39th PARLIAMENT, 1st SESSION
EDITED HANSARD • NUMBER 079
CONTENTS
Wednesday, November 8, 2006

Private Member’s Bill
(C-285 – Canada Mortgage and Housing Corporation)

Mr. Ed Komarnicki (Parliamentary Secretary to the Minister of Citizenship and Immigration, CPC):

Mr. Speaker, Bill C-285 seeks to require CMHC to transfer funds from its reserve to provincial governments. There is no question that the objective of the bill is laudable in the sense that it encourages social housing. This is something that is already being done by this government and the Canada Mortgage and Housing Corporation.

However, a simple mechanical formula, as that expressed in Bill C-285, is in isolation and without regard to all of the factors that must be taken into consideration and without regard to all the players involved in Canada's housing system.

Canada's housing system involves many players working together to help meet the housing needs of Canadians. The federal government itself, through the auspices of CMHC, is a key player in the system, providing funding and working to promote partnerships that will increase the supply of affordable housing.

Additionally, the federal government helps maintain the existing housing stock and supports research that helps identify new ways to ensure the housing and support requirements of those in need are met.

However, the government does not act in isolation. Provincial governments play a pivotal role in providing housing, funds for housing and support services. Furthermore, municipal governments, community associations and others help with the on the ground delivery and management of housing and associated services. Working with these partnerships is at the core of CMHC's mandate. Through active involvement with partners and stakeholders, CMHC has been serving Canadians for the past 60 years. Beginning in 1946, CMHC was given the job of helping to house more than one million returning war veterans and to lead Canada's national housing programs.

There is also another function of CMHC and that is the insurance and securitization component. In that respect, it is meant to be a commercial enterprise that operates in the private market with others that provide mortgage insurance. With respect to the introduction of mortgage insurance by CMHC relating to building or house loans, it operates as a business, a business that earns its income from insurance premiums and fees but at rates that are competitive with and on a level playing field with other business enterprises offering a similar service.

This bill essentially requires, in accordance with an inflexible formula, the transferring of CMHC's mortgage insurance profits to the provinces for social housing purposes. This initiative would not require further parliamentary debate or approval where all parliamentarians would have the opportunity to examine and put the initiatives to the test. It plans to have an arbitrary formula based on specific percentages without regard to those items that might essentially cause a need to have a greater reserve. The bill proposes to have the transfer made automatically without any parliamentary consultation whatsoever.

The clause, as it now reads, intends to amend section 29 that establishes a reserve fund. It states that moneys get placed to a reserve fund after taking into account a series of events like bad debts, depreciation and anticipated future losses. I find that some of those are calculable but the anticipated futures losses are dependent, in a large part, on the economy, on interest rates and a whole series of factors. To arbitrarily fix it at a specific rate, as being proposed in this bill, does not bear relationship to those factors and certainly is not something I could support.

While CMHC is not a private insurer, it is subject to the same risks and follows the same guidelines set by the Office of the Superintendent of Financial Institutions for capitalization for prudent management and in order to maintain a level playing field with private mortgage insurers. The reserves required by the OSFI serve to protect the Canadian taxpayer from potential future costs arising from mortgage defaults. If, indeed, the interest rates were to go up substantially, there would be a significant claim on the reserve fund. If that fund were transferred out according to an arbitrary formula and without regard to potential loss, it could have significant effects on the Canadian taxpayer because, in the end, it is the Government of Canada that guarantees the due performance of the mortgages.

In order for CMHC to be competitive with other institutions that are operated privately to provide the same services, it needs to establish a reserve to properly capitalize its assets to ensure that if there is an economic downturn it can cover those losses.

Currently, to purchase a home in a low equity ratio of say 95% or 5%, those loans are insured by CMHC, which is backed by the Government of Canada that has a stake in this matter. It can provide housing to first time homebuyers at a very low down payment of 5% in this case and interest rates that generally would not be available unless one had a 25% down payment. This insurance is financed by premiums that go into the CMHC revenues.

Without a doubt, the CMHC plays a distinctive role in our housing system and delivers substantial benefits to Canadians. For example, CMHC mortgage insurance has helped one in three Canadian families buy a home of their own with as little as 5% down and at interest rates comparable to those for homebuyers with a down payment of 25% or more.
I have less difficulty with the objects of the use of the funds proposed to be transferred from CMHC than the formula suggested to raise those funds. Those objectives are: first, for social and affordable housing purposes; second, to encourage a supply of quality housing at affordable prices; third, to increase housing choices for the people in the provinces; and finally, to contribute to the creation and development of housing cooperatives.

It is also important to recall that the government is already taking action in all of the four aforementioned areas. For example, through CMHC, the federal government has demonstrated its commitment to social and affordable housing by spending $2 billion annually, primarily in support of some 633,000 households.

In addition, a major component of CMHC's assisted housing efforts are directed toward Canada's aboriginal population, both on and off reserve. CMHC provides funding for specialized housing construction and renovation programs, capacity development and ongoing subsidies for existing portfolio of assisted housing on reserve.

Moreover, we are encouraging the supply of quality housing at affordable prices. For example, we are moving ahead with the $1 billion affordable housing initiative and working with provincial, territorial and other stakeholders to deliver affordable housing for Canadians.
More broadly, the one percentage point reduction of the goods and services tax is helping Canadians by making housing more affordable. As well, the budget includes a provision for a strategic investment of as much as $1.4 billion to establish three housing trusts. These trusts will focus on affordable housing, northern housing and housing for aboriginal people living off reserve.

Likewise, we are also working to increase housing choices. Funding for CMHC's residential rehabilitation assistance program, commonly referred to as RRAP, and several related housing, renovation and adaptation programs has been extended for 2006-07 at a cost of $128 million. RRAP provides financial assistance to repair homes occupied by low income people. This program is also used to create housing by converting non-residential buildings into residential use.

We are also providing resources for cooperative housing. Across Canada, where CMHC administers, there are about 53,000 households living in some 2,000 non-profit housing co-ops currently in operation. In addition, where CMHC administers on behalf of the federal government, CMHC will provide some $100 million in 2006 to federal cooperatives under various programs. This is how it should work, where parliamentary appropriations address the needs envisioned by the objectives outlined.

However, the proposal to use profits in a mortgage insurance business for social housing purposes means essentially that the premiums are, in effect, being used for social objectives and are, in effect, being funded by individual homebuyers as opposed to the Government of Canada.

Bill C-285 would lock the government and Parliament into a very rigid formula that would circumvent, not only Parliament's direction but also do it at the expense of first time homebuyers and those purchasing mortgage insurance.

It is for these reasons that I cannot support the bill. We cannot use moneys collected from premiums made by first time homebuyers and use those funds for social housing objectives or any other objectives for that matter. Those types of objectives should be made by Parliament and by appropriation from this House where everyone has an opportunity to contribute to the process and actually have a vote because in the end it is the taxpayer that is responsible.