. You know, Canada is seeking the best talent in the world, which is good for a lot of jobs in Canada, but it is also not good for a lot of other jobs in Canada.
I don’t know if you are familiar with the tier system in immigration. Largely what we need is lower-tier workers, which really can’t come through economic immigration. The provincial programs are a little better at bringing them in, but we really need to change the national program, not to up the number of immigrants in total, but to increase the types of workers that can help build homes in Canada.
Senator Cardozo: You’re saying the current process focuses more on university education, for example, and not on the trades.
Mr. Lee: Exactly, and that includes the most highly credentialed trades, for example, which have trouble sometimes meeting the requirements in Canada anyway. We can’t bring in people who could ladder up through the system — who could be coming in with lower education levels but with a little bit of experience could make their way through residential construction and be quite successful contributors to the economy.
Senator Cardozo: Are you able to Red Seal new people coming in?
Mr. Lee: No, definitely not. That would be a perfect example.
Also, with residential construction, there is so much focus right now through the government on Red Seal trades and working with the unions to build more homes. Outside of Quebec, only 10% of workers in residential construction in Canada are unionized. While we do use the apprentices and journey persons, the vast majority of our workers are not apprentices and journey persons, and the paths to successful careers in residential construction are not really through Red Seal, other than for a few specific trades.
We really need to rethink how we properly supply workers to the residential industry.
Senator Cardozo: Thank you.
Senator Ross: My question is for Mr. Rankin. I’m interested in what you see as the best efficiencies — the best cost efficiencies and the best labour efficiencies — in terms of off‑site.
I’m also wondering if you can give me a sense of the work that you are doing. At this point, is it more theoretical, or are you actually able to support industry in terms of getting products out the door and building actual homes, given the shortage that we have?
Mr. Rankin: Thank you for the question. For the first part of the question, in terms of efficiencies, I will avoid the cost question and say that the real benefit is in terms of speed of delivery.
As I mentioned before, there is certainty in terms of the quality of the product and in terms of cost. However, whether it competes on initial first-time costs, the industry is not necessarily mature enough to answer that question, but all arrows point in that direction.
In terms of whether our work is theoretical, I mentioned that, since the inception of the research centre, we have worked with 70 industry partners. That ranges from off-site manufacturers, people who are looking at how to design more effectively for the manufacturing process, understanding what is required in terms of investment, the right sequence in terms of introducing digital technologies, introducing automation and robotics and the right split in terms of what you do in the manufacturing scenario and what you do on-site. Those are all questions for each individual participant in the industry, and for the industry as a whole, that we’re dealing with.
As an industry, we know that we need to essentially build twice as fast as we ever have in terms of what is required to be delivered in housing and other infrastructure projects. We need to think about a different way of doing things.
Senator Ross: This question is for all of you. Mr. Lee, in response to Senator Marshall’s question, you said that there is no silver bullet. However, given the shortage of homes that we have at all levels of cost — both for rental and for ownership — and given the decrease in starts that you referenced, Mr. Lee, along with the layoffs in construction workers, and, as referenced by Mr. McGuinty, the construction of homes in areas of risk, what is — in each of your opinions — the number one thing that the government has to do to fill the gap?
Mr. Lee: We have to get away from the idea that there is one thing. We have to come at it from all of the different directions, whether you are talking about the building code or about increasing productivity. When you talk about changes to the building code to address climate change, that’s important, but how you do it is important too. That’s because, yes, consumers will pay for it, but the question is how? Will that be across the entire insured community or will it be on the individual house? If it’s on the individual house, it is very expensive, because not every house is hit by a tornado.
So the question is this: How do you find that balance? We are working on that as well. How do you figure out what should be in the code? What should be covered by insurance? What should be covered at the community level around wildfire and flooding? You don’t want to be building on flood plains, and if you are, you have to take some major steps. It is about coming at it from multiple directions. The answer is that there is not one thing. You have to be focused on it continually, and you have to be focused on the whole continuum.
That was my point earlier. Build Canada Homes is not set to build 5 million houses; it is set to build 4,000 houses and on federal properties up to 50,000. That’s good for government‑subsidized housing. However, it falls short of 5 million — it is less than 1% — so we must look at what else we can do for purpose-built rental and how we unlock the ability of Canadians to buy homes. The reason is because if they can’t, we will never get there. We can’t do it through government subsidies. We need to fix the market.
Mr. Rankin: I tend to agree with Mr. Lee. It is tough to respond to if there is just one answer, because we have to think of a lot of them. In addition to what Mr. Lee said, in terms of the role of the federal government, it can provide certainty in the market, for one thing.
If you provide certainty in the market, then the market will figure out how to most efficiently respond to that. That applies to the ability to make long-term investments in changing the way we do things. I know I’m on a kick here in terms of the automation and off-site approaches, but those require significant investments, and no one is going to make those if they don’t have certainty in the market at the end of the day.
Building on what Mr. Lee was saying, the Build Canada Homes program is an opportunity to demonstrate how it can be done, but what has to go hand in hand with that demonstration is capturing the lessons learned. If that’s a part of the program, it can go a long way towards educating the rest of the industry in terms of opportunities to improve their efficiencies.
Margot Whittington, Manager, Climate Policy, Insurance Bureau of Canada: I heard you nail down one thing, but for us, the most important thing is making sure that the homes are built in the right places and in the right ways. We must ensure that they are not built in high-risk flooding and wildfire zones and that they are built to be resilient from the outset. This will reduce costs in the long term.
It may cost a little more at the beginning. However, it is crucial to ensure that these homes are resilient because that will support homeowners in the future, ensuring they don’t need to rebuild their roofs or their homes in the event of a natural disaster or natural catastrophe. We know that investing in these costs now is what will save costs in the long term. I would say that’s the most important thing for us.
[Translation]
Senator Gignac: My question is for Mr. Lee. Mr. Lee, your association has 8,500 members across Canada. Can you expand on the differences between provinces and between regions in terms of government fees? A CMHC study showed that government fees in Quebec can represent, on average, $24 per square foot. However, this amount is about $70 per square foot in Vancouver and $85 per square foot in Toronto. There are huge differences in government fees based on the region. Can you give us more details on the rationale behind that?
Mr. Lee: I am pleased that Senator Forest is back, because Quebec is indeed the best.
[English]
When we talk about government-imposed costs at the municipal level, first of all, Quebec has the least expensive housing in Canada. That’s for starters, and the question is why that is. It’s a good question, because the materials are about the same cost, and Quebec is heavily unionized, which will often lead to slightly higher labour costs. However, you have very low or — in many cases — no development taxes in the province of Quebec. It is the perfect example of how you properly do taxation with respect to infrastructure. You don’t place it on the individual buyer; you spread those taxes across the entire tax base because the entire community benefits.
So, that could be from property taxes or fee-for-use services like toll roads, municipal water or waste water. The other thing is that the Province of Quebec allows its municipalities to do debt financing of infrastructure. Rather than financing new infrastructure on a 25-year mortgage by a homebuyer, instead, you are financing that over 50 or 75 years, which is the life expectancy of the infrastructure. You are doing it at a much lower rate because the municipalities in tandem with the province can get much better interest rates than the mortgage interest rates.
There is better pricing in Quebec. Provinces like Ontario — they are finally starting to investigate that — and British Columbia are the worst offenders for development taxes. You are talking about hundreds of thousands of dollars on development taxes on housing. That needs to change.
When we say we need alternative funding models to better fund infrastructure rather than development taxes, the Quebec model is the model, although I will say that Montreal is starting to go down that path. Actually, Calgary and Edmonton, with historically lower development taxes, are starting to go down that path. The message is this: Don’t do the bad thing. Don’t do what Ontario and B.C. have done. Those are the places where people can’t afford homes. Stick to the approach that has been used in Quebec.
[Translation]
Senator Gignac: Thank you for your answer, Mr. Lee. I am pleased that my question has been used to extend an olive branch to my colleague, the committee’s deputy chair.
[English]
As a former chair of the International Housing Association, you probably have other ideas or have seen other best practices. Housing affordability is affecting not only Canada, but also many other countries. Have you seen other countries facing the same problem enact bold measures? If so, what were they?
Mr. Lee: Interestingly, prior to the current government, in the last couple of years here in Canada under Minister Fraser, when we had the new Canada’s Housing Plan, we were actually taking a lot of good steps and moving in a lot of directions.
You are right that the challenges we face are not unique. There are very similar challenges in the United States, although the United States, in many cases, has better approaches to development taxes, as we just talked about. Australia is very similar to Canada: few people, large land mass and two very expensive cities with very high development taxes.
We started to take steps to try and address development taxes. That is a national discussion, and we know we have a major housing shortage that we need to address. We need to do a better job looking at building codes. That is one thing driving up the cost of housing. We need to get the right labour into Canada. That’s another important thing.
The idea of productivity and more factory-built is good. Some countries have done it really well, but they also had large investments from the government a long time ago, in a different era. When we look at Canada and productivity, we need to be realistic about where we are and where the risks are. One of the main reasons we don’t have more factory-built construction in Canada — it is not new technology; it is emerging and has lots of potential — is you need huge overhead. It is big investment. Right now, instead of talking about layoffs with the slowdown, we would be talking about factories closing. By the way, we had one close earlier this year in Kelowna because of lack of sales. We need to de-risk the investments and create a pipeline, as Jeff was talking about, so there is more certainty.
Build Canada Homes is focusing on factory-built, which will create some certainty for factories that will get involved, but we have to do a lot more. The lessons that we are learning right now are things going on around the world. In Canada, we have been getting better in the past couple of years. We have to get back on that path, and I think it will be headed in a good direction.
Senator Dalphond: Thank you for your presentations. It seems things are moving. Ontario has a new bill — I think Bill 17 — that will allow municipalities, similar to Quebec, to finance through a municipal corporation or another type of vehicle instead of charging the development costs. You will have a user paying a fee to cover the debt to a separate entity. The federal government has reduced the GST/HST tax on the purchase of a house for new buyers. They are only 5% of the market, but that could be larger.
According to a study done by Statistics Canada, one of the major problems is low productivity in the construction sector. This is not because of government but relates to the home builders themselves and to the workforce. What are you doing to address these issues? What could be done?
I also note that Professor Rankin is researching all these issues. Should we really reshape the building sectors to move to more off-site parts that are assembled on-site? Should we work for a different type of labour? I’m surprised to hear that outside Quebec, labour is not really unionized. In Quebec, it is unionized, so it must be more expensive, but maybe at the same time it is more reliable with more training and more supervision. I don’t know.
Mr. Lee: One of the things we are doing is debunking the way that people are looking at productivity in the residential sector. There is talk that productivity has dropped since the pandemic. That’s completely erroneous. It has on macro levels, when you take the number of houses and the economic investment in housing and divide it by the number of workers. That’s the case because things have been so bad in the past few years, but we have not laid off workers in residential construction. It is starting now, and the reason we have not laid off workers is because if you lay them off, they are gone and may not come back. Residential construction will try and hold on to workers for as long as possible.
You saw a massive spike in productivity in 2021 in residential construction, but not because we suddenly figured out how to build housing faster with fewer people. We had the same number of people working a lot more, doing a lot more, and so you see the spike. Since then, you see a massive drop-off in productivity because we are retaining workers while doing less. If you actually look at the period from 2012 to 2022, residential construction improved in productivity by 14%, which rivals any manufacturing sector. It is not the dismal story that people are talking about.
That said, can we do more? Can we automate more? Can we go to more factory-built? Yes, we can, but then it gets back to how to de-risk, how to create a funnel and how to support that transition. That is something that both Jeff and our group are working on. There are opportunities, but we have to understand the realities of moving to higher productivity, de-risk some of that, support investment and create a pipeline with certainties so that the industry can invest.
Mr. Rankin: I agree with everything that Mr. Lee was saying. Productivity in the construction industry can be a touchy subject. One of the other layers to it is productivity is a ratio of inputs and outputs. The output that is being delivered today is much different than the output of 20 years ago. Other witnesses have referenced the building code and addressing aspects of climate change.
The asset that is delivered, if you want to think about a house, is much more valuable as an asset today than it was 20 years ago; however, the measure is still workers per house without actually accounting for the value of that asset. So, yes, there are opportunities to increase the production, but there is also a counter-argument that productivity, if you crunch the numbers in a different way, is actually as good as it is in other industries.
Senator Dalphond: If I understand, you dispute the way that Statistics Canada estimates productivity, which is the number of hours and the delivery, the output. They say that it has been declining since 2017, per hour, and there are fewer results. But are you saying that maybe they are not looking enough at the results, and that we have moved from simple results to more complex results?
Mr. Rankin: Yes. I don’t dispute Statistics Canada and the way they crunch the numbers, but it’s worth looking at it in a different way.
I am sorry if I am getting into the theory aspects, but if you look at productivity in agriculture, a cob of corn from 20 years ago is pretty much the same as it is today. You can easily measure the metric of how much went into producing that cob of corn, but a house today is a lot different than it was in 2017, for good reasons. The value of that asset, the longevity of it, what it provides to the end user, is much greater.
Senator MacAdam: My question is to Mr. Lee. I noticed on your website that you’re the lead on your internal Modular Construction Council. Can you tell me the current adoption rates of prefabrication and new technologies among Canadian home builders?
Mr. Lee: Yes. When things were really booming in 2021, about 30% of our members were using some form of prefabrication. With full modular, it is less than 5% of the industry, probably less than 3%. A lot of that is on panellization. Definitely, more of a move is being made to off‑site construction. Some of that is building panels, wall panels, floor panels, just in an enclosed space, which is still slightly more efficient. It is easier to deal with weather conditions, so you get some productivity gains.
Then you can go to that full level of complete automation. Only a couple of factories in Canada really do it to that nth degree.
We look at the potential future for factory-built as creating an environment where, ideally, one day — just like now, you don’t bring a fine-finish carpenter into a house that’s under construction to build all of your kitchen cabinets from scratch. You actually talk to the kitchen manufacturer, and they ship you componentry that drops in.
Over time, if we can get over a lot of these hurdles that are the realities of the market — it’s not a problem with the technology; it’s not a problem with risk averseness from the industry. It’s a problem of actual business issues and investment and risk. If we can get past that, then ideally, there will come a time when these factories aren’t just producing modules that sell to a small group of installers. They are really providing componentry in the form of panels or full modules to home builders.
We’re quite a ways away from that right now. We have our CHBA Sector Transition Strategy that talks about a lot of the realistic hurdles that, to my International Housing Association experience, are not unique to Canada. The United States and Australia are exactly the same way. Countries like Norway and Sweden that have made different investments at different times use much more factory-built, but they don’t have the same geographic challenges and have populations within a closer area.
There’s a lot of potential, but, to your original question, adoption is very low. Those are the barriers we have to break through to get more work done that way.
Senator MacAdam: As the industry continues to shift or try to shift in this direction, what is Canada’s state of readiness with regard to the Canadian supply chain and the ability to buy Canadian? We’re trying to move in that direction, so can you comment on that?
Mr. Lee: Yes. We’re in a very odd era, to say the least, where the world, through free trade and lots of trade, has really allowed countries to specialize in what they do. Certainly, the North American market was very seamless when it came to residential construction. You have places in Canada where drywall manufacturing is supplied locally. In other places in Canada, it makes no sense to have drywalling. You bring it in from the United States because it’s closer and easier. So many things have been like that.
So we are in a transition right now where, yes, we want to maximize the Canadian content in housing, but, by the same token, we need proper trade partners. The reason the world has been able to increase standards of living over time is that countries have been able to specialize in what they do.
For example, we have two very small furnace manufacturers in Canada. I don’t think it’s time to invest in a whole furnace industry in Canada. Other places can provide good heating equipment. It’s really about creating better trade relationships, diversifying our trade relationships around the world, and also focusing on things that we can and should do better in Canada in terms of adding more value. We can focus strategically on those.
Mass timber would be a good example where we have more value to add. The challenge right now with mass timber is it’s still more expensive than conventional construction in terms of steel and concrete. If we want to do more mass timber, our big message is that we should work together to bring down that cost because that is a great value-added Canadian product. We are seeing tall wood go into the building code; we will be able to build 12 storeys with wood one day, which would be great. We just need to get the cost down.
Senator MacAdam: With respect to the National Building Code and climate change, what is the current feedback that your organization is providing back into the code development system?
Mr. Lee: We are heavily engaged. To the earlier question about whether things are going into the code, yes, there are. There’s a lot on climate change resiliency and adaptability and mitigation going into the code.
We have concerns in some areas. Things like embodied carbon are being discussed to go into the building code. The science, measurement and benefits aren’t there yet. That is usually how you measure things in the code. We’re heavily involved in the resilience activities.
As I said earlier, it is about how you find the right balance. How do you do the right things in new construction that won’t be too expensive and will provide the biggest bang for your buck in terms of avoiding and fighting against the challenges of weather events? We are also not saying we’re going to go to such a degree that it becomes a huge affordability issue because there are other ways that we can deal with it. The insurance industry, obviously, still has a role in Canada in doing this. It’s striking the right balance that we’re after, and that’s why we say that if we focus on affordability in the building code — which we do not in Canada; it is not a core objective of the National Building Code — we’ll make better-balanced decisions.
Senator Kingston: I will continue a bit on what my colleague Senator MacAdam has talked about, but I would also like to hear comments from Mr. Rankin, Ms. Whittington and Mr. Lee because I would like to expand on this idea of embedded carbon. I don’t know very much about that.
How can integrating climate resiliency in housing design and infrastructure planning help mitigate the financial impacts of severe weather events on both homeowners and insurers? As far as Build Canada goes — and I’m looking at you, Mr. Rankin, because I think you will be dealing quite a bit with the people at Build Canada — how can they show the way in terms of new construction that is climate resilient on a more global basis? The insurers right now are more concerned — and that’s understandable — about places of greatest risk. But global warming is happening everywhere, so building now for the future would entail, I would think, some changes to the building code. Can you all comment on what we need to do in terms of building for climate resiliency as well as affordability? I’ll open it up from there.
Ms. Whittington: Different studies and different numbers exist, but one of the numbers that we’ve cited before comes from the Canadian Climate Institute. For every $1 invested in adaptation, you end up saving $14 down the line. Similar studies exist for energy efficiency. That’s not our focus, but, generally, the research shows that if you invest in those things early, at the beginning, at the building stage, you end up saving money and not having to retrofit the home down the line. It ends up saving costs.
It’s important to ensure that we’re sharing risks and educating people on the risks to their homes where their homes are. What risks do they face? How can they ensure their homes are resilient, knowing the risks they are facing and making sure their homes are ready to face those risks?
That includes things like hail-resistant roofing if you live in, say, Calgary or what they call Hailstorm Alley, places like that; making sure we have fire-resistant siding and roofing on homes; and flood resistance. Many different flood mechanisms, like sump pumps, can be put into a home if it is at a high risk of flooding — things like that.
There are ways that we can ensure that homes are built to be more resilient.
Mr. Rankin: Maybe specific to the Build Canada Homes effort, I would suggest that could be incorporated into the procurement exercise — very explicitly, those aspects of what you’re delivering for a house. It’s not just limited to first-time costs or — put another way — affordability, but it’s looking at that long-term value of what’s being delivered, so there should be leadership in that direction.
As a follow-up and to build on the insurance side of things, insurance premiums are increased with increasing risk or uncertainty in the process. While they’re undertaking this exercise, to actually capture the data and the practices and reduce the uncertainty in terms of what those overall outcomes are, I think, is a real opportunity.
It can go to some of the concerns in terms of affordability. If you understand what it is that you’re delivering, you can react to that in terms of your process.
Mr. Lee: I have spoken a fair bit about climate change resiliency. I’ll get to the embodied carbon discussion you were asking about.
First, in terms of climate change mitigation and trying to reduce greenhouse gas — or GHG — emissions, in the National Building Code, there are five different energy tiers. It is up to the provinces to decide which tier they want to move to, and they’re going to different tiers based on their readiness.
One of the problems is that the fifth tier has gone too far. We have labelled over 2,000 net-zero and net-zero-energy-ready houses in Canada, and when we were involved in the consultations on that we said, “Tier 5 is going too far; it is going to be way too expensive for almost no return.”
Again, without affordability in the code, that wasn’t really being analyzed. It was just a number that had been picked based on other programs. From our experience, we said all that.
The other thing we were saying is that once you start looking at embodied carbon — which is the amount of carbon in products when you actually install them, through their manufacturing and transportation processes — if you actually install too much insulation and make your walls too thick, that is a lot of embodied carbon, and you will never get that back in terms of the greenhouse gas savings through the operational savings through the course.
You really need to look at both of those, and, as you can imagine, the science for embodied carbon is really just starting now. How on earth do you deal with transportation when you don’t even know where the materials are coming from sometimes? That is based on supply chain optimization, which changes over the course of the year.
Our concerns are around how we do this in a really smart way and how to not rush this. Everything to do with climate change is being rushed. There is a climate change crisis, but there is also a housing affordability crisis, so we need to handle those two together in a smart way.
Instead, operational carbon and GHGs are being done separately from embodied carbon, and as I said, if you considered the two together, you would make different, smarter decisions that are better for the environment and actually cheaper for homebuyers.
That is the work that we need to do to not race. There has been so much political pressure on the code system right now that it’s collapsing. We’re not doing proper research. We are not avoiding unintended consequences.
One of the challenges with a warming climate is what is called overheating. Very energy-efficient houses hold heat much better, and when you have a heat dome over the Lower Mainland and British Columbia, and temperatures rise in housing to the point where it’s actually really unhealthy, you haven’t done your job. We had actually said that this is a potential problem. We’ve built these houses before, but it was ignored, and it was rushed through.
We have to ensure we get back to doing the building code properly, looking at affordability and avoiding unintended risks. We are not going to solve the climate change crisis over the next five years. This is a long-term game, but we can really make some big mistakes around housing if we rush these things through without doing them properly.
[Translation]
Senator Oudar: My question is about delays, technical barriers and red tape. I will start with Mr. Rankin. In your speech, you said that you were optimistic about the implementation of the Build Canada Homes program. First, I would like to hear your thoughts on that.
The reality is that, even when federal funding is available, unfortunately, a number of delays still exist, due to technical or regulatory barriers that slow down construction. In some cases, there are concerns that this is because of the bidding process or federal technical standards. I would like to hear your thoughts on that. Mr. Lee, if you could expand on the issue of how can we speed up the process and reduce red tape without affecting quality? Do you have any specific examples? We all agree on the theory but, in practical terms, what can Canada do to accomplish that and how can we work together on these efforts?
[English]
Mr. Rankin: That is one of my character flaws: I’m always optimistic.
I think you got to the core of what I was trying to say. The Build Canada Homes program is an opportunity to investigate or challenge many of those obstacles, so we do have to do things differently. We have to rethink the way that we procure projects.
I referred to the Confederation Bridge earlier in my statements. That is a procurement method that brings the designers, manufacturers, contractors and end users to the table at the beginning of the process.
I think there’s a leadership opportunity for Build Canada Homes to investigate some of those alternative procurement methodologies in terms of overcoming some of the challenges, whether they’re regulatory or what have you.
I’m not sure if it was part of your question, but, as an example, Mr. Lee was talking about embodied and operational GHGs — and not to contradict you, but there is research ongoing in terms of trying to sort that out.
As Kevin said, it is fairly complicated. When you try to look at how you quantify that through the whole supply chain to end up with some kind of reasonable number, that number is going to be somewhat uncertain.
Again, that is another opportunity for Build Canada Homes to show leadership in actually quantifying that or showing how it can be quantified.
Mr. Lee: I could add that in terms of red tape, we have to look at the federal level and avoid creating red tape through many different means.
We’ve dealt a lot with the Canada Revenue Agency, or the CRA, the Department of Finance and Environment and Climate Change Canada over the past few years. Other initiatives that they think don’t affect housing have major impacts on housing and create red tape for small businesses. But the biggest things around red tape are, unquestionably, at the municipal level.
We talk about how, in this time of trying to create more trade across Canada and break down interprovincial trade barriers, we actually have inter-municipal trade barriers. Even though a province will have one building code, municipal officials will have different interpretations of that building code. One of the things we are calling for is a National Building Code interpretation centre so that we can have better surety on what the interpretations are going to be. We are working with the Alliance of Canadian Building Officials’ Associations, or ACBOA, and they are in support of this as well, because a national code interpretation centre would reduce the workload for building officials — as they wouldn’t have to make as many judgment calls — and, very importantly, reduce liability for municipalities, which is often a concern when it comes to interpreting building codes.
Then, through zoning and bylaws, you will also have very different requirements for each house. It is one of the things we have talked about in terms of increasing productivity and factory-built. When you can’t build the same house in two cities that are right beside each other because of zoning and bylaws, even though the climate and everything else are exactly the same, we have created red tape we don’t need. That falls under provincial jurisdiction to work with the municipalities to remove conflicting bylaws and zoning impediments that prevent our factories from being able to produce.
The worst example that I heard just a couple of weeks ago was that of a renovation of a semi-detached house. It was the exact same house, but detached, and so there were two different building officials. They did the renovation on one side, and it was deemed to be acceptable; they did the exact same renovation on the other side, and it was deemed unacceptable by the building official in the same city. These are the things we need to overcome.
Another thing that the government has committed to, which we called for, is avoiding duplication between what is done in the factory for modular construction and what is inspected on‑site by municipal officials. That was in the government’s platform throughout the government’s election campaign. We want to see that. There is a good Canadian Standards Association, or CSA, standard in place that needs to be followed, but we need more clarity so that municipal officials don’t feel that they have to reinspect things that they couldn’t see because they were done in the factory. The whole purpose of that standard is to say that this complies with the building code. Once it arrives on-site, you don’t have to worry about those things; you only have to worry about finishing things, which happens on-site. So there is a lot going on from a regulatory and red tape perspective — to your point — which is actually solvable if we work together. The differences are the problem, in many instances.
[Translation]
Senator Oudar: I completely agree with you. I will give my speaking time to my other colleagues.
Senator Miville-Dechêne: This is a question for Mr. McGuinty. Your article on the insurance crisis in California warns that a similar crisis could happen in Canada. Federal programs, as we have already discussed, were designed to stimulate the creation of housing. You discussed this earlier, but what does the Insurance Bureau of Canada recommend? Should there be a mandatory assessment of a future insurance risk related to disasters in order to avoid building housing that is extremely expensive to insure or maintain? My question has to do with your efforts. It is all very well to lobby for change, but what are you calling for exactly?
Mr. McGuinty: Thank you for the question.
[English]
California is a stark warning for governments. For a bit of context, California is in the midst of an insurance crisis. No less than 3.6 million California policyholders were not renewed in the past few years. Their insurer of last resort has surged and grown by 300% in the last few years. Three factors led to that crisis: First, increasing wildfire risk, which we’re seeing in Canada; second, rate suppression on insurance, which we don’t have here in Canada; and third, inadequate public policy measures, such as building in the wildland-urban interface without proper mitigation measures, building code inadequacies, et cetera. All that is covered in the report you mentioned.
We’re not there in Canada, luckily, but I want to be very clear about what we’re already seeing in Canada around home insurance in particular. Rates have been increasing more than twice as much as inflation for the past several years. It has been an unprofitable line of business across the industry for the past two years.
Our lawyers don’t like it when we project rates, so I’m not projecting rates. But if those trends continue, you can expect to see real challenges when it comes to home insurance. There won’t be an availability issue, but there will be an affordability issue, especially if you live in an area that is at high risk.
We’re building in a place in Alberta called Hailstorm Alley. You’re good for around $1 billion in losses in Hailstorm Alley every year when it hits vinyl siding and roofing material that is inadequate. The Canadian Climate Institute said that we’re building hundreds of thousands of homes in flood zones over the next five years.
My message is that we first have to think about land-use planning rules, which is a provincial matter, and secondly, when it comes to the federal government, tying funding to ensuring we are not building in high-risk zones. We were happy to see that in the federal platform. We would like to see a formal commitment. Today is a good opportunity with the federal budget. You will probably hear more and more from organizations like ours about that.
Also, there may be some difference of opinion on the panel with regard to building codes.
We have a five-year cycle after the National Building Code of Canada 2020. It can take provinces a further five years to update theirs. We would like to see provincial building codes that account for the specific perils that you face. What happens in B.C. and the perils they face are completely different in Alberta and completely different in Ontario. We think it’s appropriate to have some regional context built into the building codes.
[Translation]
Senator Miville-Dechêne: You talked about places where we should not be building, but your colleague talked about how we should be building. Should it be the same thing? Should it be mandatory to include materials that are better able to withstand extraordinary weather events?
[English]
Mr. McGuinty: We will wait to see what comes from the National Building Code model expected at the end of the year and what flows through from provinces, but we’re hopeful. We are starting to see changes being made to acknowledge the importance of resilience being built into the building codes. Also, insurers offer a number of incentives, but also disincentives, in terms of the materials that your homes are built with. If you have a home that is in a high-risk flood area and it doesn’t have proper mitigating measures in place, you can expect to see that in the nature of your coverage and premiums. You’re seeing quick changes across Canada in terms of home insurance coverage and premiums, and — going back to your original question about California and looking at the trends in the United States — within a few decades, I suspect that home insurance will be a very hot topic of conversation.
[Translation]
Senator Miville-Dechêne: Right now, are there any homes that you refuse to insure in Canada?
[English]
Mr. McGuinty: With home insurance, there is not an availability of challenge in Canada. You can obtain home insurance, and wildfires are a basic part of that home insurance policy. However, again, if trends continue, you will get to a place where in some parts of the country, while there won’t be an availability challenge, there will be an affordability challenge that some will interpret as a proxy for an availability challenge.
Senator Galvez: I’m very happy you’re having this discussion because over the many years that I’ve been sitting on this committee, we have been talking more and more about the impacts that global warming has in Canada.
Canada is warming two times faster than the rest of the planet, and the Arctic is warming five to seven times faster than the rest of the planet.
We didn’t wake up when we learned about that, which was 20 years ago. Right now we’re waking up to this situation, and we are going to inject a lot of money into building new units. We’re going to see it in the next couple of hours; we’re going to have the budget. We’re going to see how much money we’re going to inject in order to fight these affordability and housing crises.
But I see that the trend is increasing. I see every year your curve of insurance losses, and we are at $9.1 billion. You are saying that if we don’t construct in a better way and in the right places, we could have losses of — as you said it in your presentation — $3 billion as a result of projected damages.
One of the big things is the building code. I am, like you, a civil engineer, so I have been on many committees dealing with this. We are behind with the building codes. I know that we cannot rush, but at the same time we have to be — you said smart, but the word is “efficient.”
These new clusters of housing are being focused around big cities, which are receiving less and less of the natural infrastructure that increases resilience to the sea level rising or extreme weather events.
My question to you, Mr. Lee and Mr. Rankin, is this: What are specific, concrete things that your sectors are doing in order to respond to that? Have you worked together before this meeting? Do you know each other? We need to work horizontally, but we are still working in silos. How can we work to integrate all of this? First, Mr. Rankin.
Mr. Rankin: The question is this: How can we work together more efficiently? Maybe I will deflect a bit. The challenge is the fragmentation within the whole space, not just at a project level. But then that permeates through the various associations, whether it is on the industry side or the research side.
I will offer to have lunch with Mr. Lee after this meeting, but we do work together. Honestly, as a good example, the latest platform within NRC, the platform to decarbonize the construction industry at scale, has actually provided a bit of a mechanism to bring a lot of these players together, to start having these conversations. It is looking at efficiencies in terms of the regulatory process and trying to figure out better ways to digitize and speed that up. It is looking at different ways to address the productivity issue. It’s looking at different ways to come up with better solutions in terms of climate resiliency.
Again, not to deflect too much, but it is complicated. Based on where we are as a country, and not to overstate it too much here, we really are rebuilding all of our infrastructure. We do have an opportunity to get it right, as much as we can. You are right: That means better collaboration among all the parties.
Mr. Lee: We’re doing a ton of collaboration on this work. I also have to say that the National Building Code, just for clarity, does provide for all the regional variances, such as different levels of energy efficiency depending on how cold it its. You have earthquake resistance in the Lower Mainland, which you wouldn’t have in other places.
With respect to collaboration on resiliency, we have been doing a ton of work with the Institute for Catastrophic Loss Reduction, which is funded by the insurers, to figure out all the best ways to deal with hail, flooding, wildfire, high winds and so on. We’ve been looking at a program to potentially label houses ahead of the building code on this type of thing. We are heavily engaged in it.
We’re also heavily engaged in trying to find the smartest ways to do things. Our industry leaders have been doing work, for example, after hurricanes in Puerto Rico, where you can really learn about dealing with high winds. Our volunteers were down there helping to reconstruct. One of the things they learned is that there are better ways.
You may have heard about hurricane clips to fight high winds, but they are actually really finicky and labour intensive to install. We found that just putting in long, 8-inch screws through the top plate into the trusses is a great way of doing things. This is getting a little technical, but you asked what we are doing. You have to ensure that you don’t attach the roof just to the top storey of the house; otherwise, you create what is referred to as a “flying umbrella.” You have to secure it right down to the foundation.
These are some of the things that you must do properly. We are doing a bunch of work in collaboration like this. We worked a lot with FireSmart as well, to set up their program in B.C. We recognize the challenges. We want to ensure we do it in an intelligent way that is not just climate change at any cost, even though it is a crisis. How do we do it in smart ways?
The other thing I will say is climate change will cost society money, period, full stop. It won’t be cheaper because of climate change; it will be more expensive. The question is this: How do we do it intelligently? How do we spread the cost across the right people? Consumers will probably have to pay a little more for housing. The insurance industry will have to figure out how to do their actual science and do it. Government will have a role in all of this. How do we do it in an intelligent way? How do we balance all of these things?
[Translation]
The Chair: I think that coordination seems to be lacking.
I am not a fan of summits, but should we not hold a summit to bring together all the players in construction, that is, unions, developers, municipalities, banks and funding agencies?
We have not talked a lot about banks, but they are rather cautious when it comes to providing funding for the construction industry. CMHC takes 90% of the risk in funding housing. There is something wrong there; it is a Crown corporation.
Perhaps we need to bring together all the stakeholders for two or three days and come out of these meetings with an action plan in each of the areas, such as with respect to unions, municipalities, the financing sector and developers, so that we can work together.
We should not have to stop at the end of a year or two by saying that we need to come to some agreement, because there is a step forward or a step backward, and that this lack of agreement explains why housing is not being built at the pace we would like to see.
[English]
Mr. Rankin: I agree with the suggestion. I think I mentioned in my opening remarks that we are currently in the middle of such an exercise with the Atlantic provinces. My apologies; I will follow up with this committee on a few of the documents that I referenced in my opening remarks. One is the road map. The others are responses from the various bodies to the Build Canada Homes market sounding.
One of the things I mentioned was a project that we’re doing that is funded through the Regional Development Agencies. We have brought together the construction associations, housing authorities, universities and engineering schools, all in the Atlantic region.
We are at the point now where we have conducted those workshops that you referred to, one in Halifax, one in Moncton, one in Charlottetown and one in St. John’s. We are running through that exercise. What are the barriers in terms of regulation, financing and the productivity aspects?
We are also taking the next step, which is to ask what the solutions are. Those are solutions that require all those parties to work together.
I’m happy to share those results with this committee when they are available. I think we are aiming for February or March.
[Translation]
The Chair: I would like to receive that.
However, the idea is not only to find solutions, because we are hearing about a lot of solutions. The idea is to use it as a starting point to get stakeholders to sign a commitment to achieve all of that within a certain amount of time. It is about how we will accomplish it.
Mr. Lee: I understand that. If only it were that easy: three days and we could get all the solutions.
[English]
The fact is that it’s hugely complicated. Despite what you may be hearing here, there is probably a lot more coordination and cooperation. What you’re hearing are differences of opinion, which we would all get in these groups.
I do this, obviously, all the time. I am in group settings and in consultations. CMHC holds a conference every fall, similar to what you are talking about, bringing together different players. Lots of discussions like that are ongoing, and, to your point, we need a lot more. But it’s very complicated because we have been talking about resiliency.
How do you balance the building code, the cost, the insurance industry — and we haven’t really talked about the 16 million existing housing units that are in major — talk about Hailstorm Alley, right?
In Calgary, there’s just been a major event with millions if not billions in damage. And in terms of building back better, there are hail-proof shingles. Some insurance companies are offering incentives to use those, but not all homeowners are taking them up on it and are using the regular shingles that were just hit.
I think it’s important, to your point, that we continue to have the dialogue. I think this is a really important study, but it’s complicated.
We can all agree on something: We’re waiting for the budget this afternoon, and I guarantee it’s not going to hit on all the things we’ve talked about today because there are finite resources and differences of opinion.
We need to keep the dialogue going. Jeff likes to see the glass as half full, and I tend to as well despite the fact that maybe I haven’t today. I do think there are a lot of opportunities moving forward. We just have to work together to make it happen.
[Translation]
The Chair: I have a supplementary question for you. How many housing units are destroyed each year by fire or floods? I tried looking for this information but could not find it. I can find the number of claims but not the number of housing units destroyed.
[English]
Mr. McGuinty: I don’t have that off the top of my head. I have the insured loss number. We’ll look to see if we can provide that to you. It is a number that’s increasing every year.
I will go back and say that we’ve called for a national summit on resilience. We would support it and would love to be part of it.
I think one of the templates that served as a good model for this is the National Summit on Combatting Auto Theft, which was a real crisis a year and a half ago. What followed — and I think to the point you’re making — was a clear action plan with deliverables and accountability. The government has tracked progress on that auto theft plan for the past year and a half or so, and we’ve seen a real material decrease in auto theft, thanks in part to major decreases in Quebec and Ontario as well as a real enforcement upswing in the CBSA’s capacity at the Port of Montreal in particular. I think that’s certainly an idea worth exploring, and we’d be happy to contribute to it.
Senator Marshall: This question is for Mr. McGuinty or Ms. Whittington. What kind of statistics do you have available with regard to insurance on housing in Canada? Do you know how many homes have adequate insurance? How many are paying a premium because of flood insurance? How many are denied insurance in the area of flooding? How fine is it broken down? How many homes don’t have insurance? I know a lot of people who don’t have insurance on their homes. What kind of statistics are available?
Mr. McGuinty: I will start, and then, Margot, perhaps you could build on that.
There’s more data on the auto insurance side of things because it’s a regulated product; the rates are regulated. There’s a little less on the home insurance side, but let me tackle it in the following way: As this group knows, if you have a mortgage, you have to have home insurance. There are some folks who, once they pay off their mortgage, decide not to have home insurance coverage anymore. We don’t have those figures, but we can safely say the overwhelming majority of homeowners have home insurance in Canada.
There’s a segment of the Canadian population that cannot access overland flood coverage. Several years ago, 10 years ago, there was no overland flood coverage in Canada. Now somewhere between 90% and 95% of homes can access overland flood coverage. You’ve seen a real private sector surge of interest around providing coverage. There’s still a gap, I’ll peg it at 5% or 6% of households that can’t access overland flood coverage. We think that’s something that could be covered by a national flood insurance program, and we’ve spoken a lot about that in the past several years.
Senator Marshall: Where would those zones be? Would they be in Alberta and the Calgary area? Are they all across the country?
Mr. McGuinty: They are all over the country, in high-risk areas. Different insurance companies will define “high-risk” differently. I think the key is that you’re seeing fewer homes that can’t access overland flood insurance, but if you’re a high-risk household, that cost is going to be fairly expensive.
The Chair: Excuse me, Senator Marshall, but I will give two minutes maximum if we want to be on time.
[Translation]
Senator Forest: I think that the idea of having a coordinated intervention on the impact of car thefts is interesting. I agree with the chair’s idea, in the sense that there are realities that we are not even considering. The Federation of Canadian Municipalities estimates that the cost of infrastructure is $107,000 for new homes that are being built. This does not include the streets, sidewalks or water and sewer systems. Rather, the issue is whether it is necessary to expand the waste water treatment plants or whether a new drinking water treatment system is needed.
Residents who live in a city have already paid for their own infrastructure. Is it fair to say that Quebec is the best? It may be the best for developers but perhaps the last in terms of intergenerational fairness. Long-time residents of a city have borne the costs of the infrastructure and have to pay for new construction. We need to give serious thought to his matter because we do not know the impact this might have.
My question is about Build Canada Homes. Often, the federal and provincial governments do not consult municipalities, and yet they are the ones that take on the projects to build homes and build the infrastructure. Should the Build Canada Homes program include a component that supports the development of infrastructure that is needed to build new housing?
[English]
Mr. Lee: There is no question that federal investment in infrastructure is critical; we need that. One of the things that we’ve said, from our association’s perspective, is that should also be tied to housing outcomes so we’re doing smart things with housing at the same time. The government has been doing that in recent times.
Again, to the example of the Province of Quebec, the way they delineate between what the municipalities have to pay for in terms of infrastructure versus what the province has to pay for makes a lot of sense. Most of the bigger infrastructure projects are taken on — even if they are local — by the province. The whole point is to spread it across the tax base.
The idea that growth pays for growth and the next generation should pay for things because they are new is completely erroneous. Most Canadians in Canada live in houses that never had to pay development taxes.
Those taxes have gone up incrementally over the past 20 years by over 700%. So the fact is most people didn’t pay for it; it came out of the broad tax base.
And the only reason DCs have gone the way they have is because municipalities have rightly understood that if they increase property taxes — which is their only other way of getting money — they’re not going to be very popular at municipal election time. So the only other way to pay for it has been to not raise property taxes sufficiently and instead raise development taxes.
To your point, it’s not a great situation for municipalities, which is why we’re talking about needing alternative funding models. The federal government has a role to play, the provincial government has a role to play, and all the other mechanisms that are available to municipalities, or need to be made available, because in some provinces they can’t have it. But the idea that a new community centre is only going to be used by the people in that community is completely wrong. It’s going to be used by people all over the city who come to use it. It is the same with waste water.
If the logic was to only have them pay for new stuff, then they should get a holiday on property taxes for a few years because they just paid for all the stuff that’s brand new. So instead, we have to better spread it across everyone.
The only way to get this done and return to housing affordability, especially in large urban centres, is to have better funding models than local development taxes.
Senator Ross: I have a question for Mr. Lee. I believe I counted three times in your comments today the term “affordability crisis.” The PBO, or Parliamentary Budget Officer, had a report out a few months ago and it said house price affordability has improved in the past three years by about 20%. This isn’t what we’re seeing, it’s not what we’re hearing and it’s not what we’re experiencing in terms of what the general public is telling us, what we’re seeing in the media and so on. Costs are rising. Can you comment on this? Do you think that we are headed for some type of a correction?
Mr. Lee: What kind of correction?
Senator Ross: A housing price correction, such as the one experienced in the United States a number of years ago.
Mr. Lee: No, I wouldn’t say we are headed for any kind of major correction. The fact is, it is expensive to build houses right now. Instead, we are seeing an inability of Canadians to buy homes, and things have shifted to more purpose-built rental. That will become more expensive to build over time, too.
The affordability crisis needs to be addressed by the types of policy changes that we’re talking about.
I do think it is possible, by the way. I don’t think this is a lost cause in any sense. As I said, we’ve started to develop some momentum over the previous few years. The focus now is a little too much on government-supported housing versus the whole continuum. We need to get back to figuring out how to get home ownership back on the rails. Interest rates are coming down.
I think we would be having a different discussion if we didn’t have the trade war going on right now, which is wishful thinking, but that has really thrown a big wrench into things. We would still have an affordability crisis, but we would be getting onto a better path.
I don’t think we’re talking any kind of major housing correction, but I do think we have an opportunity to go in different directions; we just have to make the right choices, policy-wise.
Senator Ross: How do you square that with what the PBO reported in October?
Mr. Lee: I won’t even bother trying, because all the other data suggests things are completely different. A slight improvement in affordability in the middle of an affordability crisis isn’t going to make the necessary difference, and that’s what you are really seeing, especially in Ontario and British Columbia, where we have the really high numbers.
By the way, there are places where affordability is not terrible. Atlantic Canada has been benefiting. Even though house prices have gone up, it is still one of the most affordable places. The Prairies are doing well. Alberta has very good affordability. Edmonton, with one of the least amounts of red tape and no provincial sales tax on housing, is incredibly affordable. And Quebec, as we have talked about, has some of the most inexpensive housing in Canada. I will also say, given the sign of the times, that 80% of Quebec’s housing starts this year are for purpose-built rentals, so there are still some affordability challenges.
Opportunities are there but so are challenges. Ontario and Quebec, where it is very expensive, are suffering from all of the other things compounding and making it really tough.
Senator MacAdam: I am wondering about Build Canada Homes, the new agency and how it may help with issues that each of you are facing. Someone even said that Build Canada Homes can be a leader. Are you more hopeful in getting issues addressed with this new agency in place, and if so, why? What has changed? We have CMHC and we have Housing, Infrastructure and Communities Canada. I want to get thoughts on those things from each of you.
Mr. Lee: I can begin.
We have to put Build Canada Homes into context, and I don’t think it has been put into context properly in the public arena. BCH won’t help us build the 5 million houses we need over the next few years. That’s not the way it’s currently structured. Right now, it is very much structured around supportive government housing, and that’s okay; we need more of that. It will also support things. It will try to help with more modular and factory‑built homes but at a very limited scale, because you’re only talking about a small number of houses.
Build Canada Homes can be good for what it will do. We have called for a long time to release federal lands that are underused to create housing. That’s a good thing, but we need all the other things, too. We need to focus on market-rate housing — all the big policy changes that need to occur that I have mentioned — in parallel.
Build Canada Homes won’t solve the housing crisis. It will address part of the housing crisis, and that’s good, but we need a lot more, as well.
Mr. McGuinty: I agree with my colleague. BCH is a good step. It is equally important from an insurance perspective, with the barometers for risk, to talk about the conditions for smart housing investment. I mentioned this earlier, but funds that go to municipalities that are cash-strapped and have limited funding resources or tools at their disposal — the DMAF is one such example — those are critical, and they need to be considered in tandem with BCH.
There was an article this morning in The Globe and Mail, about a new building infrastructure fund, I think. We will see what comes of that, but we have to think about BCH in context, which is that we need the right sorts of conditions across the country in terms of building. That means considering where we build but also ensuring that our municipalities are equipped and have the right conditions in place for smart building.
Mr. Rankin: That’s why I am optimistic, and I agree with the other comments. It will not solve all the issues we have, but it is an opportunity to be a convener for all the players to look at some sample projects, if you want to call them that, and figure out what is required on a broader scale. That’s why my glass is full at this point. I do think it is a unique opportunity.
Senator Kingston: My question is in the same vein.
Mr. Rankin, because Build Canada Homes is looking at affordability as its major piece, and it is for housing that is aimed at people with low incomes, is there still an opportunity — and you said this partially — to do the things that are really good for climate resiliency as opposed to some of the things that Mr. Lee talked about that might have unintended consequences? Is this a possibility for your organization and others to make an impact on good affordable housing that is also climate resilient and that will move us forward in the rest of the housing market in those ways?
Mr. Rankin: In a word, yes. What is key is an opportunity to quantify that and to remove uncertainties for the home builders, insurance and financiers. So, yes.
Senator Cardozo: I have a quick question.
Mr. Lee, we talked a bit about affordable housing, but what are your thoughts about cooperative housing, especially housing for Indigenous People, both on- and off-reserve? What recommendations would you have?
Mr. Lee: Those are big social policy questions, so that’s not really our domain. We are certainly well positioned as an association, as are our members, to provide and construct that type of housing. I will say, especially for Northern and remote areas, there is a huge opportunity for factory-built and modular construction, as well.
I’ve heard discussions about capacity building in remote communities for home building. I would suggest that’s probably not the way to go, because there is not enough demand to build a lot of housing. But there are a lot of opportunities for renovation, though, and stitching, as we call it in the modular world; it is putting the houses together. If we could build off-site and ship into rural and remote communities, including Indigenous communities, and then create capacity for ongoing maintenance, renovations and that stitching componentry, that would make a lot of sense. Certainly, there is a plan to invest a lot more in housing in the North. That would be the way to go that combines the best of all of the strengths of the different communities and the technologies available to us.
[Translation]
The Chair: Thank you very much. That concludes our session for today. Mr. Hudson Rankin and Mr. McGuinty, if you could send us the information you suggested within a week, that would be greatly appreciated.
Thank you very much everyone. Our next meeting will take place tomorrow, November 5, at 6:45 p.m.
(The committee adjourned.)