THE STANDING SENATE COMMITTEE ON NATIONAL FINANCE
EVIDENCE
OTTAWA, Tuesday, November 18, 2025
The Standing Senate Committee on National Finance met this day at 9:01 a.m. [ET] to study and report on matters relating to federal estimates generally and other financial matters; and 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.
To support the smooth operation of committee proceedings, the following guidelines must be observed by all participants to help prevent audio feedback.
Please consult the cards placed on the committee tables for guidelines to prevent audio feedback incidents. Keep earpieces away from all microphones at all times. Microphones must not be touched. Activation and deactivation will be managed by the console operator. Avoid handling your earpieces while the microphone is active. Earpieces should either remain on the ear or be placed on the designated sticker at each seat. Thank you all for your cooperation.
I wish to welcome all senators as well as the viewers across the country who are watching us on sencanada.ca. My name is Claude Carignan, senator from Quebec, and chair of the Senate Committee on National Finance. I would ask my colleagues to introduce themselves.
Senator Forest: Good morning and welcome. Éric Forest, Gulf division, Quebec.
Senator Gignac: Good morning. Clément Gignac, Quebec.
Senator Dalphond: Good morning. Pierre J. Dalphond, De Lorimier division, Quebec.
Senator Oudar: Good morning. Manuelle Oudar, Quebec.
Senator Cardozo: Good morning. Andrew Cardozo, Ontario.
[English]
Senator Ross: Good morning. Krista Ross, New Brunswick.
Senator Kingston: Joan Kingston, New Brunswick.
Senator MacAdam: Jane MacAdam, Prince Edward Island.
Senator Marshall: Elizabeth Marshall, Newfoundland and Labrador.
[Translation]
Senator Hébert: Martine Hébert, Victoria, Quebec.
The Chair: For our first panel, we are pleased to welcome, from the Treasury Board of Canada Secretariat, Annie Boudreau, Comptroller General of Canada; Martin Krumins, Assistant Comptroller General, Financial Management Sector; and Blair Kennedy, Executive Director, Government Accounting, Policy and Reporting.
Welcome and thank you for accepting our invitation to appear today. We will now hear opening remarks from Ms. Boudreau.
Annie Boudreau, Comptroller General of Canada, Treasury Board of Canada Secretariat: Good morning. Thank you, Mr. Chair. I am very happy to be with you here today.
Before beginning my remarks, I would like to acknowledge that we are meeting today on the unceded traditional lands of the Algonquin Anishinaabeg people.
My comments will relate to my role at the Treasury Board of Canada Secretariat, and more specifically as regards financial issues and my commitment to the responsible and transparent management of public funds.
Mr. Chair, as Comptroller General of Canada, I am responsible for government-wide direction and leadership for financial management, including procurement and real property.
My department establishes the administrative framework that describes how organizations should manage their real property. They are responsible for ensuring that their real property meets their operational needs and is managed effectively.
This calls for determining what property is necessary, how it is maintained, and when and how it is disposed of when it is no longer required. The procurement process is a shared responsibility across government. All departments and agencies have the authority to enter into contracts up to certain amounts.
Public Services and Procurement Canada acts as common service provider for large or complex contracts, while Treasury Board of Canada Secretariat maintains the policy under which procurement activities must be managed.
[English]
Mr. Chair, as members know, the Public Accounts of Canada is the annual report of the federal government’s financials for the past fiscal year.
Preparing the public accounts involves multiple players. My office determines how financial information is recorded and reported across government. We also set the disclosure requirements that departments must follow to support transparency and accountability.
The Receiver General at Public Services and Procurement Canada, or PSPC, compiles the financial data submitted by departments and agencies to ensure they are consistent and complete and also produces the final consolidated statements.
The Department of Finance validates the fiscal information and makes sure it aligns with broader economic reporting and budget planning.
Making this information publicly available helps ensure that spending decisions are open to scrutiny so that parliamentarians can exercise their oversight role and Canadians can see how their tax dollars are being used.
I want to assure this committee that we are always working to improve the public accounts, both in terms of the quality of the information they provide and also the efficiency of their production and publication. The goal is to ensure the data is reliable, timely and useful. Progress continues to be made.
For instance, in the current fiscal year, we have implemented new chief financial officer certifications, improved controls on the statement of cash flow, enhanced the membership of several important accounting oversight committees and delivered mandatory training to the community.
These measures ensure compliance with policy related to financial reporting and that the information included in the Public Accounts of Canada is accurate and timely.
[Translation]
However, if there is one thing that will not change, Mr. Chair, it is the commitment to the objectivity and integrity of the financial statements. The new Capital Budgeting Framework will improve the existing financial reports, but will not replace them.
The consolidated financial statements in the Public Accounts of Canada will not change following the adoption of the new Capital Budgeting Framework and will continue to adhere in all respects to public sector accounting standards.
As always, Mr. Chair, we will continue to welcome the views of parliamentarians, including the members of this committee, in our efforts to improve Canada’s public accounts.
Thank you for your time. We are ready to answer your questions.
The Chair: Thank you. Do disposals of assets fall within your mandate?
Ms. Boudreau: Yes. We have administrative rules that support real property assets.
The Chair: Disposals also?
Ms. Boudreau: Yes.
Thomas Larouche, Director General, Budget and Government Operations, Finance Canada: Mr. Chair, thank you for your introduction and the invitation to appear before the committee today.
My speaking notes will deal with the new approach to budgeting that the government introduced in the 2025 budget, which is certainly a topic of interest, given the subject under consideration today.
[English]
Today, I will outline the government’s new capital budgeting approach, which was first announced on October 6 and further detailed in Annex 2 of Budget 2025.
The Capital Budgeting Framework intends to establish a consistent and transparent method to classify government spending that contributes to capital formation, otherwise referred to as capital investment in the budget.
The federal government has adopted this framework because capital investments are the building blocks to economic growth, and the Canadian economy has faced challenges on this front, particularly when it comes to business capital.
When we look at the past decade, we can see that business investment has grown steadily in the U.S. but has remained more or less unchanged in Canada. In a global economy increasingly shaped by shifting trade dynamics, this gap is weighing on Canada’s competitiveness and resilience.
As announced in Budget 2025, the adoption of the Capital Budgeting Framework intends to help reverse this trend and make capital investment a priority.
[Translation]
Similar approaches have been adopted in several advanced economies such as the United Kingdom and Singapore. Those approaches are similar but not identical, since the Capital Budgeting Framework is an approach designed in Canada and tailored to a federal context, thus to the federal government.
[English]
Let me expand briefly on how capital investments are defined for the purposes of this framework. Generally, government expenditures and expenses or tax incentives that have a clear link to public or private sector capital formation and where there is a condition or requirement to invest funding received in capital assets would count as capital investments. That’s a general definition.
This definition — and details are provided in Annex 2 of the budget — includes capital transfers, which are just under half of all capital investments. An example of capital transfers are the federal transfers to provinces, territories and Indigenous communities for major infrastructure investments. This also includes capital-focused tax incentives, which are designed to incentivize new capital formation. Examples of that include accelerated depreciation and the Clean Economy investment tax credits.
The definition of “capital investments” for this Capital Budgeting Framework also extends to the cost of capital assets owned or controlled by the federal government, amortized over their useful lives. Altogether, these three categories cover about 80% — the large majority — of all projected capital investments in 2028-29, according to Budget 2025 projections.
While making capital investments is important, there have to be boundaries. There needs to be guideposts to guide or steer fiscal policy. This is why, at the same time, Budget 2025 announced two fiscal anchors. The first is to balance day-to-day operating spending with revenues by 2028-29, and the second is to maintain a declining deficit-to-GDP ratio.
Here, day-to-day operating spending is all spending that is not classified as capital investment. The commitment in the budget is to ensure that such spending is balanced by revenues three years from now, so it’s in 2028-29 and each year thereafter. This means that from 2028-29 onward, the projected deficit will only be due to capital investments.
The second fiscal anchor is to maintain a declining deficit-to-GDP ratio. This puts an upper limit on deficit spending, regardless of type. Consistent with this, Budget 2025 projects that the deficit-to-GDP ratio would decline from 2.5% in 2025-26 to 1.5% in 2029-30.
[Translation]
The Capital Budgeting Framework will continue to be applied in future federal budgets and other relevant documents, while at the same time, as my colleague the Comptroller General said, preserving comparability with the Public Accounts and thereby enhancing the consistency and credibility of financial information.
Thank you, Mr. Chair. My colleague and I will be happy to answer the committee’s questions on behalf of the Department of Finance.
The Chair: Thank you.
You understand that we were in the part dealing with the economic update and budget forecast and not the part dealing with Build Canada Homes, for this panel.
I am going to invite my colleagues to ask questions. I know there will be many questions.
[English]
Senator Marshall: My first question is for Ms. Boudreau. It is on contingent liabilities, which did get a bit of coverage in the budget document. Contingent liabilities have a major impact on the deficit. I know in 2022-23, they increased the deficit by $26 billion. Then in 2023-24, they increased it by more than $16 billion, but there is very little information in the public accounts. I know the government has recognized that there is an issue with regard to contingent liabilities because last December in the fiscal update, they said government committed to convening a working group of experts “. . . to advise on the government’s accounting of future potential contingent liabilities . . . .” And the working group’s “. . . advice will inform the presentation of contingent liabilities in Budget 2025,” which we thought would be tabled in March or April. I was waiting, but I didn’t see anything.
Budget 2025, which was released a couple of weeks ago, has recycled the commitment. It says, “Actions are underway to manage this uncertainty through improved visibility and oversight on large areas of contingent liabilities . . . .” And it says, “. . . experts are also being engaged on how to improve public communication . . . .” Can you update us as to what’s happening with contingent liabilities because there appears to be a reluctance on the part of the government to address the issue even though they recognize there is an issue?
The other question is: Why does the government need to hire experts? You are a professional accountant. We have the Auditor General, the Parliamentary Budget Officer, smart people in the Department of Finance and lots of people at the Treasury Board — why do we need experts in order to address the issue of contingent liabilities? Can you give us an update and walk us through what is happening?
Ms. Boudreau: Thank you very much for the question. I will provide some information and maybe my colleagues at the Department of Finance will want to add a little.
As you know and as you said, contingent liabilities are extremely complex. It’s one of the most complex transactions in the public accounts. In terms of why we need to speak with experts, for contingent liabilities in the public accounts, a big percentage is linked to Indigenous claims. In order to have valuable information and to try to understand the past and where we are going, we feel that it’s important to have people who know the business, like Indigenous People, being part of those experts. That’s one element.
The second element is that, yes, you are right: We have the Auditor General, my team and the Department of Finance, but we also want to speak to provinces and territories. We want to know what is happening out there. For the Province of British Columbia, they do have some claims —
Senator Marshall: Sorry, I only have four minutes.
Why is it taking so long? We knew it was an issue several years ago, so the government raised it in its financial documents a year ago, but there has been nothing happening over the past year. You promised something a year ago. Now you have recycled that promise one year later. It seems like there is nothing happening. We are still talking about engaging experts. When is the accountability and the transparency — and you even mentioned the useful data. I have spent hundreds of hours looking at contingent liabilities. On the lack of data, it’s appalling what is being presented on contingent liabilities. Are my four minutes up?
The Chair: You have five seconds.
Senator Marshall: I’ll continue in the second round. I’m sure Ms. Boudreau will be able to give us an answer.
[Translation]
The Chair: Thank you. I’m sorry, we have to be fair.
Senator Forest: Thank you for your presentations.
The Minister of Finance has said that reducing payroll through attrition is still an important objective. However, the unions say that the budget makes it clear that some jobs will be eliminated.
My question is for Ms. Boudreau.
Would it be possible to clarify the government’s position on this subject? If I understand correctly, eliminating jobs “if necessary” is therefore not in the cards right now?
Ms. Boudreau: Thank you for your question, senator.
At the moment, departments and agencies are reviewing their staffing needs. As you have seen in the budget, a review was done this year, a comprehensive expenditure review in which organizations were asked to come back with proposals, which means that some programs are going to be reduced or eliminated. Obviously, eliminating programs will have an impact on the personnel responsible for delivering the programs.
As was noted earlier, the budget was only tabled two weeks ago and the organizations are currently reviewing their plans to determine what was accepted in the comprehensive expenditure review, so they can come back with an updated human resources plan as quickly as possible.
Senator Forest: Thank you.
Mr. Larouche, I have a more specific question concerning lumber in Quebec. The forestry industry is going through a huge storm with the tariffs and the debate about the new forestry rules in Quebec. This is a vital institution in many regions of Quebec and Canada.
In Quebec, there would be 34 single-industry forestry regions. The Fédération québécoise des municipalités and the Union des municipalités du Québec have issued a release calling for an emergency bailout for the industry.
Are there existing measures in the budget to help this industry deal with this unprecedented crisis?
Mr. Larouche: Thank you, senator. That is a good question.
There are several measures in the 2025 budget to offer support for the industry. The vehicle for those measures consists of temporary increases in employment insurance benefits for workers. I think most of these measures are in effect now and will end by March 2026.
There are also general support measures through the Business Development Bank of Canada and Export Development Canada to provide general support.
I am not in a position to identify the specific measures for the forestry sector, because that is not my field. However, I can still assure you that a number of support measures have been put in place over the last five months to provide support, and this will also cover the forestry sector.
Senator Forest: Since the start of the crisis we are in with our neighbours to the south, the Prime Minister and the government have been saying that we need to encourage buying local. One of the measures that could help the industry would be to have incentives for increasing the use of wood in construction. For this sector precisely, are there things in the budget?
Mr. Larouche: Yes, there are. An announcement had been made before the budget concerning the “Buy Canadian” buying local policy. The budget confirms the government’s intention to put that policy in place.
In fact, there is a relatively large range of purchases. Forestry products could be covered by this new policy.
[English]
Senator Cardozo: My question is to talk more about how the Capital Budgeting Framework will change how both departments evaluate new spending proposals. My background question is to ask you first about the role of the Comptroller General in this whole environment. You have the Comptroller General and your role to the rest of the Treasury Board; you are not the Secretary of the Treasury Board, so what is that relationship? How are you different from the Auditor General and the Parliamentary Budget Officer?
Ms. Boudreau: That’s a great question as background. How am I different from the Parliamentary Budget Officer and the Auditor General? I’ll try to define myself for the public accounts as being the CFO for the Government of Canada. So I am sending guidelines to departments in terms of how to account for, for example, contingent liabilities, allowance for doubtful accounts, tax revenues and things like that. We are the ones providing the direction in terms of all the accounting principles.
After that, the Auditor General, who is my colleague Karen Hogan, is the one auditing the public accounts, making sure the numbers present the reality fairly. She has a wider mandate. In terms of the public accounts, she is the one reviewing and providing an opinion in Volume I of the public accounts.
In terms of the Office of the Parliamentary Budget Officer, my understanding is — and my colleagues will want to add — they look mainly at the budget. They tabled a report last week. They also look at the estimates, meaning all the money the departments need in order to run their business. They do more analysis. The two of them are agents of Parliament. They report directly to Parliament.
Senator Cardozo: How about in terms of your relationship vis-à-vis the rest of the Treasury Board and Finance Canada?
Ms. Boudreau: I am one of the deputy ministers within the Treasury Board of Canada Secretariat. I sit at all Treasury Board meetings where requests for funding are being discussed and analyzed by Treasury Board ministers. I am there to provide guidance in terms of procurement policies, real property policies and the impact on the fiscal framework to a certain extent because we look at all of those elements.
On my relationship with the Deputy Minister of Finance, for the public accounts, we have four signatories or four people signing the public accounts: the Deputy Minister of Finance, the Secretary of the Treasury Board, the Receiver General and I am the fourth one signing the public accounts. We are all linked together.
Senator Cardozo: You mentioned the Receiver General. What is their role in this?
Ms. Boudreau: The Receiver General is part of Public Services and Procurement Canada. They are in charge of pulling the public accounts together. For all the big volumes you see — Volume I, Volume II and Volume III — they put all of the information there and make sure it is consistent. We can refer the information from one organization to the other organization. We work closely with them, like we work closely with our colleagues at Finance Canada as well.
Senator Ross: Thank you to our witnesses. My question is for Ms. Boudreau.
Public Services and Procurement Canada is implementing a comprehensive modernization strategy to prioritize Canadian suppliers, the buy Canadian policy, supplier diversity, simplified processes and vendor performance management. I am thinking that this coupled with the new Major Projects Office will see some significant shifts in procurement.
Given procurement falls under your oversight, how have these accelerated and streamlined changes impacted your processes of oversight? What must you do differently to ensure transparency?
How involved was your office in developing the Public Services and Procurement Canada modernization, and were you involved in the development of the Major Projects Office?
Ms. Boudreau: We play a key role. We are working closely with Public Services and Procurement Canada in terms of policies. You will remember the Auditor General did a lot of audits on procurement.
If I can summarize her observations in one sentence, it is this: We have many rules, and we don’t need to add more rules, but the rules need to be followed. I think that summarizes exactly what she said on many occasions.
What my group is doing, working closely with Public Services and Procurement Canada, is to harmonize procurement rules to ensure we have a — and we are streamlining all of that. While departments understand and see the streamlining, they can act quicker in terms of procurement. We want to make sure the controls are still in place. We don’t want to add any additional controls, but we want to speed up the process of procurement. That’s mainly what my role is. I am in charge of the administrative policy and work closely with my colleagues at Public Services and Procurement Canada to make it happen.
Senator Ross: In terms of the Major Projects Office, were you involved in the creation of that new way of choosing projects and how that procurement might work?
Ms. Boudreau: The Major Projects Office is what we call a special operating agency. The Major Projects Office is within the Privy Council Office, or PCO. It is not a separate entity; it is part of that department. To answer your question, I was not involved in deciding which projects to go with. It’s not under my purview.
Senator Ross: Will you be involved in the oversight of the procurement that will happen under those projects?
Ms. Boudreau: Absolutely, because they’re part of a department, which means they have to follow Treasury Board policies. Yes, when they need to obtain policy coverage for what they’re trying to do, they will need to come to the Treasury Board in order to get the approval. Yes, my team will be involved, because for all special operating agencies, they need to follow Treasury Board policies.
Senator Ross: Thank you very much.
Senator Kingston: My question is for Ms. Boudreau. I’m thinking about your Capital Budgeting Framework. There seems to be a bias more and more toward physical infrastructure in terms of spending in government. My concern is that there are things that the federal government is interested in supporting, like deeply affordable housing, and some of that is targeted at people who have a difficult time maintaining or achieving housing unless they have some social infrastructure to support them.
In the past, the federal government has been involved in that as well. My question is this: Do you see any expense toward the social infrastructure side with the physical infrastructure focus, and do you see a problem with that, given that physical infrastructure often requires — in my world anyway — social infrastructure to support it?
Ms. Boudreau: Thank you for the question. I will pass that question to my colleague from Finance Canada because this is their framework. Let me add something at the end if we have time.
Mr. Larouche: Thank you very much. It’s a great question. In the Capital Budgeting Framework, as it’s described in Annex 2 of the budget, there is a category of spending which specifically includes measures to grow the housing stock.
I would point you to Table A2.2 in Annex 2, which describes which measures are counted as capital investment under that category. Generally, infrastructure is counted as capital investment, where social infrastructure or any other kind of infrastructure — whether it’s bridges or airports — does count as capital investment, because it is a capital asset, whether it’s on the government’s balance sheet or a private sector entity or another level of government.
There are several measures that count as capital investment in the housing space. There’s the Affordable Housing Fund, the Housing Accelerator Fund, the Apartment Construction Loan Program and Indigenous housing. There are investments there which are all counted. These are existing measures, and there are, of course, some new measures in the budget in terms of launching Build Canada Homes. These all count as capital investment under the framework. In general, infrastructure investments are counted, and there is more information about the particular components in Table A2.2 of the budget.
Senator Kingston: The Reaching Home funds were moved from Employment and Social Development Canada to Infrastructure Canada a couple of years ago, and at that time, it felt like there was less emphasis on supportive housing than the actual structures of housing. That’s what I’m trying to get at here. How do you ensure that whatever you’re doing to increase the supply of housing is also reaching the goal of people actually being able to access that housing, because they have complex needs around it?
Mr. Larouche: Thank you for the observation. Reaching Home is not my area of expertise. However, I can commit to getting in touch with my colleagues who manage the housing space, and we can get back to you as to where it’s accounted for or which program it’s now a part of.
In terms of the details of the housing measures that are counted as capital investment, again, they are what I just listed in Table A2.2 of the budget.
Senator Kingston: When you commit to increasing investment in one area and limiting investment in another area, where the two areas are intrinsically connected, I have a concern about that.
[Translation]
Senator Hébert: My question concerns capital spending and operating spending, all that accounting business. Administering capital spending programs, be they tax credits, the new defence agencies being created or major projects, it calls for operating spending. Is the operating spending that is associated with that capital spending included in the capital investment figures, or is it separate? If it is included, what percentage does it represent?
Mr. Larouche: That is a good question.
In general, operating expenses are not included. The category breakdown in annex 2 to the budget sets out a few details of the spending that is recorded as investment spending. A large part of that spending consists of capital transfers and does not include the employees responsible for administering the programs in the public service.
In some programs, it can be difficult to distinguish operating costs from capital costs. It is not impossible that some will be there, in certain small programs. However, generally speaking, the idea was to count only the transfer portion and not the operating expenses. That does not mean that the government is going to stop operating spending. Operating spending will continue. Priority is simply given to investment spending.
Senator Hébert: Thank you.
Mr. Larouche, you said in your presentation that the concepts and methods used in Canada to distinguish operating spending differ somewhat from what is done elsewhere. Would you have some concrete examples to give us in this regard, please? And what is the reason why that was chosen?
Mr. Larouche: Yes. As I said, the primary motivations for this approach are to identify and focus on investments that enable or stimulate the formation of capital in the public sector, but mainly in the private sector.
There are countries that have been taking similar approaches for some time. The familiar examples are the United Kingdom and Singapore. The provinces have also been doing this for some time. There is a table in the budget that shows a bit of a comparison between the federal approach and the approaches found in those advanced economies.
In terms of differences, I would say that on the whole, there are still similarities in the major items, such as capital transfers in general. It is recorded as investment spending in all these approaches, and it represents a majority of investment spending.
Senator Hébert: Is corporate tax included in the other jurisdictions as it is here?
Mr. Larouche: No. Table A2.1 provides a comparison. It shows that corporate tax credits, on the tax side, which are a tax expenditure, are not recorded as investment spending in the approach taken by the United Kingdom and Singapore or even the provinces. I don’t know whether it is used in other countries, but in those we looked at, it is not used. The reason why the government records it is that the objective was not to adopt exactly the same approach, but to identify all spending that would have an effect on capital formation. These tax expenditures have a fiscal cost and have a very obvious effect on the creation and formation of assets in the private sector, and so have been recorded as investment spending.
Senator Oudar: My question is for Ms. Boudreau first, concerning the comprehensive expenditure review.
I have read the documents from the Parliamentary Budget Officer carefully. He talks not just about the lessons from the OECD about how things should be done in terms of spending reviews, expenditures, scope and savings, but also a lot about the necessary transparency. He also wonders about your objectives as to whether or not to publish and your transparency in what is to come.
However, before talking about transparency, I have a question about the details. I was surprised to read that he had had some trouble getting certain details that would have been very useful to him in properly assessing the impact on programs. He seems to have made requests to several departments in order to assess the impact on programs, but also on staffing reductions. I was surprised to learn that.
I have reviewed Treasury Board’s mandate. I saw that the four main responsibilities are very clear, the first being spending oversight and the second, administrative leadership. I am getting to the third one, because that is about being the employer of the public service. Do you not find it surprising that he was unable to obtain those details, that he had trouble assessing the impact on programs, and that this forced him to question each department and agency instead of getting the information directly from Treasury Board? You surely have responsibilities at Treasury Board that you have to fulfill both in terms of administrative leadership and in terms of spending oversight. Can you enlighten the committee about this? I still have a lot of questions after reading the Parliamentary Budget Officer’s document.
Ms. Boudreau: Yes, I will be pleased to “enlighten the committee,” to use your words.
I have also read his report. As you know, there is an annex in the budget devoted entirely to the comprehensive expenditure review, how the review was done, the dates used, what was included in the methodology and what was excluded. Then, when the proposals arrived at the Treasury Board of Canada Secretariat, they were analyzed with our colleagues at the Department of Finance, and then all those proposals were reviewed by a cabinet committee, the Government Transformation/Government Efficiency Committee.
A very large number of discussions were held, including discussions about the horizontal impact of the proposals and the impact on groups and minorities. The decisions were made after the committee by the Minister of Finance and the Prime Minister. That is where you will find those decisions in the budget document.
The budget document then presents a page with details regarding each portfolio under federal government administration. The method used in the budget is similar to what was done at the time of the spending cuts in 2012. Is the information all there? No, in fact; the information is not all there.
That being said, in March every year, the federal government tables the Main Estimates in which all funding needs for the departments that are part of the Government of Canada are set out. In addition, the departmental plans for each organization are also tabled. In those plans, you will find more information regarding the comprehensive expenditure review. It was impossible to include millions and millions of pages in the budget document in order to explain everything. In all honesty, however, the organizations also have to be allowed time to look at what was approved and not approved in the budget and also to redefine their plan accordingly.
The budget also refers to eliminating 1,000 senior management positions within two years. There are more targets for staffing reductions. All this information is essential to the organizations so they can make robust plans that can then be explained to Canadians.
Senator Gignac: I would like to welcome the witnesses. My first question will be for Ms. Boudreau.
The government has ambitious objectives. Spending has increased by 8.5% per year for several years, and here it is talking about 0.5% starting now. You introduced yourself a little earlier as the government’s financial manager. I hope the compensation will be proportional to the budget for you as well. That ends my side note.
All joking aside, could you explain departmental plans for us? How are you involved in that? How are the departmental results for the years and the histories of each of the departments taken into account in the departmental plans? Some have good road maps; others, not so good. I am curious about the relationship. Do you have “handles,” like, the authority to genuinely intervene? I would like to hear your thoughts on that.
Ms. Boudreau: Thank you, senator.
I am going to tell you about my personal handles and the ones I don’t have but that are part of my department.
Each time there is a request for money, it has to be made to the Treasury Board Secretariat. When requests are made, there has to be a plan, as you said. There has to be a plan regarding results: what are the anticipated results of the program, results for groups and minorities, regional results, and so on.
Often, we get the plans and the money has to be sent quickly, and the plans are not always finalized. I am being honest with you. Often, we give the money, because we know the stakeholders need money to be able to do their work on the ground. The results will improve, year over year. Yes, sometimes the road maps are scary, I definitely agree. However, when the money is given, we really want to make it so the people who need it get it quickly, and the results will be defined afterward.
I would like to point out something else. There are also results that cannot always be recorded on an annual basis. For example, there are results that are based on the census. We all know that the census is not taken every year. So there will definitely be results that come back saying “not applicable” because the census has not yet been taken.
I would also say that we try for the departments to have very high requirements. We want them to exceed the requirements. We do not want to have requirements that are too low, since that would mean they are always going to exceed them, they will always be 100% achieved, because ultimately that is also no better. We try to push them as much as possible so they come back with relatively robust requirements.
I think you had another question.
Senator Gignac: Yes, I have another question.
In the private sector, you know how it works: Directors get bonuses based on whether or not targets are met. How does it work in the public sector? Last night, I was having trouble sleeping, and I went to look at the departmental results for the Canada Revenue Agency —
The Chair: That must not have helped you.
Senator Gignac: It didn’t help me, so I went to sleep at 2:00 in the morning. The Receiver General of Canada said that about 18% of the time, the wait time was longer than 15 minutes. He also said that the information was incorrect in many cases. When I look at the departmental results, I see that the percentage of outside service standards that are met should be 75%. The figure has been lower than that for three years.
Is the compensation paid to deputy ministers and assistant deputy ministers affected by the departmental results? Is there no connection between departmental results and the compensation paid to government officials?
Ms. Boudreau: Just quickly, there are various components that figure in the performance evaluation process. If the committee agrees, I could come back with a detailed description that might help answer your question and let you sleep better at night.
The Chair: Thank you.
Senator Gignac: Departmental results are taken into consideration in public servants’ compensation. Thank you.
The Chair: You can send us that in a week when the Senate is not sitting; it may make up for lost time.
Senator Dalphond: On December 17, 2024, the Auditor General submitted her report and made comments. One of those comments was addressed directly to you, Ms. Boudreau, and I quote:
[English]
More oversight is needed by the Office of the Comptroller General over the accuracy and accounting of significant transactions and new programs across the government. This is important to enable completion of the consolidated financial statements on a timely basis.
[Translation]
My question is this: What have you done since that comment? What is in place? Is it getting better? Will we have the reports sooner than later?
Ms. Boudreau: Thank you.
You referred to December 2024. The Public Accounts were tabled on November 7 this year, and her comments came back in which she noted an improvement. I would suggest that everyone review the comments she tabled on November 7 this year.
I took the Auditor General’s recommendation very seriously. As I said earlier, there were several problems relating to significant recorded transactions for which I was not consulted. I changed the process to make sure that when there are significant transactions, the Comptroller General is consulted herself and must give her opinion. In addition, there are working groups in the federal government, but not at the right level. They were at levels that were too low. The levels of the working groups were therefore changed in order to have better accountability.
I also mentioned that training has been given regarding accrual accounting, regarding contingent liabilities and regarding very significant items that are sometimes lost sight of because there are other things to do. This is another thing that was done internally. The chief financial officers are also asked to make sure they have done the necessary briefing within their organizations. This was also a shortcoming to be remedied last year. Several things were being done, but the deputy ministers were not necessarily informed or involved. This process has therefore also been corrected.
I would like to point out that employees have performance agreements dated April 1 of each year. When that time comes, I send my performance agreements to all the chief financial officers in all the organizations. They have to take it all into account. It is part of their year-end performance evaluation.
The Chair: Thank you. That answers the question.
[English]
Senator MacAdam: Thank you to the witnesses for being here today. I’m not sure who is best to answer this question. One of the fiscal anchors in Budget 2025 is balancing day-to-day operating spending with revenues by 2028-29. I’m wondering what type of independent assurance reporting will be provided on an annual basis on the day-to-day operating account. In other words, are those numbers going to be audited?
Mr. Larouche: It’s a good question, and maybe I can say a few words. At this stage, it’s important to keep in mind that this calculation of the day-to-day operating balance, which is really only in Table A1.5 of the budget, follows the Capital Budgeting Framework that has been explained in the budget. It relies on information that is otherwise audited and is consistent with the public accounts, so that concept isn’t in itself audited, but it relies on information and concepts that haven’t changed and are still part of numbers and figures that the auditors will look at. There are no plans right now to change this.
The day-to-day concept is very useful in priority setting and for the government to guide budget decision making. That’s the focus, and there has been no change to the deficit-to-debt ratio, the expenses or how these are accounted for in the traditional budgetary balance. This information continues to be provided in the budget and is available for auditors to review and for other external commentators to look at.
Senator MacAdam: What public reporting will there be on the actual day-to-day spending and revenues for this operating account? Will Canadians be updated, and how often will they be updated on how well the government is doing in achieving the balancing of that operating account, given that it’s one of the government’s fiscal anchors?
Mr. Larouche: The intent is to provide an update on the day‑to-day operating balance in every budget after this one and other types of documents that are related to the budget.
Canadians, parliamentarians and senators will continue to have the ability to see how expenses evolve over time in terms of projections and then the actual numbers in the public accounts, for example. They remain unchanged, so for all the expense positions that we are used to seeing, the information will continue to be provided as it was before.
What the Capital Budgeting Framework and the day-to-day operating balance do is provide an additional lens and additional way of computing and looking at information, but it relies on concepts that already exist. In terms of actual numbers and projections, we’ll be able to continue to see this in budget documents, the public accounts and other financial reports of the government.
Senator MacAdam: But the actual amounts will be in the public accounts based on PSAB.
I’m wondering what reporting Canadians are going to get on the day-to-day operating account. The numbers will be in the budget, but that’s a projection. What about the actual numbers?
Mr. Larouche: At this point, like I said, the day-to-day operating balance, essentially, is a residual, so we look at what is capital investment, and what is not capital investment is then the day-to-day operating spending. The calculation is to ensure that there is enough revenue to balance that spending.
The underlying spending isn’t changing, so there will be actual numbers against the major transfers to individuals and direct program spending, for example, and these categories haven’t changed, so the actual numbers will continue to be reported against those.
For now, what is reported in the budget is an additional lens. It’s available in Table A1.4 and Table A1.5, and it shows the sum total of spending identified as capital investments and how the day-to-day operating balance is accounted for. Again, it’s an additional lens, and so far, the commitment is to provide this information in budgets.
[Translation]
The Chair: Thank you. I have a question.
We learned in recent days that there is $11 billion in bad debts for the CERB that are related to the pandemic, and that the budget allocates $123 million to help recover that money. We are talking about $11 billion. Only $3 billion has been recovered. We are talking about approximately 1.5 million taxpayers who have repaid it in whole or in part. If we prorate this, then for the $11 billion, there are probably 4 million taxpayers who owe money.
Carleton University professor Ian Lee, for whom we have great respect, testified before our committee. His qualifications were very impressive. Regarding the Canada Revenue Agency, he told us that it is fully aware of the financial situation. However, if the agency decides to seize bank accounts, Mr. Lee said, it might cause an uproar among the public, but he does not think the agency will try to recover a large portion of the billions of dollars. He says that the $123 million is a political ploy. The Canada Revenue Agency is perfectly capable of recovering that money very quickly. What is happening on this issue? I don’t want to play word games with your “comptroller” title, but there seems to me to be a loss of control.
Ms. Boudreau: Thank you for your question.
The CERB was paid to vulnerable people. The people who received this monthly allowance were not people earning in the neighbourhood of $100,000.
I can’t speak for the Canada Revenue Agency, but with respect to the recovery of money from the most vulnerable people, that is something the agency has to take into consideration in its collection model. That is the only thing I can tell you today.
The Chair: Have we abandoned the idea of recovering those funds? People are saying it involves four million individuals. From what we read between the lines and hear from political analysts and commentators about this, the government does not want to send bills out to four million people when it is a minority government that can find itself going to the polls at any moment. People are afraid that this money is being abandoned for political purposes.
Ms. Boudreau: I can’t answer you regarding political purposes.
The amounts included in the Public Accounts, whether they are the amounts given as compared to the amounts received and what has been written off, all that was reviewed by my team and by the Auditor General, and an unqualified opinion was given: the figures in the Public Accounts are therefore valid and accurate.
Regarding the additional amount allocated in the budget to assist in collection, that is a question for the CRA.
The Chair: Can you answer it?
Mr. Larouche: That is not my field of expertise.
The Chair: We will definitely be inviting the CRA for the study of the budget.
Time is up. Do you have a few more minutes? Three senators have requested a second round, and the witness on the second panel is running slightly late. We would have five or six minutes to continue, if that works for you. Thank you.
[English]
Senator Marshall: My question is for Mr. Larouche.
I looked at the detailed numbers you have in the Capital Budgeting Framework. There are several pages there. I know they are estimates because the numbers in the budget are different projections. They are budgeted.
There is also a paragraph there that says, “Don’t forget these are really just estimated numbers.” It seems so out of place. You need those numbers to come in close to what they are in order to meet your fiscal anchor in 2028-29.
Given the history of the government meeting its projections, there is doubt in my mind that you are going to meet that fiscal anchor in 2028-29. How good are your numbers?
Mr. Larouche: It is a good observation. There are a couple of things I would say about this.
First, on the operating balance, there is a surplus in 2028-29, so there is a buffer.
Senator Marshall: But it is small.
Mr. Larouche: One thing the government has shown in this budget is there is significant action that has been taken to achieve that result. We are seeing up to $13 billion in savings from the Comprehensive Expenditure Review by 2028-29.
It is not for me to say what the government might do in the future. You can see action has been taken in this budget. This is a calculation that will be performed in every budget. We will have to see where we are next year.
Senator Ross: My question again is for Ms. Boudreau, and it is a follow-up to what I was talking to you about before.
The new Defence Investment Agency established last month is to streamline and accelerate defence procurement and focus on buying Canadian when possible. There is over $80 billion in the budget for defence coming up.
Anytime we hear the words “transforming procurement,” we know the oversight needs to be particularly robust so that policy changes don’t inadvertently miss a step. Can you tell us about your oversight in this regard?
Ms. Boudreau: Thank you. My answer to your question would probably be similar to what I offered earlier.
The Defence Investment Agency is also what we call a special operating agency. It is part of Public Services and Procurement Canada. That means they have to follow all Treasury Board policies.
What is different, and why are we calling them a special operating agency? They have more flexibility. They will be focusing on one task, and that is the procurement task. All the rest in terms of policy design and things like that will remain with either the Department of National Defence or Public Services and Procurement Canada. We will be there to support them in terms of flexibility.
I can assure you those operating agencies have to come to the Treasury Board. If they need exceptions or flexibility, we work with them. If we decide to grant them some flexibility, we want to make sure they have a great framework of internal controls to ensure that they have everything we can look after and that everything was done according to policies and guidelines.
Senator Ross: If they are talking about transformative change to procurement, but everything is still the same, what’s the transformation?
Ms. Boudreau: From my perspective, I will define transformation in two buckets: The first would be speed. We need to go faster.
I was talking earlier about harmonizing procurement rules. We want to make sure we have one set of rules that everybody understands, and we can go fast. That would be the first thing.
The other would be to streamline and look at buying Canadian, specifically the new buy Canadian policy — how can that also be part of that transformation? I see those two elements as part of that definition.
[Translation]
The Chair: Thank you.
Senator Gignac: My question is for the Department of Finance.
I like the fact that you have added more information. However, given that the definition of capital investment spending is crucial for determining how it is working and your fiscal anchor, the credibility of the process could be enhanced by saying that you refer to international practices. The Parliamentary Budget Officer tells us, in what he released last week, that by his definitions, your operating balance will not be balanced within three years; it will be $18 billion, because he counted certain measures. Could the Department of Finance consider that, to enhance the credibility of your fiscal anchor? There could be a study group to consider it. When we are talking about corporate subsidies, things are stretched pretty thin already.
Mr. Larouche: That is a good point, Senator Gignac. I have looked at the Parliamentary Budget Officer’s report. I will say two things about that. First, the government is very transparent when it comes to the content of investment spending and the fact that tax incentives are included. That is clearly stated in the budget. Experts may have differences of opinion regarding certain measures. A majority of investment spending consists of capital transfers, an expense item that the Parliamentary Budget Officer included in his calculations. There is actually a consensus regarding a majority of the expenditures.
Regarding the inclusion of tax expenditures, the objectives are slightly different. The government’s objective is to identify and categorize every measure that contributes to capital formation. Studies show that tax expenditures have an important role to play in that.
The Chair: Thank you.
Senator Dalphond: The budget deficit announced for the 2025-26 period is $78 billion. Does that include the $17 billion provided to give effect to the settlement that was made after a certain class action for Indigenous people, which was not provided for in the budget but was ultimately added in the supplementary estimates?
[English]
Gina Clark, Director General, Fiscal Analysis and Forecasting, Department of Finance Canada: Thank you for that question. I can confirm that as it relates to Indigenous claims, the government accounts for contingent liabilities as those arise and we determine that it is likely to occur, and we can estimate the amount. When you look at the contingent liability bounds, we have a stock that has increased to — I don’t have the exact number in front of me — around $57 billion.
Those stocks would be growing. As the payment is made, there would be a reduction in the overall stock, and we would see the cash payment made. To that specific claim, I’m not sure to what extent the contingent liability is equal to the cash amount, so I would need to look into that.
Senator Dalphond: Can you check that and please get back to us, because once the year is over, we know the liability because the government made an agreement. For the upcoming years, we don’t know because you don’t account for it, as they are not yet finalized. We have $78 billion this year, including maybe the $17 billion. That puts us to $60 billion if you compare it to next year, which is $65 billion but not including the contingent liabilities. I’m trying to figure it out.
[Translation]
Ms. Clark: I take your point.
[English]
We increased the contingent liability across the horizon in consideration of the higher contingent liabilities that have been experienced in recent years. We are reflecting on recent years and trying to build that more robustly into our budgeting forecast.
[Translation]
The Chair: Thank you. We will give you a week to provide the additional information. We will certainly see one another again when the time comes for the study of the supplementary estimates.
Honourable senators, for our second panel, we are continuing our study on federal programs and initiatives to support the creation of housing.
We are pleased to have with us Gabriel Miller, President and Chief Executive Officer, Universities Canada, and Heather Campbell, President, Vive Development.
I am glad you have managed to join us, despite the problems with your flight. Thank you for accepting our invitation to appear today.
We will begin with Mr. Miller for a short statement, and we will then have a question period.
Gabriel Miller, President and Chief Executive Officer, Universities Canada: Thank you. Good morning, ladies and gentlemen and committee members. My name is Gabriel Miller and I am the president and chief executive officer of Universities Canada.
[English]
Thank you, Mr. Chair and honourable members, for inviting me to appear today on behalf of Universities Canada and our 97 member institutions across the country.
As you know, Canada is facing a generational housing crisis. It will take every tool we’ve got to fix it. One of the most important assets we have is sitting in plain sight: It’s our university campuses. Our campuses are hubs of community life. They are home to child care centres, health clinics, libraries and athletic facilities used daily by families and seniors.
Universities also sustain local transit systems. In many communities, buses and light rail depend on daily student ridership to remain viable.
In other words, campus infrastructure is community infrastructure. That’s why we are pleased that this year’s budget recognizes university campus infrastructure as eligible under the build communities strong fund because campus infrastructure is, as I said, community infrastructure.
We have built and managed student housing for decades. Across Canada, universities provide more than 135,000 student beds — enough to house everyone in the city of Kingston. Right now, there are shovel-ready projects ready to go on campuses across the country that could deliver thousands of new beds in the near term. But many cannot proceed without targeted federal participation. We are ready to be part of the solution alongside municipalities, non-profits and the private sector.
There are three practical steps the federal government could take to help universities build and renew the student housing that Canada needs:
First, recognize student housing as a national priority. We welcome the inclusion of student housing under Build Canada Homes. It is important that we acknowledge the role of universities in addressing housing needs. The next step is to ensure that eligibility translates into real impact, with dedicated support. By giving student housing federal funding, the government can help shovel-ready projects move quickly, delivering thousands of affordable beds and freeing up homes in the broader rental market.
Second, make funding flexible and realistic. Most universities build new residences through debt financing. But provincial legislation and our own financial limitations limit our ability to borrow or run deficits, even for financially sound projects. Of course, on top of this, as you all know, construction costs have risen dramatically — up 67% since 2020. This combination has stalled many viable projects, and it’s why federal participation is key. Federal support can de-risk projects, bridge financing gaps and help keep rents affordable. A balanced mix of grants and flexible financial tools would allow universities to act quickly, sustainably and responsibly.
Third and finally, design programs for scale, innovation and renewal. The first step in increasing our housing supply is making sure we do not lose the housing we already have. Renewing our existing stock of student residences must be a priority. Nearly half of them were built before 1980 and urgently need refurbishment. Renewing this stock is critical to preserving affordability, safety and sustainability.
We also need to be flexible so that a variety of projects can be realized. In smaller communities, a 200-bed residence can transform the local housing market. Allowing bundled or multi‑campus applications, for example across the Université du Québec network, would enable national reach while respecting regional realities.
Universities are ready to lead on innovation — using modular construction, advanced design technologies and net-zero approaches, often in mixed-use spaces that combine housing with classrooms or labs. With the right partnership, campuses can serve as living labs that help Canada build housing faster, greener and smarter.
These are just some practical measures that can deliver results quickly. When we invest in campuses, we are not just investing in buildings; we are investing in people, ideas and the infrastructure of opportunity.
Thank you. I look forward to the discussion.
The Chair: Thank you, Mr. Miller. Please proceed, Ms. Campbell.
Heather Campbell, President, Vive Development: Thank you, chair and honourable senators.
I am the President and co-founder of Vive Development. We are a purpose-built rental developer focused on delivering mid‑market, energy-efficient and transit-oriented housing to markets across Ontario. We currently have 1,000 units in the ground. Today, I hope to bring practical experience and perspective to your important study of these issues. I will start today with the short-term reality, because the decisions made now will determine Canada’s housing supply for the next five years.
Canada does not have enough housing, and what we do have costs too much. And we are not building fast enough to catch up. In Canada, we currently have the lowest per capita number of housing units in the G7. And we are building at the same number of units per year as we have since about the 1970s. In this moment, when we need housing starts the most, construction activity is falling and projects are actively being delayed or cancelled.
After years of labour and trade shortages, the industry finally has capacity, and we can build at a lower cost base than we could a year ago. But now what we do not have is viability. Rents have softened, prices have fallen and the math for delivering housing simply doesn’t work. Canada gets stuck in this boom-bust cycle. We stop building in downturns and then we scramble when population rebounds. This drives labour shortages and it drives our costs even higher.
I often hear how we should slow immigration until housing catches up. But if we slow immigration and also slow building, how do we ever catch up?
There are three federal levers that I believe can smooth this cycle today and get housing built now. The first is development charges, or DCs. This is the most immediate supply lever. We have been waiting for details on promised reform, and while we wait, the industry is stalling and homes are not being built. This will eventually lead to a loss in capacity of our construction sector and will prevent long-term solutions like modular and prefabricated housing from getting off the ground. DCs need to be eliminated or meaningfully reduced in the short term to get projects moving now. DC reductions are a municipal investment. They unlock supply and generate long-term property tax revenue that continues for as long as our buildings continue to operate.
The second lever is the Canada Mortgage and Housing Corporation, or CMHC, rental financing, which is essential for purpose-built rental. CMHC is the reason that many developers — including us — are still building rental today. Without CMHC, new rental construction would collapse. There are strong, permit-ready projects across the country that could start immediately if CMHC financing becomes available. Vive alone has 1,000 construction-ready units on hold pending this financing. So we need additional funding from the Apartment Construction Loan Program, or ACLP, in order to help move these types of projects forward.
CMHC could also increase its impact by prioritizing execution capability when selecting which loans to fund. We run into hurdles where very experienced developers often get capped to the balance sheet or large borrower rules. Given how urgently Canada needs affordable, energy-efficient and transit-oriented housing that CMHC provides funding for, execution priority should stand above the borrower’s balance sheet.
The third item that we can do today is the accelerated capital cost allowance, or CCA. This is a high-potential item noted in the budget, but additional clarity is needed. Accelerated CCA could attract private capital into rental housing and help support innovation but only if the deduction can actually flow through to investors in rental housing. Purpose-built rental doesn’t generate enough profit inside the entity that owns the building in order to actually use this deduction, so flexibility would make this incentive far more effective.
We know short-term action is essential, but in the long term, we must address the structural issue holding back our supply, which is that construction productivity has been flatlining for about 20 years. Our regulatory and planning environments make repetition difficult, and our urban design processes often push expensive bespoke forms that increase costs and reduce our ability to deliver affordably.
Our construction processes, as we are well aware, are still highly manual. The industry is fragmented with thin margins, so instead of taking risk, we continue to build the same way we have always built. To deliver housing efficiently and sustainably in the long term, Canada needs industrialized construction. We need modular and prefabricated and repeatable building systems.
Government can help accelerate this shift by doing a few things: requiring planning frameworks to consider efficiency and scalability in addition to urban design; prioritizing modular and prefabricated systems in government procurement, which helps to stabilize demand for these factories that have huge start-up costs; offering targeted incentives to developers to encourage uptake and to de-risk purchases of prefabricated or modular products; and finally — agreeing with my colleague — investing in research and development to help understand how we can build better over the long term.
Industrialized construction is how we lower costs, increase supply, increase affordability and reduce our climate footprint over the long term.
To close, in the short term, we need DC reform now, expanded ACLP rental financing and an accelerated CCA that truly drives investment. In the long term, we need industrialized construction so that we can build faster, more predictably and more affordably. We have a unique window now with lower construction costs and available trades to deliver housing for Canadians, to support an industry critical to our economy and to build the capacity we need for decades.
Thank you, and I look forward to your questions.
[Translation]
The Chair: Thank you. We will now proceed to questions. We are going to aim for three minutes each. I’m sorry, but we started a little late.
Senator Forest: Thank you for your presentation. My question is for Mr. Miller.
Mr. Miller, you mentioned the importance of foreign students. Where I am from, enrolment at the Université du Québec à Rimouski is down 37%. That is a dramatic decline. Not only are we depriving ourselves of talent, but we are also jeopardizing important programs like engineering, computer science and the master’s degree in project management.
What are your solutions for not just remedying the housing shortage, but also making us more attractive to foreign students?
Mr. Miller: Can you repeat the last part of your question?
Senator Forest: My question is this: What solutions are there for striking a better balance between the need for housing and the need to attract foreign students, who make an important contribution to the vitality of our universities, particularly in Rimouski, where I come from?
[English]
Mr. Miller: Let me start with the question about how we can do a better job of matching housing needs with the importance of recruiting international students to Canada.
Fundamentally, what is critical is that the country must do a better job of matching its housing needs to its future population growth. This isn’t a question of tying specific housing requirements to specific institutions. We need to maintain flexibility about how different communities will meet their housing needs.
What we can see across Canada is we have not been building enough housing. We haven’t been building enough housing fast enough, and as a result, we’re not able to take advantage of the opportunities we have to attract real talent to the country.
We’ve given suggestions today about how the government can work with universities to help them be part of this solution. What is critically important on that front is to use this new Build Canada Homes vehicle to put funding in the hands of universities so that they can expand their residences and renew the ones that already exist.
We are a major housing provider in Canada. We don’t have the financial tools to expand the housing we’ve got and to fulfill our potential as partners in meeting this solution. If nothing else, going forward with the commitment to support university residences through Build Canada Homes is critical.
On the other point, we’ve seen further changes in the past two weeks in terms of Canada’s targets for the number of international students it will welcome over the next three years. Based on what we know so far, those targets still allow Canada an opportunity to begin repairing the damage that has been done to our international student system in the last few years.
Two things are going to be critical.
[Translation]
We need stability now.
[English]
We have to stabilize the policies and targets in this system so that the world hears this is what Canada wants and how their system works.
The other thing is we have to make our system of visa processing work as well as anybody’s in the world. Right now, it takes too long for too many talented people to find out if they can come here.
Senator Cardozo: I have to say I’m depressed with what you’ve put before us and also disappointed, because we just had a budget with the biggest-ever deficit. There’s no more money. There’s no appetite for more money.
I’ve been in the Senate for three years. Rarely has there ever been a group who has come before us and said, “We’ve got enough federal money; stop funding us.” Everybody legitimately says the federal government and other governments underfund them. We have to figure out a solution within the budget.
The problem with regard to student housing, as I see it — correct me if I’m wrong — is that provinces across the country have systematically underfunded universities and colleges. Excuse me for putting it this way, but you have become addicted to foreign or international students who pay a much higher fee. I think you had a responsibility when you were bringing in these students to ensure there was housing for them.
Another witness made the point recently that when temporary foreign workers come in to work on farms, the employers were required to ensure they have housing. It may not be good housing, but at least we have that principle there.
To what extent do you think colleges and universities bear some responsibility to ensure there’s adequate housing? Can you not push the provincial governments or somebody else to provide more student housing?
Mr. Miller: I thank you for the question, and I certainly didn’t come to depress you. I’ll see if I can do a little better for the rest of the conversation. It’s a tough topic to be rosy about, but there are reasons to be optimistic.
To your points, first, I completely agree with you that Canadian universities, for whom I speak, are facing an acute financial challenge across the country. The main underlying reason for that is we haven’t had a sustainable policy for funding higher education in provinces across the country. Different regions are worse than others. We have a general problem in Canada where we have not been adequately funding higher education.
The second piece is it is true that the almost only source of growing revenues for higher education in Canada over the last 10 or 15 years has been international student revenues.
It is important for us to unpack what is happening with international students; they are an extraordinary asset to Canada. The reason for this committee or anybody else in Ottawa to pursue international student recruitment is not primarily to benefit universities; it’s to benefit Canada. They bring dollars into this country. They help create opportunity for our students by helping to pay for educational opportunities. Then they create lifelong economic bonds with Canada, whether they stay here or go back to other parts of the world.
What happened with Canada’s international student program is tragic, because we had made so much progress at a sustainable rate through the university system. There were a handful of private colleges that abused the system and blurred the lines between international education and the Temporary Foreign Worker Program.
The federal government, to say the least, has taken sweeping action in the last couple of years to address that problem and will soon be more concerned with how we get and keep the people we want rather than concerned with how we keep out the people we don’t want.
To the last point, yes, we need to continue working provincially for a new deal that is sustainable so that Canadian students have the opportunities their older brothers, sisters and parents had.
The federal government does have an important role in terms of the research investments it makes, its support for infrastructure and housing and the immigration policies it adopts. It needs to consider Canada’s interests, which include strong, sustainable universities.
Senator Ross: My question is for you, Mr. Miller.
There was an Association of Atlantic Universities report that said there was a 36% decrease versus 2024 in international student enrolment, and this has harmed the Canadian education brand, and also the visa approval process became more complicated and costly for international students. The changes that caused this reduction were done to support housing and health issues.
In Atlantic Canada, there’s been a call for a regional strategy that would help to change some of these policies for Atlantic Canada. What is your opinion on that?
Mr. Miller: I certainly support the spirit of what they’re calling for in this sense. I think we need to have a more nuanced approach to this issue now than we had, especially during the first six months of the student cap, which was a broad and blunt instrument that ignored the fact that in certain communities, let’s take within Atlantic Canada for example, the very viability of that community is intimately tied to the continued attraction of international students. We need a more nuanced approach that recognizes the different situations in different parts of the country.
I will say this: I think that we’ve seen an effort by the government in the past two weeks to hit reset on this issue. They’ve announced a new national levels plan. They have announced some concrete steps they’re taking to make our visa processing system work better. I’ve spent a lot of the last two years being very critical of the direction the government has gone. Now is the time for us to bear down and see if we can make these improvements to have as great an impact as possible and put the whole system back on a sustainable path that meets the needs of not only Atlantic Canadians but also the whole Canadian economy.
Senator Ross: Mr. Miller, what would you say would be the most important or best thing that the universities — across the country but also in Atlantic Canada specifically, such as my area — can do to make some of these new changes work in their favour?
Mr. Miller: It’s a good question. The most immediate priority, I think, for our members is to ensure that we understand exactly what the rules mean, and there’s still some work being done, even on the significance of the new targets. The government has announced a new target for international student recruitment to Canada for the next three years. We need to understand exactly which students are going to be covered by that target and how we can ensure that we’re working with our recruits to prepare their applications to the visa processing system so that it will lend itself to the quickest and most effective assessment. In the near term, let’s make sure we understand as clearly as possible the changes the government has made and then do our very best to work with the government so that what is coming into this system can flow through it efficiently.
[Translation]
Senator Oudar: My question is for Ms. Campbell.
We know that with 424 housing units per 1,000 residents, Canada has the lowest housing units to residents ratio in the G7 countries. Several times in your presentation, you said that the industry had the capacity to build at lower cost. You even talked about having a “window now.” I would like to hear your thoughts on that.
The government’s figures show that the cost of building an average house in Canada has risen by 51% since 2020 and might even rise further because of the American tariffs. In fact, all of the documents indicate that Canada has fallen behind when it comes to investment in below market price housing, and this creates a shortfall for vulnerable Canadians. This stock of affordable housing is declining and today represents only 4% of housing stock, which means that Canada is not in a very good position in this regard.
However, you seem to have a positive view of this capacity to build at lower cost, which, I hope, will then have an impact on rents for the people who will live there. Can you clarify the message you wanted to send us when you talked about building at lower cost, and what the impact would then be on rents?
[English]
Ms. Campbell: Thank you for the question. We are currently building about 1,000 units in Ontario. We’ve been tendering those units and those projects over the past few months, and from a year ago, we’ve seen construction costs come down significantly. Because projects aren’t going in the ground, new projects aren’t starting, so there’s excess capacity in the industry. We’ve been facing labour shortages for many years in construction, and we’ve been facing trade shortages. All of those shortages have just driven up the cost that it takes to actually build a rental unit.
With housing starts stalling, that dynamic — where we’ve seen that the construction industry for condos has almost come to a complete stop, and new rental construction starts are down significantly as well — has created capacity in this industry again. We’re starting to see trades being willing to work just to keep their crews moving to avoid industry-wide layoffs, so this is where I think we have an opportunity now.
Because of the nature of how we build projects, it takes two to five years to actually build the supply that we decide to start today, so we tend to lag. The supply we’re seeing coming on now is based on a really strong economy that we saw for housing in 2022-23, and that has significantly shifted, which is causing this current excess capacity. I think that’s where we have an opportunity for the government to help smooth these types of boom-bust cycles and help provide some incentives that reduce costs so that more projects become viable today and allow the sector to continue building in this unique environment.
Obviously, when demand comes back — when people become more confident about moving out of their parents’ house or moving out of their roommate’s extra bedroom and when we start seeing more immigration again — we expect that demand will rebound quite quickly, and we’ll start to see shortages again in building trades and in labour, but right now, I think we’re in a unique window where we can take advantage of the softening to move more projects forward.
You mentioned rents. If we can deliver projects at a lower capital cost, that means more projects can become viable at a lower rent. Supply cost is intimately tied to the rents that the industry charges in order to make projects viable.
Senator Dalphond: Thank you for being here this morning. I hear that some colleges and universities are shutting down some campuses because of the dropping foreign enrolment. I heard that there were close to 10,000 layoffs in Ontario in the education sector. At the same time, you’re saying we’re happy to see that if we renovate our student residences, we’ll get subsidies from the federal government because that’s going to be capital expenditure, but is there a need to do capital expenditure? Are there surpluses of buildings that would be sold by universities and would generate cash for universities? If a campus is closed, I assume that you’re selling the property, and the university or the college will get the profit.
How will you focus on the best projects that need to be revamped and those that you should dispossess and abandon and sell?
Mr. Miller: Thank you very much for the question. I should start by saying there are two stories playing out right now in Canada about the dominoes set off by changes in international student policy. There is what’s been playing out on college campuses and then universities. I think the examples you’re citing are mostly from colleges. What we’re still seeing in universities are changes in the level of services that can be provided to students, programs being discontinued and larger class sizes.
If we don’t come up with a more sustainable agreement about how we fund higher education, universities will find themselves facing the same sorts of choices that you’re describing.
I think the short answer to your question is that there will definitely need to be ongoing capital investments in universities. Canada’s universities have an estimated $17-billion backlog in unfunded maintenance and repair work that needs to be done. If you think about university campuses, to a great degree, they’re like a small local government and, in some cases, a big local government. They provide roads, water, sewers, recreation facilities and often facilities that are used seamlessly by the surrounding community, yet universities have traditionally not been eligible for federal infrastructure programs. That’s why the inclusion in this year’s new federal infrastructure plan is so important.
While universities are certainly pursuing opportunities to generate revenues through things like real estate partnerships or, in some cases, sales, that won’t be a solution to their ongoing financial operating challenges. Yes, we will need the continued partnership of our federal and provincial governments in order for universities to remain viable.
Senator MacAdam: My question is for Mr. Miller.
What is the estimated current shortage of affordable student housing in Canada, and how robust is the data that you have to support those numbers?
Mr. Miller: I’m going to try and give you the best answer I can. I’m not sure it will qualify as a shortage.
Canada’s universities provide between 10% and 15% of students with accommodations. That’s 135,000 residence beds across the country. More than half of our institutions provide guaranteed accommodations for first-year students.
Those numbers — 10% to 15% — are in keeping with what traditionally universities in Canada have done. There hasn’t been a dramatic change in the number of students to whom we are able to provide accommodations, but what certainly has happened is that Canada saw a spike in newcomers at the same time that its ability to produce new housing generally in the community was stagnant. As a result, the whole country and the communities we’re located in are facing real financial challenges.
I will just add this, though: I think something that has changed since I was in university is that the primary financial barrier now for many students are cost-of-living barriers, and the biggest of those is rent.
In cities like Toronto and Vancouver, many are having to pay rent upward of $2,000 a month. Whereas, 30 or 40 years ago, tuition was at the top of the list in terms of affordability concerns, and now I think rent and housing are. That is where the gap is best measured when it comes to what students are experiencing: Housing costs have now become the leading affordability barrier for students to leave home and attend university.
Senator MacAdam: Do you see much variation by region?
Mr. Miller: For sure, and the variations are more or less along the lines of what you would expect because of the housing market generally, where in the biggest cities with the tightest housing markets, the costs of providing student housing are the greatest. But you also have other dimensions such as in regions like Atlantic Canada, for example, where there isn’t as much housing stock, then our inability to increase that stock can be a real barrier, not only to students getting an education but also to those schools being able to grow and fulfill their mission.
I would say it generally mirrors the housing market more broadly but with some specific nuances depending on the region.
Senator Kingston: I’m going to start with a shout-out to our University of New Brunswick that does have some research and development going on in terms of industrialized construction, and it was highlighted in the news not too long ago.
What I’d really like to talk about — and I guess it’s to Ms. Campbell — is you said your second need or wish for progress is that the Canada Mortgage and Housing Corporation, or CMHC, rental financing stay in place or increase, but from what we’ve heard, it doesn’t seem to us that they’re completely tied to Build Canada Homes. What will or should be the interaction between those two entities to fulfill that particular thing that you have near the top of your list?
Ms. Campbell: Thank you for the question.
My hope is that CMHC can continue to provide funding for market-rate or slightly below-market-rate rental projects. That’s where we’re using it now. There are affordability criteria that we meet in those projects. There is energy efficiency criteria and transit-oriented, but I think that program is really important to be able to ensure that we can continue to build rental supply.
It reduces our financing costs relatively significantly throughout the construction period, but the most important lever that it pulls is that it reduces our risk. We have a sense of what our interest rate will be for the next 10 years, which removes a great deal of the uncertainty that we’ve seen over the past few years, and it allows us to have the confidence to put shovels in the ground.
I have one more point to clarify from a prior question, if I could.
Senator Kingston: Sure.
Ms. Campbell: We’ve seen costs come down. We think we can achieve about a 10% cost savings. It was a question earlier about where costs are going.
We’re still a long way off from the 56% to 60% escalation that we’ve seen, but there has been some pullback in the market in the past few months. Thank you.
[Translation]
The Chair: Thank you. Are there more questions for a second round?
[English]
Senator M. Deacon: Ms. Campbell, I have a question for you today, and thank you for being here.
We do hear in a lot of our housing conversations that we are decision makers in Ottawa, there are bureaucratic layers, the municipality and the province and the federal government aren’t working together, we’re working with layers and layers of regulations and “Oh, come on, you’ve got to understand our world.” I think you’ve touched on it a little bit today.
I want to ensure I understand what it is we need to know today to ensure we are on the ball in 2025, and perhaps share with us the reference constantly made about real estate math and us not understanding what real estate math might be.
I wonder if you could shed some light on that, please.
Ms. Campbell: Sure. I think there are some misperceptions in the industry about how projects can move forward and what it takes to get a project to move forward.
When we move through the municipal planning process, as an example, we try to build and design buildings that are as efficient as humanly possible. We know that if we want to drive rents down, we need to design efficient buildings, and we also need to be able to build them more efficiently.
Often, when municipalities take a look at the applications that we’ve submitted, we see changes to those applications that drive up the cost of building and, therefore, drive up rents that are required in order to make those projects viable.
I think if there were an ability to take municipalities and the levels of government through development math at a more detailed level, it would be absolutely more effective in helping us figure out how we can work together in order to really move the needle on new supply.
I think from a development charge perspective, that’s a big one. We talk a lot about how it’s a cost to reduce or eliminate development charges, but I think on a longer-term basis, we’re reducing development charges, but then we’re creating a revenue stream for municipalities that lasts for years — as long as our buildings run — which is relatively significant and is probably financeable. If we look at the math and we have deeper conversations surrounding these issues, we can probably find solutions for ways to build that are still fiscally prudent.
Senator M. Deacon: With that math piece at the end, let’s just say the people in the room are roughly between 60 and 75 years old, and we are now looking at what we’re needing for 20‑year-olds, 25-year-olds or 30-year-olds — our kids and our grandkids — to be successful. What might we be hanging on to when we are not thinking about the needs of our next generation or the subsequent generation, too?
Ms. Campbell: Hanging on to?
Senator M. Deacon: Hanging on to what we thought we could do and what worked well in 1984 when this housing crisis started versus today.
Ms. Campbell: Yes, I think it’s really critical that we just think differently, generally, about how we build and how we finance construction. I think there are a lot of opportunities to get innovative, to be bold and to think about how we can build differently.
Senator Cardozo: Mr. Miller, in terms of land, one of the big problems around housing is land. What is your sense about how many universities have land?
If you look at Toronto, I think Toronto Metropolitan University and the University of Toronto probably don’t have land, but York University does. What percentage of universities have more land on which to build buildings?
Mr. Miller: I wouldn’t want to give you a number because I’m not sure. We have surveyed our members recently. There are at least 20 projects nationally to add student housing, which will help relieve pressure on the local housing market, and they are ready to go. Some of those are expanding into new land. Some are reusing land that the university has a footprint on. There will be projects. There is one at York University where we are using air rights over an existing building. There are a lot of those actions being taken.
There has been a lot of talk about the federal government using some of its own lands to support housing. There are opportunities where there are federal lands near universities for partnership, where federal land could be made available for student residences in partnership to provide that land, with the university coming to the table to build and maintain that residence. We think that could be part of the solution.
Senator Cardozo: Thank you.
[Translation]
Senator Forest: Thank you for your presentation. My question is for Ms. Campbell.
One of the big issues in affordable rental housing construction is that often what is being built is one- or two-bedroom units, but we need bigger units for families who want to live in urban centres and not have to have two vehicles. Are you able to improve the balance between the needs of families with two or three children and the housing supply in urban areas, which is not just a densification factor, but also a factor that has a very significant environmental impact?
[English]
Ms. Campbell: That’s a great question. It is something we think about every single day. In the current environment, we find that to build housing — just what it takes to build a three‑bedroom or four-bedroom unit that a family could live in within an urban area, as well as what the family could afford to pay for rent — the math just doesn’t work. There is an affordability gap. If we are going to be able to build larger housing units for those families in urban areas, we need to change the fundamentals of how we build. On a longer-term basis, we have to think about scalability, prefabrication and industrialization. That’s the only way to drive costs down enough to be able to achieve those goals.
We have built larger units, and we lease them for what we would need to achieve in order to obtain bank financing and actually move forward on the projects. At those rents, there isn’t sufficient demand for the units to make them viable.
[Translation]
Senator Forest: Would it not be important for CMHC or government support programs to provide a real incentive to support this type of construction?
[English]
Ms. Campbell: Yes, absolutely. If we can align some of the CMHC funding criteria to provide incentives for developers to purchase prefabricated or modular building components, it helps. When we build a building, there is so much risk and so little room for error. When we look at getting creative and installing prefabricated bathrooms in our project, if that pushes our schedule a little bit or throws off some of the other trades, the risk is too great for us to take without some type of incentive to help us make those decisions in the longer term.
[Translation]
The Chair: Thank you. Thanks to the witnesses.
That concludes our meeting today. We will resume tomorrow at 6:45 p.m. to continue our study. Thank you for coming today and have a good trip home.
(The committee adjourned.)