NDVA Committee Meeting

STANDING COMMITTEE ON NATIONAL DEFENCE AND VETERANS AFFAIRS

COMITÉ PERMANENT DE LA DÉFENSE NATIONALE ET DES ANCIENS COMBATTANTS

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, March 17, 1998

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[English]

The Chairman (Mr. Robert Bertrand (Pontiac—Gatineau—Labelle, Lib.)): Order.

Dear colleagues, I want to welcome you back from Kingston. I understand you had a good meeting there yesterday and this morning.

This afternoon we are meeting with Mr. Mike Nelson, CEO of the Canadian Forces Housing Agency, and also Mr. Morrie Evans, general manager.

The way we usually proceed, Mr. Nelson, is that you have between 10 and 15 minutes to make your presentation. Then you have questions from MPs—10 minutes Reform, 10 minutes Bloc, and then 10 minutes Liberal.

Before we get to that, I understand Mr. Hanger has a very short comment to make.

Mr. Art Hanger (Calgary Northeast, Ref.): Mr. Chairman, this pertains to the tour arranged for Kingston for the attendance of the parliamentary committee. I feel we were put at a disadvantage, this committee as a whole, but definitely the opposition members, given the fact that the minister was going to introduce Bill C-25, the amendment to the National Defence Act. I find the coordination between the committee and the department rather poor, because I don't think this should have happened.

If we're going to perform as a committee, with an opportunity to view all aspects of defence and make comment on it, I think the opposition should have the freedom to be able to do what the rest of the committee, and especially the Liberals, since they're greater in numbers, are doing.

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My objection is that there's not enough coordination for us to adequately deal with this whole issue of the social contract with the military if we're cut out of it.

The Chairman: Thank you very much.

Mr. Nelson, please.

Mr. Mike C. Nelson (Chief Executive Officer, Canadian Forces Housing Agency, Department of National Defence): Mr. Chair—

Mr. John Richardson (Perth—Middlesex, Lib.): Mr. Chairman, I can't let that go unanswered.

We don't make the schedule, Art. That, Art, is developed through National Defence Headquarters, where they can accommodate us. I think Mr. Chairperson would share that opinion. We don't make that schedule. We give them where we want to go, but it's developed at National Defence Headquarters.

The Chairman: Because I gather there's a lot of planning in this to satisfy everyone, not only our demands, the committee's demands, but also the people who are on base.

Mr. Art Hanger: There is some flexibility on this side, and influence, if you will, from the chairman to the defence department, and in particular to the minister. So I think there can be something done in that area.

Mr. John Richardson: But on Bill C-25 it was purely how you can get up the ladder and get it on. The ministers all fight to get their legislation on the table. So it's ultra vires this committee.

Mr. David Pratt (Nepean—Carleton, Lib.): Mr. Chairman, it's also important to point out that there are two members of the Reform Party on this committee. They had every opportunity to split their forces—

Mr. Art Hanger: Unable to do it.

Mr. David Pratt: Well....

An hon. member: It's not the committee's problem.

Mr. Art Hanger: I think it is.

The Chairman: Mr. Nelson.

Mr. Mike Nelson: Mr. Chair, members of the committee, thank you for the opportunity to appear before you today in the first of your two sessions on housing issues.

As you mentioned, Mr. Chair, I have with me Morrie Evans, who is on exchange assignment with my agency from the Defence Housing Authority in Australia.

CFHA came into being two years as an integral part of the department. Its focus is the housing needs of military families within Canada. The mission of the agency is to ensure that military families have access to suitable, affordable housing and to manage the existing portfolio.

In the organizational terminology of the federal government, CFHA is known as a provisional special operating agency. As the chief executive officer, I report to the assistant deputy minister of personnel, Lieutenant-General David Kinsman. My staff and I are public servants. We are not a private organization.

I am pleased that members of this committee have had the opportunity to visit several bases and wings. I am grateful that you took the time to speak with families and with my housing managers and to walk through some of the housing DND owns and my agency has been tasked to manage.

Although I'll talk about the housing portfolio itself in general terms, there's little need for me to describe to you how bad the condition of some of that housing is and how urgently we need to make some significant and fundamental changes.

[Translation]

The question of supplying housing to military families can be terribly complicated or terribly simple. When it's very complicated, we are faced with a set of rules, practices and policies that, over the last 40 years, have caused the situations that you could see: families living in rundown housing, a rent system that is extremely hard to understand with little possibility of improvement in sight.

But, it doesn't have to be so complicated. The organization that I head has consulted with families and military commanders all over the country to find out what their needs are. Although there are different solutions, they are all looking for something very simple: when postings are made, families want to know that they will be able to find suitable housing at an affordable price. I certainly don't want to hide the fact that the road ahead will be difficult, given the present situation, but I believe it's important to concentrate on this simple goal.

While you are considering this important question, I would ask that you not forget that, at present, only a third of military families live in the government-provided housing that you saw. It is certainly important to ensure that the housing we own is appropriate and meets modern standards. But it is essential that we keep in mind the housing needs of all military families, throughout the country, and not only of those that live on bases.

[English]

When I appeared before SCONDVA last year, I spent a good deal of time describing the origins of the current housing situation. That's now on record. I will not repeat it. My goal today is to provide you with what I believe is a way ahead. I've cast these thoughts in the form of some principles that could frame a new approach to housing for the Canadian Forces.

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First and foremost, we must listen to the families and understand their needs. Although the department has been providing housing to military families for more than 40 years, we have, for the most part, only anecdotal information about what our members and their families require in terms of housing.

What percentage of their incomes are families prepared to spend on accommodation? Would they be willing to drive an extra 15 minutes to work if it meant living in a single-family home instead of a row house or an apartment? How important is home ownership to them?

My agency, in cooperation with the Canadian Forces, has begun consultation on questions such as these with families at Edmonton and Toronto, and we will begin soon in Esquimalt. We will do this all across the country because each housing market is different. The information we gather will form the basis of our planning for the future.

Second, we must reduce the amount of housing that we own to a minimum. The department has been providing housing to military families for more than 40 years, with the majority of existing married quarters constructed between 1948 and 1960. The current married quarters portfolio consists of some 20,000 DND-owned and -leased units at 35 sites across Canada.

Vacancy rates vary from one location to another. Some locations have waiting lists, while others have hundreds of vacancies. The condition of the housing, the attractiveness of local market housing, the availability of home ownership assistance programs, longer postings, and the restructuring of the forces, resulting in the movement of whole units from one location in Canada to another, have contributed to a vacancy rate of about 10%, 2,000 dwellings across the entire portfolio.

As you've seen during your visits, the condition of the married quarters varies widely among locations. Since housing maintenance has historically been in competition for resources with the operational areas of bases, there's been a general decline in condition over the years. Wet basements, undersized electrical systems and worn roofs are common.

In addition to problems with the actual housing, there are serious problems at some sites with municipal infrastructure services. This has led at some bases to the sewer back-ups and water quality problems of which you've been made aware.

A preliminary assessment of the housing stock we have inherited from the department has revealed that expenditures in the order of $200 million will be required merely to bring the portfolio up to a social housing standard, and by that I mean a fresh coat of paint, a roof that doesn't leak, a dry basement and so on. This would not at all address the fact that most houses are smaller than contemporary standards and have outdated kitchens and bathrooms. In other words, $200 million would only buy us a more palatable version of the status quo.

Setting aside for one moment the difficulty of obtaining $200 million for this purpose, I believe that the wise course of action is to look to the private sector to supply much of the housing that military families require. This could be done through rental or through purchase directly by CF members, as many families do now, or where required, through crown leases, purchases or other arrangements with suppliers.

We could then dispose of the housing that we no longer need to own, permitting us to focus our limited resources on the housing that we need to keep and leaving us, then, with surplus property. This leads me to my next point.

We must work with our colleagues at the Treasury Board and other central agencies to find ways to use the existing property assets to best advantage.

Even in the scenario where we make extensive use of the private sector housing supply, we are likely to be faced with the requirement for thousands of homes. Cold Lake, Gagetown, Petawawa and Valcartier alone could account for over 5,000 dwellings, so we're going to need a source of capital.

When the notion of a housing agency was first brought forward within National Defence, the idea was that revenues from disposal or redevelopment of surplus housing properties would be a primary source of capital for the agency. However, CFHA, as presently mandated, does not have the authority to deal in real property.

Officials from Treasury Board Secretariat will be briefing you on real property matters when they appear before you on March 19. There are certain limitations as to what can be done with respect to the use of real property assets to generate funds, but I'm optimistic that progress can be made in this important area.

[Translation]

Fourthly, we must be sure that military personnel and their families get the best information available and, if need be, help in dealing with the private sector on housing matters. If we are going to count more and more on the private sector to meet the housing needs of military personnel, we must be sure that our members have the information they need to make informed decisions.

In my opinion, at least two measures could be taken. The first would be to continuously inform and train military personnel, from the very beginning of their careers, on the basic principles of property ownership and mortgages as well as on owner-tenant relations and related obligations. The second would be a location- specific consulting and information service that would be available to all members and that would provide detailed information on the housing market, schools and other major services that could influence housing choices when a posting is made. Information of this kind can help families better protect their assets if they invest in their own homes. There are already several such services in the Ministry under the Canadian Forces Relocation Program. This program will be explained to you in greater detail in the weeks to come by Pierre Lemay, Director General, Compensation and Benefits.

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[English]

Fifth, we must find a way to improve the accommodation assistance that is provided to members in high-cost areas so as to minimize the impact of housing costs on their pay.

I must acknowledge here that compensation issues are not part of my responsibilities and I know that you'll be briefed on these matters at a later date, but the problem of rent disparity across Canada is very real. As the manager of rental properties from coast to coast, I can confirm that military families who are posted from say CFB Greenwood in Nova Scotia to CFB Esquimalt in British Columbia will see a significant increase in the cost of owning or renting housing.

I would argue, however, that charging artificially low rents in married quarters is not the way to solve the rent disparity issue. You've seen first-hand what happens if housing is not funded properly. A reasonable rent stream is a necessity to ensure that housing is maintained and renewed over time.

Just as important is the fact that I cannot control the rents of those living in private sector accommodations. I would suggest, without making too fine a point of it, that spending hundreds of millions of dollars to acquire housing for the purpose of charging low rents, with all the maintenance consequences that would follow, is a very inefficient means of solving the problem of high rents in some parts of the country.

From my perspective, the rent disparity problem is best addressed through a system such as the current accommodation assistance allowance, which allows the housing market to operate, yet does not do so on the backs of the members and their families.

[Translation]

Finally, we must make it possible for CFHA to rapidly take measures to provide the range of housing services the Canadian Forces need. The creation of CFHA was an important step towards resolving the Ministry's housing problems but, as regards our mandate, funding and flexibility, we are very limited. As I have pointed out, we have no power in relation to the real estate sector. We can't buy, we can't sell, we can't rent and we don't have access to real estate funding. As far as our mandate goes, we are limited to maintaining and using existing housing units. We must find a solution to these deficiencies, probably by giving the agency an organizational structure that is better suited to the work it has to do. CFHA, if it is given the proper powers, will be able to provide a complete range of housing services to military families, including management of government housing, renting housing in the private sector and providing training and information services. The Agency would be the one-stop service the Ministry, the Canadian Forces and military families need.

[English]

In summary, we are at the end of an era in the way we provide housing to the Canadian Forces. The solution for the next several decades must reflect the needs of families, the requirements of the military, and the wise use of resources. The objective should be to ensure that wherever military commanders send families to live, they have access to housing that is of a contemporary standard, is within their financial means given the pay and benefits they receive, and that suits their individual circumstances.

Mr. Chairman, members of the committee, housing—shelter—is among the most fundamental of human needs. By following an approach based upon the principles I've outlined today, my agency, together with the department and the Canadian Forces can ensure that as we move our military families around this great country they serve, they will have access to the housing and housing services they need. The pay-off for Canadians will be Canadian Forces members who can focus on their profession rather than on their housing circumstances.

Mr. Evans and I would now be pleased to take any questions you might have.

The Chairman: Thank you very much, sir. Mr. Hanger, first round.

Mr. Art Hanger: Thank you, Mr. Chairman. Thank you, gentlemen, for appearing.

I've been waiting actually for this time because—I know other members of the committee feel this too—I feel there's quite a problem in this whole area of housing for the military. To say the least, I was quite appalled at what I saw up in Edmonton and some of the complaints that came forward.

I can only say that I don't think our military people should be living in what I consider to be, in some of those places, garbage. There was certainly a lot of strain on the families that stayed behind by even having to live in some of those places, especially the ones that leaked sewage into the basements, I guess in part because of sewer back-up and just decaying lines.

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Out of all the places I think we were at, most of the complaints that were levelled reflected immediately on your agency in that Edmonton region. Other areas of course were much more appreciative of CFHA, but getting back to Edmonton, there was nothing positive out of the complaints that I heard, at least, about how CFHA handled the problems of fixing up some of the shortcomings in those houses.

There was one in particular—and I'm going to ask this question because it was CFHA-directed—that because of a sewage back-up problem, all the woman's furniture was moved out into the backyard. It rained for three days, and even though some of it was covered with tarpaulins there was still considerable water damage. There was no restitution for the damaged property. It was a suggestion, in fact pretty much a request, on the part of CFHA to follow through that type of a process to fix the problem in the basement. But the family really suffered the losses in a substantial way and were not compensated.

Is there no room for compensation if something goes wrong with directions given by CFHA to their workers?

Mr. Mike Nelson: I was very troubled when I first heard that account and then I read the actual transcripts. I can imagine the feeling in the room that night. It seemed to be quite clear that the individual was very upset with the service she had received. There is an investigation under way. I asked for an investigation, I know the base has an investigation under way, and we have some of the details of the actions we took.

This doesn't answer your question about restitution, and certainly if there was something CFHA caused to happen.... Our agency is about people, and I'm pleased to hear that at some of the bases you did hear good remarks about the agency. In my mind there's no doubt the condition of the housing and the attitude toward my agency are pretty closely linked. The fact that on a day-to-day basis my manager out there—and at other places such as Kingston, which also doesn't have very good housing—has to say no more often than he can say yes gets a very difficult relationship going between us and the base.

In that particular case, Morrie, would you be able to give a couple of examples? The investigation isn't complete and I'd like to be able to make an answer on the restitution question as well.

Mr. Morrie Evans (General Manager, Operations, Canadian Forces Housing Agency): I think with regard to claims there is a mechanism for people to claim. In the first instance, as elsewhere, we ask that people insure their personal effects under the same circumstances as anybody else does. In the event that the claim is not payable by the insurer because the agency is liable, or the department or crown housing is liable, for the circumstance, then there's a mechanism whereby we can pay.

Regrettably, in that particular circumstance we're not aware of any claim for restitution. Hopefully the investigation will bring it to the fore, but at this point in time we've not received any claim from the particular occupant I think you're referring to. When he's received it, certainly it will be processed in the normal way. Hopefully the investigation will bring that to the fore.

Mr. Art Hanger: Restitution is only upon claim if the insurance the householder has does not cover the damage or the application.

Mr. Morrie Evans: The crown is liable in all circumstances where we have failed to take due care and exercise our responsibilities fully to protect our occupants and to protect their property in exactly the same way as any other landlord would. From time to time we do pay restitution to occupants where we have been remiss, or the department has been remiss, in some shape or form. We are not liable in circumstances where, for example, an act of God causes a problem that is imposed on our houses in the same way as it's imposed on the general community. People need to have insurance to protect their personal effects in the same way as everybody else does.

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Mr. Art Hanger: Okay.

Maybe it's because there were so many problems that the maintenance crew were unable to really deal with all the problems effectively, but there seemed to be a attitude—a negative one, I might point out—that existed between the maintenance group in CFHA in that Edmonton region and those renters that wanted some sort of satisfaction and the problems fixed, and they never seemed to get anything resolved. Is that because there are so many shortfalls in the structures of the houses that they can't fix them anyway?

Mr. Mike Nelson: It's very difficult when you're down to health, safety and security—which is essentially what we're down to in those places—to provide what I consider and what I think any of us would consider to be a reasonable number of times you could say, yes, you shouldn't be dealing with a 1952-vintage kitchen, and yes, your paint really shouldn't be peeling any more.

Those houses end up with people in them who I think have reasonable requests to say, look, I'm paying some rent; I would like a reasonable place in which to live. But because the housing will at some time in the future be disposed of, and because the amount of money we have gets us down to health, safety and security so that we can put the money elsewhere, in housing we know we're going to keep, I think people just get angry. I think you saw a lot of that anger, and on a day-to-day basis you can believe that my housing managers need to deal with that anger of what I think are reasonable requests that we have to say no to more often than we should.

Mr. Art Hanger: Well, it seems to be posing quite a problem. I wonder if there isn't some other alternative, and I know there are a number of families living in, I guess one would have to say, definitely substandard housing.

One other point that strikes my mind, too, about that Edmonton trip was that there was some concern, from one woman who had a young child, about the odours that were seeping through—whether it was the ground in through the cracks in the concrete or the sewer, I'm not really sure—and its effect on her family and their own health in there. How is that going to handled, and how is it going to be investigated? Is the agency itself actually investigating those direct concerns?

Mr. Mike Nelson: Was that one that was identified to us?

Mr. Morrie Evans: No.

Mr. Art Hanger: That one was not identified.

Mr. Mike Nelson: It wasn't identified to us. I can certainly imagine that it was identified to our agency, and that if anything like that happens, we would be calling in the gas company immediately to take a look at that.

Mr. Art Hanger: Yes, it seemed like it was something other than gas.

Have I still a couple minutes?

The Chairman: You have 45 seconds left.

Mr. Art Hanger: Have you considered simply giving a housing allowance to the members of the forces, say, perhaps indexed to the local cost of housing?

Mr. Mike Nelson: The whole area of compensation is outside CFHA's mandate. I have no ability and no mandate to do anything other than, at this time, take care of the housing that I've inherited from the Canadian Forces.

I believe Colonel Lemay, director general, compensation and benefits, will be addressing that when he addresses this committee.

The Chairman: Thank you, Art.

[Translation]

Ms. Venne.

Ms. Pierrette Venne (Saint-Bruno—Saint-Hubert, BQ): If I understand correctly, rent on family housing produces revenue that the agency you head uses for housing maintenance.

Is this the only revenue the agency has? If there are other ways of funding your activities, we would like to know what they are. What is your agency's annual operating budget? Do you report to somebody in your administration and, if so, to whom?

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[English]

Mr. Mike Nelson: In response to the first question, the only source of revenue that we have is revenue from the housing. That does include the rent, the charges that are made to the individuals. As well, in cases where the utility charges are not paid directly by the occupant, like the case of a row house, perhaps, where it's not metered individually, we also collect that and use that as part of our revenue.

As well, there are some locations where we have foreign countries, like the Dutch, the Germans and the British at Sheffield, which is one example where they pay us. That comes into the agency. The total amount for this year in revenues is about...so to answer your question, there are no appropriations. The taxpayers are not meant to be supporting CFHA's operations. It's entirely from the revenues from the housing.

To answer the second question, the budget of the agency is around $83 million this year, and I report to Lieutenant-General David Kinsman, assistant deputy minister of personnel.

[Translation]

Ms. Pierrette Venne: Thank you. In your presentation, you seemed to say that the Canadian Forces Housing Agency should have the power to acquire houses. Anyway, that's what I understood.

In fact, what you want is to take over this power from the Treasury Board Secretariat which has it now. Am I to understand that you want to take over this status because, in your opinion, the Treasury Board Secretariat is not properly managing the stock of family housing?

[English]

Mr. Mike Nelson: Treasury Board's role is not to manage the housing stock. That is the role of the custodial department, the Department of National Defence. On Thursday Treasury Board will be appearing before you and its officials can explain that particular role. The actual management is up to the Department of National Defence and, in this case, the Canadian Forces Housing Agency.

In creating my agency as what is called the “provisional special operating agency”, without any real flexibility.... You described quite well the things that we cannot do. The idea behind creating a provisional special operating agency is to be able to put in place an organization to assess the problem, to do just what we've done, to set up an agency across the country to assess the condition of the housing stock.

And then, in the decision that created my agency about two and a half years ago, we were directed by the Treasury Board—or the department was—to come back to the Treasury Board once we had an idea of how we would like to manage the problem, which is what we believe we're prepared to do now, along the lines of what I described in my presentation.

[Translation]

Ms. Pierrette Venne: To solve the problem of rent disparity among regions, you recommend improving the housing allowance. What does improving the housing allowance mean to you?

It's strange that, while you are proposing to increase the allowance to solve the rent disparity problem, we see here, on page 3 of the notes supplied to us by our research assistants in the Library of Parliament, that when the Agency took over management of family housing, it made rents comparable to those in the local markets, thus creating a disparity between rents on different bases.

This situation has become one of the major irritants affecting the quality of life of military personnel. That's what we read in this summary the Library provided us. I would like to know how you explain that.

[English]

Mr. Mike Nelson: The disparity in rents has existed for years. The policy of the Government of Canada to charge market level rents equivalent to whatever market you're in has existed for several years and was, in fact, applied by the department before CFHA arrived. CFHA did not—I beg to differ with the notes in that regard—introduce any new system of rents. We adopted exactly the system of rents that was in place before. So that disparity of someone living in a house in Greenwood and paying $400 a month and then moving to Esquimalt and paying $700 for the same house has existed for years and existed well before CFHA.

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My suggestion for improving the housing allowance, from my perspective, is just to put enough money in the pockets of the individuals so that they can afford to live as they move across Canada. As I said in my remarks, I'm not an expert in compensation, but if instead of giving them more money one were to just reduce the rents to an unreasonable level, then the situation we have seen across Canada, which is 40 years of abuse of housing, would only be perpetuated.

[Translation]

Ms. Pierrette Venne: At the beginning of your presentation, you said it wasn't necessary to describe to us the rundown condition of certain units and tell us how urgent it was to make changes.

Our defence committee visited houses on a number of military bases, but we still don't have an overall idea of the situation. Can you describe the present condition of the Ministry of Defence's family housing in general? Don't bother describing damp basements or things like that. Describe the general state of the units.

Mr. Mike Nelson: I am going to ask Mr. Evans to answer that question.

[English]

Mr. Morrie Evans: I can just give you some statistics. Our portfolio currently numbers 19,330 houses. If we use $15,000 as the threshold of expenditure that we need to expend on houses to bring the maintenance standard of the houses up to a social housing standard, we would have 1,792 houses beyond economical repair. That is to say, we have 1,792 houses that require more than $15,000 of expenditures; they require between $15,000 and $20,000.

We have a further 1,130 houses that would require more than $20,000 per unit to bring the maintenance standard up to a minimum maintenance standard. That's not addressing bringing kitchens, bathrooms and the general amenity of the houses to contemporary standards. That's just addressing the maintenance issue.

We have some sites like Edmonton where we have two sites. The housing at Griesbach is arguably the worst housing we have in our portfolio. We also have very bad housing in Kingston and a number of other sites. But Edmonton is certainly prominent in that we have 757 houses in Griesbach, most of which are beyond economical repair. Within the department we have made the decision that it would not be economically prudent to pour millions of dollars into those houses, because at the end of the day, all we will have done is maintain the dog boxes so that we have a good quality of dog boxes versus the poor-quality ones we have now.

So our priority with the department is to find a new housing solution for Edmonton. We've deemed that the Griesbach site is to be disposed of, and there is a mechanism now in place that will see that site disposed of in the next few years.

By about the middle of this year we will have developed a new housing solution for Edmonton, which will allow us to get rid of the housing that is consuming and wasting a lot of our funds. We will be directing our money into housing which will provide a better long-term solution for families. We are currently doing that exercise in Toronto and Esquimalt as well and will do all sites accordingly.

[Translation]

The Chairman: Any other questions?

Ms. Pierrette Venne: Not at the moment. Thank you very much.

The Chairman: Mr. Wood, you have the floor.

[English]

Mr. Bob Wood (Nipissing, Lib.): I just want to get back to the rental issue and how that's set up. When DND transfers people from one coast to the other, these people don't get a pay raise. The salary stays the same. Why doesn't the rent stay the same? Private business certainly would give you an offset allowance if you were moving into one of these areas. Why is it that the rent goes up? Why isn't it the same? Let's face it, all these buildings and houses were paid for 20 or 30 years ago. So why can't we stabilize rents?

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Mr. Mike Nelson: There are a couple of approaches to that question. I don't want to just stand on the policy and say, “Because it's the policy that we have the rent policy the same everywhere”.

One perspective, though, is that only about 30% of the people are living in the housing. So even if I could control just the rent—which would mean I would have even less money to put into the housing, which would mean it would get even worse, but even if I could control the rent—I couldn't do anything about the other 70% of the folks living outside the base.

That is where I'm coming from when I say a compensation-based solution that corrects across Canada for these areas is the best way, because a compensation solution gets at everyone who's posted to a site, not just the folks who happen to be living in married quarters. You can imagine, I think, the “dissatisfier” it would be if we could only get 30% of the people into the married quarters and those people got a lower rent than we could give to the folks on the outside.

Mr. Bob Wood: I'm interested in directing a number of questions to Mr. Evans, who is obviously very familiar with the Australian efforts to privatize their military housing.

First of all, Mr. Evans, would you consider the Australian example to be a success?

Second, are there conditions in Canada that differ from the Australian situation? For example, is the bureaucracy and administration of our housing system such that it might impede this process?

And if we do decide to follow the example of the British and the Australians and sell off our PMQs and then lease them back, what types of problems and complaints are we likely to hear, based on your experience, over the next few years?

Also, Mr. Evans, do you anticipate any uniquely Canadian difficulties, such as variable housing market, size or climate of the country, or whatever?

Mr. Morrie Evans: The first thing to say is I believe the Australian Defence Housing Authority has been a resounding success in terms of eliminating from the family agenda the problem of housing. I guess the way to articulate that is that in 1987, when the Australian government created the Defence Housing Authority as a government business enterprise, it gave the authority the agenda of resolving the housing circumstance, which in that year was not dissimilar to what we have here in Canada right now.

But there are some big differences in the conditions of service of the military. The first and probably the major difference is that in Australia the military is deemed a unique employment category. It is considered by the Australian government and the Australian people as a requirement to provide housing subsidy to the military if you want to deploy it when, where, and how you want it to perform the duties in support of the nation.

The way it manifests itself is that families essentially only pay 50% of the market rent for their particular property. So there's a 50% subsidy across the board for the housing portfolio. In dollar terms, the rent that the Defence Housing Authority charges to the department is full market; we charge the department the full $240 million per year that the housing portfolio we provide is worth on the market. The department underwrites $120 million of that in subsidy to families and pays, and then families contribute $120 million into what they call a group rent scheme. The group rent scheme is such that rents are set exactly the same across the country and they're set by rank. Salary categories are grouped and then people pay a set rent for that.

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DHA has essentially replaced the total portfolio that it had in 1987. I think the figure is something in the order of 19,000 new dwellings, all of which are now at community standards. They are built or acquired to scales that reflect the rank, so there are slightly different standards, whether you're a general down to a private soldier, but the rents reflect that difference in standard.

The other fundamental difference is that the housing has been acquired in the general community. The concept of enclave housing has gone, and essentially all of the military families now reside in the general community along with everybody else. You can drive down the street in the suburbs of those cities and you would not identify a Defence house from any other house in the community.

From that perspective it has been a success. From the department's perspective, however, the big consequence has been the cost. When DHA came into being in 1987, the rent bill was probably somewhere in the order of $100 million. But because we've replaced the dog boxes with community-standard housing, which is larger, has more amenities and is in better locations, and we've disposed of the housing in the poor socio-economic environments, of course the rent bill has moved quite dramatically to its current ceiling of around $240 million.

And of course now that the housing is no longer an emotional issue—families are generally very happy with the housing circumstance—of course the department's focus is now more on how much it costs to actually continue with that solution. DHA is, in its current mode, looking very much at selling its portfolio to the investment market and then leasing that portfolio back for medium- to long-term leases, to allow the government to gain some of the equity that has been built up through those housing programs over the last 10 years.

From that viewpoint it's been a great success, but there is a cost that the department now feels, in the form of that subsidy.

As far as your bureaucracy is concerned, I think the only discernible difference is that when DHA was created, it was created as a business enterprise and given the full powers to trade in the housing stock and the land stock that it was given as equity by the government when it was created. So the government transferred the housing and the land that the housing was on to DHA, and said, okay, now go and do business.

It was empowered to mortgage the property, it was empowered to borrow, to trade in the stock, to do urban renewal projects. It was empowered to do joint ventures and the full spectrum of strategies that a company with authority can use to maximize the return on its investment. That investment of course manifested itself in better housing, and in due course, to the government it will manifest itself in the form of equity that it will get back as that portfolio is moved to the lease market.

The circumstance in U.K. is a bit different. The portfolio was sold, but as a package the 66,000 houses were sold to a consortium of banks, in as-is condition. I wouldn't recommend that deal to too many people, given that the government got a windfall once but of course has inherited all of the maintenance costs and upgrade costs still on that portfolio, though it no longer actually owns the property. I don't think it was a very good business deal.

In Australia I think the benefit is that the government will reap the benefits of the equity in due course. Obviously it takes time in markets to liquidate your assets, but in so doing you can put in place leasing strategies that will ensure that for the future the housing will stay in good condition, for the long term.

Mr. Bob Wood: I have a quick question. I was just looking over your speaking notes, Mr. Nelson, and I see that you complain at least twice about CFHA's lack of authority or mandate to deal in real property—that obviously you're limited by Treasury Board regulations, and that they control the lease and sale of any base property and the proceeds from these transactions.

I take it that if you had access to money that was made from selling or redeveloping surplus houses and lands, you would put more money back into the remaining housing units. Now, this makes sense to me, but it seems that in reality this money goes elsewhere, and that leads me to a couple of questions. I probably know the answers, but I just want it on the record.

Where does the money for this real property go? Does it go back to DND operations, to Public Works, or does it go to the central revenue fund of the Treasury Board? How do we change this so that CFHA controls these properties and gets the money from these sales for their own operations? In your dealings, do you see a willingness developing within DND and Treasury Board to make some of these changes?

• 1620

Mr. Mike Nelson: Right now the money goes into the consolidated revenue fund. You're absolutely right.

I'll just prefix my remarks by saying that I know my colleagues from the board intend to take this on in larger detail on Thursday morning when they address you. They asked me to sit here with them again on Thursday morning.

So right now the money goes into the consolidated revenue fund. There is a revenue-sharing arrangement between Treasury Board and departments that allows for up to 50%, I believe, of the revenues from land transactions to go back into infrastructure projects. Again, I would defer to the better information of my Treasury Board colleagues on Thursday morning.

But with particular respect to housing right now, the deal is that the money goes back into the consolidated revenue fund until such time as CFHA and the department return to the board and say, as I was saying earlier, that they're ready for another version of CFHA, until such time that they can't get at the money.

You're right that we would redirect it to that housing that we intend to keep rather than put it into housing that we don't need any more at places where perhaps there is a private sector market. Yet, because we're still hanging on to the properties, we're doing odd things like replacing 600 furnaces in some places and rewiring 300 houses in other places, where we really shouldn't be keeping the housing.

As for fixing it, it's a complex technical question, so I'm told, that has to do with more than just the powers of the board. It has to do with the Financial Administration Act and the Federal Real Property Act.

But as for willingness, I would say yes, I'm very encouraged by the attitude of Treasury Board officials with respect to trying to find.... They don't try to put a wrapper on the department and say you should be a crown corporation of type X. They ask what you want to do and whether that makes sense. They want to help design the right organizational form.

Some of that might be beyond the mandate of the board. Things like crown corporations are more in the mandate of the Privy Council Office and ultimately the Prime Minister of Canada. But yes, I would say that I see a lot of willingness, and I'm very encouraged.

The Chairman: Thank you, Mr. Wood.

Before we go to Mr. Price, I have a quick question for Mr. Evans. As for the 50% subsidy that's paid to the renter, is that a taxable benefit for the recipient?

Mr. Morrie Evans: The Department of National Defence pays to the treasury a tax called fringe benefits tax, but the department picks up that cost. So it becomes another operational cost of the department. So there is a tax on the subsidy, but the tax is paid by the department, not by the members.

The Chairman: Not by the individual.

Mr. Morrie Evans: No.

The Chairman: Thank you. Mr. Price.

Mr. David Price (Compton—Stanstead, PC): Thank you, Mr. Chairman.

Just to continue along Mr. Wood's line, you were talking about the direction in which you'd like to go, the line you would like to see set up. Unfortunately, I wasn't here at your last presentation. I'd like to know just what the line is right now, very briefly, of course. What is your set-up in CFHA right now?

Mr. Mike Nelson: In terms of authorities?

Mr. David Price: Yes.

Mr. Mike Nelson: Essentially, we are exactly the same as a government department. The only difference is that, as I answered earlier, we get our revenues from rent. But in terms of the way we hire, we do that under all of the same acts and the same processes. My contracting authority is extremely limited within the department.

I'm not saying this is Treasury Board. The department has certain authorities, but it has not delegated them all to the agency, for its own good reasons.

Mr. David Price: But as for your budget of $83 million, you control that yourself, though.

Mr. Mike Nelson: That's the good news. The budget I have, the $83 million, is up to me and my management team, with, of course, direction from my boss as to how to spend it. But if the question is whether I would ever be told that we couldn't have that money because it has to be spent on helmets this year, that doesn't happen. The money comes in and it in fact gets back into housing.

Mr. David Price: Are there particular budgets allocated to each base, or is it a global budget?

• 1625

Mr. Mike Nelson: We work globally. We collect all of the rent from all of the sites, and then we're able to direct it to those bases where it's most needed.

Mr. David Price: Okay. In regard to what we heard in travelling to bases—of course, I'm talking PMQs here; I won't talk about the other ones—the ones that are in good shape have very few complaints; the ones that are bad, of course, have all the complaints.

A lot of the complaints, though, really end up to be about response time. That's one of the biggest complaints we heard. It's a question of them calling and getting no response at all—and we're talking weeks and months. What can you tell me on that?

Mr. Mike Nelson: I'll give an initial answer, which is a bit of the historical perspective, and then ask Morrie to tell you about our response time policy.

I've been reading all the transcripts, of course, and looking into the various complaints. Without making a blanket statement, CFHA, as an organization, at some of the bases where you visited, has been in operation only since last April, so not yet an entire year. What folks are carrying around with them is the response time and everything else—along with ourselves, and I'm not making excuses for ourselves here. But you're hearing a lot of the angst and anger that has been building up for the last 40 years as to how the housing has been managed. I wouldn't expect people to distinguish the fact that when they have you folks in front of them, they say, well, it's just this new guy on the block. In fact, they're angry because the housing and the response time has not been good over time.

But I would ask Morrie, just for a moment, to tell you about our response time policy.

Mr. Morrie Evans: As far as maintenance is concerned, we've introduced a contracting system called a schedule of rates. Without getting into the mechanics of it, key to that is that we contract all of our repair services out either to bases who have successfully bid through the in-house bid process or to private contractors, and we have across Canada some 1,200 contractors working for us.

When we raise a work order, when an occupant calls in and has a particular problem, we allocate that particular job one of five priorities. If it's an urgent task related to health, safety and security, or an incident that is going to cause a lot of damage to the property if we don't deal with it immediately, the contractor is required to respond within four hours—that is, be on site and working within four hours. For next year, with the new contracts commencing on April 1, we've reduced that to one hour. From our experience and from our learning year of this year, we've come to the conclusion that four hours is too long, so we're making it one hour. Then, of course, for lower degrees of priority, it goes: 24 hours, 7 days, 14 days, and 28 days, which is the maximum priority for a responsive maintenance task. There is another priority when we're doing program work, where we would set a completion date based on a work schedule that a successful contractor has bid.

Having said that, in our first year of operation we have not been as good at meeting all those priorities as I would like. What we've learned is that in some sites, in some trades, we did not have enough contractors. Where we had three contractors for plumbing in our first year, we've learned that there are some sites where there were particularly serious plumbing problems and three contractors have not been able to manage it. So we've been increasing the number of contractors. For next year, we have even more contractors in those sites where we've learned from this year's experience we need more people on whom to call.

The fundamental problem we have is that the volume of calls is quite extraordinary. In round figures, 100,000 to 120,000 calls for responsive maintenance tasks in a year will be what we basically would expect this year. That is an incredible call rate.

Sometimes, for example, with weather conditions, you can have a circumstance as recently occurred in Oromocto, in Gagetown last week, where there was a rainstorm in that area, the town's sewage system couldn't deal with it, and we had massive back-up problems all the way through our housing. It's probably going to cost us about $100,000 for just two days' incidents.

We have very tired infrastructure, we have very tired houses, and much of our effort is just directed at trying to keep things in place.

• 1630

Mr. David Price: Actually, I'm very disappointed to hear you're hiring more contractors. I'm in a contracting business. It's the opposite way to go; we just don't see it done. You might have two contractors, a back-up, but you usually use one main contractor so that they get used to servicing that particular customer. They may bring in other contractors to back them up. That's the way it's usually done. Hiring more contractors means more paperwork, more red tape, the whole works. It's incredible. I'm very surprised to here you're going in that direction.

But that's beside the point. I'm still looking at the problem of how the houses are going downhill—and we realize it. In a lot of cases they're going to end up disappearing, and you hate to throw good money away, but in the meantime these people still have to live in these houses, so we do have to supply them a good service. That's what's very bothering about this whole thing. You're working on plans now on what's going to happen to PMQs in the future. They might disappear totally, but what type of timeframe are we really looking at here? You talked about a possibility of a plan coming up this year, but is that really a long-term plan, or is it just a stop-gap now to get us the next little step ahead? Are we looking a little further down the road?

Mr. Mike Nelson: For the specific case Morrie was talking about in Edmonton, we're hoping to be able to get a solution in place in the next year or so. But at many locations the grim reality is that we can plan all we want, yet CFHA as an entity doesn't have the authority to do anything about the plans. Let's just say that at the—

Mr. David Price: It's the capital.

Mr. Mike Nelson: Yes, at a given base we said what we need to do here is get rid of these houses and lease a whole bunch of houses in the community. We can't do it.

Mr. David Price: You can't do it. So you have to keep those houses going. Therefore you don't have any choice; you have to put the money into them.

But there are a lot of things that can be done on a temporary basis. When you know a house is going to disappear in a couple of years, a lot of solutions can be done that are temporary but will still get you by. I think what we're seeing is every solution that seems to be looked at.... I don't know how it's done. Who evaluates it?

I guess that's what I'm looking at. Is there an engineer doing it? When I say engineer, I'm talking very generally on that. For instance, when we do work we have somebody following up to make sure you did what you were supposed to do and somebody says before what you should do. In some cases the contractor himself will take on the whole task but will still be checked up after. Do you have a system like that in place?

Mr. Morrie Evans: In each of our offices we have technical staff. In addition to that, we have available to us engineers, architects, and a wide range of other technical professional skills should we need them. And we do call on those people from time to time when the complexity of a particular problem is such that we want this professional advice. So we do do that.

The fundamental issue for us, though, boils down to money. To some extent I'm guessing now, but in terms of wet basements, I would suggest to you that we have thousands of houses in our portfolio with wet basements. We have explored more ways of trying to solve wet basements than is almost imaginable, and the end result is that any fix that's guaranteed essentially is big money. And it gets down to the fact that there are some solutions, and yes, we can pull large sums of money in to fix a few houses, but we have that great mass of the rest of the portfolio that needs some money, as you quite rightly point out, just to try to keep our occupants as comfortable as we can possibly make them.

We are in a situation, as Michael mentioned in his brief, where we need $200 million in capital to redress all of those basic fundamental condition issues. We don't have $200 million. We have available, in rough figures, around $50 million plus to invest into our housing portfolio each year. And if you take out the money we need for responsive maintenance just to fix the things that go wrong and that are causing heartache to people at the time, it does not leave us much more than around about $12 million to invest in projects that will actually fix some of these fundamental issues.

Mr. David Price: What about some of the ones we heard of, like...? I'm over?

The Chairman: You're over. We now go to the five-minute round. Mr. Hanger.

• 1635

Mr. Art Hanger: Thank you, Mr. Chairman.

I was talking with one commissioned officer at one of the bases. He told me he had a really nice house, with one problem: it was falling into a hole on one side. Otherwise, the house was nice.

How do you fix a foundation that is going to be damaged in such a fashion and make it liveable? I would suggest it's pretty difficult.

You know, the more I listen to what is happening, even with your desires, Mr. Nelson, of wanting to be able to take control of the land and be able to utilize it in some real fashion to put some adequate housing up for the military, in a way I think the Australian example—and it's more than an example; it's a process that I gather is working fairly well, is it not?—seems to be the way to go.

Mr. Mike Nelson: As Morrie pointed out, one of the things we have to be wary of doing is adopting holus-bolus the whole example without understanding all of the background. One of the very important background pieces is that the Australians pay 50% rent. The advantage that gives my colleague in Australia is that there's a motivation, a very strong motivation, for people to go live in the housing the agency puts up. They get literally half of the market rent if they do that.

So we have to be careful about the idea that we would just get a whole whack of money and then replace all of the housing we have, because if people had to pay full market rent, they might say, “Thanks very much, Mike, but I'd rather live downtown. It's a little bit cheaper”. As we replace the housing, the rents will rise to market.

Mr. Art Hanger: You have either the Australian solution to the problem or you could go another way—that is, no different from the way the Canadian Foreign Service works. You get a housing allowance, which is adjusted according to the location in which you live. The soldier or the individual family finds their own accommodation, and they go from there. They've already had their rent established in that particular community.

Mind you, that sort of takes you out of the picture, but it's an alternative to what actually does exist.

Mr. Mike Nelson: In a perfect world, Mr. Hanger, there would be no Canadian Forces Housing Agency. The market would work perfectly. Since the market doesn't work perfectly and we don't have perfect information everywhere, I see the role of the agency, in a world much as you've described, as being that of information provider so that when you get your posting message, you don't start wondering, well, I've never been to Moose Jaw before, I've never been to Edmonton, what's the housing like there, and what sort of conditions?

So substituting information for infrastructure, if you will, and allowing the system to work, but not on the back of the member, I think there's a role for the agency there, but believe me, in a perfect world we don't need to intervene. It's not going to get that perfect. But I think information is an important piece of the puzzle.

Mr. Art Hanger: Griesbach barracks, I believe, is one such area or base that is under review for sale, if you will, or for some type of adjustment, whether it's new housing or... At any rate, it's 640 acres.

Mr. Mike Nelson: At some point the army is moving out of the Griesbach location, and the entire site will be disposed of.

Mr. Art Hanger: The entire 640 acres. How much would that be worth up there in the middle of Edmonton?

Mr. Mike Nelson: I couldn't put a number on that, and I don't know if anyone has.

Mr. Art Hanger: Maybe $750,000?

Mr. Morrie Evans: I have no idea.

Mr. Art Hanger: Pretty close.

Mr. Mike Nelson: Not all of it is housing, mind you. The housing is in one corner.

Mr. Art Hanger: No, but it's a lot of good land.

Mr. Mike Nelson: One of the corners, in fact, is a very valuable corner.

I don't like to take the idea that if we had all the property, then that's all the money we need, and there's this one-to-one ratio that, just by incredible luck, we have just as much property as we need money to fix that housing we need. But certainly the option of being able to trade in the stock and having at least that amount of money to get you jump-started would be a significant step forward.

Mr. Art Hanger: Yes.

The Chairman: Judi.

• 1640

Mrs. Judi Longfield (Whitby—Ajax, Lib.): Thank you.

You've probably hit me at a really bad time, because I'm not kindly disposed to CFHA today, after where we've just been.

A couple of things disturb me. One, you said that right now if it's a major emergency you're aiming for a four-hour response time. You also said that frequently, however, you don't make the four hours. Then in the next breath you say, but next year we're going to be better; we're going to respond in one hour. If you can't respond in four hours today, how are you going to respond in one hour tomorrow?

Mr. Morrie Evans: If I can just correct, we can respond in the four hours, and we do. Where I'm dissatisfied with our overall performance is at the 28-day and 14-day bracket. Essentially the issue there is volume—contractors trying to deal with the large number of jobs that they have.

We review the performance of our offices on a weekly basis, and as I said, we intervene from time to time, directing managers to take on more contractors than they have if contractors are not able to do the full volume of work that we're providing them.

In terms of emergency work, that is paramount, and people do respond in those four hours.

Mrs. Judi Longfield: Well, I guess I'm speaking to more people who don't get response in four hours than you are, but I'll leave that for a moment.

The other thing you said was, when Mr. Wood asked you about why we couldn't be paying the same amount of rent across the country.... I mean, they have the same pay envelope and they're moving through no fault of their own. A lot of people said they'd rather pay a little more in Valcartier or some of those other places, because they all know they're going to end up in one of those other places someplace along the line, when not only housing is more expensive but every other product that they have to cope with is more expensive. They said they'd rather see an equalization—pay a little more in Valcartier so that they could pay a little less when they got to Esquimalt, particularly when in many of the cases the rent in Edmonton and so on is far greater than it is, for far less.

I think our responsibility is to feed, clothe and house, and I don't believe that in a perfect world there wouldn't be a need for you. I think in a perfect world we would be providing the kind of housing that these people deserve.

I don't think the answer is necessarily to throw them out in the community. If you think the answer is in the free market, as far as I'm concerned, that doesn't deal with the need that these people have, particularly when their husbands are deployed, to feel secure, to be in an area that is a base setting, that is a community unto their own. These people don't necessarily want to be, even if they can afford to be, living in the downtown of a city. They want to be with the people who understand what they're going through on a daily basis. There's always going to be a need for housing that's controlled and operated by either you or some other agency, but for military personnel.

Mr. Mike Nelson: I won't dispute that, because the military community notion is a very important one that I know the uniformed personnel in particular hold. I would just argue that there is a need for my agency to be able to provide whatever it is that the military require.

One notion about the equal pay in all locations: as I understand it, the military postings are slowing down in terms of intensity. I'm not certain that the folks in Halifax or Esquimalt, who probably don't move an awful lot, would want to share each other's costs—

Mrs. Judi Longfield: I'm suggesting that they are part of a family. I think some of them, knowing what their counterparts are going through, would be willing to share, particularly knowing that through the grace of God they're staying on the east coast, and on the west coast are people they may need or may meet in a theatre someday.

Mr. Mike Nelson: Yes.

Mrs. Judi Longfield: I think there's far more family feeling and goodwill amongst members of the armed forces. I don't think they feel “I've got it, so I don't care about anyone else”.

Mr. Mike Nelson: No, and as I say, I won't dispute that. What is required, though, is the ability to deliver whatever is needed.

Mrs. Judi Longfield: Sure.

One of the other things we talked about is that you don't want to spend money to fix windows and put in new furnaces and do all of those things. That's not much comfort to people who are telling us that this winter, last winter and probably for the next four winters they can't ever put their child on the floor because they have to be bundled up, or that they can't have anybody over because they're always in socks. I mean, we have people who virtually don't use the bottom level of their house in the winter because it's just too cold to heat. So saying to them that this PMQ is scheduled for demolition at some time in the future as the reason why it's not being fixed now is not a whole lot of comfort.

• 1645

Mr. Mike Nelson: It isn't.

Going back to the amount of money we have, the mandate we have is that whatever we get from the rent is what we can put in. I can only assure you that we're very conscious of this. I believe you met some of my housing managers. They do feel this.

Mrs. Judi Longfield: One of them said to me that people refer to them around there as slum landlords. I know she's working hard, but she knows what they're saying.

Mr. Mike Nelson: Certainly, on a day-to-day basis, that's a terrible thing to carry around with you as well.

The Chairman: David.

Mr. David Pratt: Mr. Nelson, I just jotted down a little list here of some of our major allies: Britain, U.S., Australia, France, and Germany. When you consider our climate and GNP, would you say we have probably one of the worst-housed armies in the western world?

Mr. Mike Nelson: I don't know about France or Germany. I certainly know, as Morrie has described it, that compared to the way the Australians are housed, we're in terrible shape.

I know the Americans have an absolutely terrible problem on their hands. Of course, with America, everything is bigger, and their problems are in the billions. I've spoken with the heads of housing down there, and they face similar problems. A lot of their housing is in very poor parts of cities.

In the last couple of years, they introduced legislation to do things very much along the lines of some of the things that have been talked about around this table today. This means looking toward private sector companies to invest in housing for the military. That's just because they've got billions of dollars of unsatisfactory housing.

Not having seen a lot of the American housing, I think we're not in too bad shape compared to them, but being together at the bottom of the barrel is not much to be proud of.

Mr. David Pratt: So you'd rank us pretty close to the bottom.

Mr. Mike Nelson: I would say we're in bad shape. Morrie has seen more of that than I have.

Mr. Morrie Evans: Yes, I spent a little bit of time in the States, and I would say I've seen worse here. I've seen the States. There's some bad stuff in the States, but I would definitely put us at the bottom pretty much.

Mr. David Pratt: At the bottom. Like rock bottom?

Mr. Morrie Evans: We're at the bottom. We have a long way to go.

Mr. David Pratt: To improve the situation.

The other thing is that our climate obviously produces some more difficult circumstances for our people than it would for, let's say, the Americans in most cases because of the old housing stock, lack of insulation, etc. Looking at the problem we face from a strategic standpoint with respect to where housing prices have gone over the last number of years and the situation we face right now, I wonder whether we could be in the following scenario.

Say money starts to become available, and we sold low and bought high in terms of the next few years. I presume you have some people who are looking at housing prices, what they're doing in local markets, and the general situation across the country. Do you and your analysts see that as a possibility in terms of where the government may be headed?

Mr. Mike Nelson: I'll be honest. We haven't done an awful lot of that type of work because our mandate right now restricts us from speculating in the housing market.

We want to be very careful. I mentioned, based on most of the information we have about what people would do if they really did have any housing choices, what they would do with their money. We have to be very careful about building housing or acquiring it in any way, such as through leases. Look at what the Americans are doing. In some cases, they're getting into leases of 25 years or 50 years.

We have to be careful about getting into housing with people because the housing market changes, which is exactly what you said. Say I mortgage the agency, and people decide to go elsewhere. Because they're paying market price, they're going to pay the lowest price they can. We have to be really careful about that, which is why we have to understand, through talking to the soldiers and their families, where they would put their money and where they would like to live in every different location, because we can't afford to get into that kind of situation.

• 1650

Mr. David Pratt: How many millions of dollars has been generated in terms of revenue by the agency that has been poured back into the CRF since its inception? Do you have any idea?

Mr. Mike Nelson: We're only a year and a half old in terms of worth. We had one year, 1996-97, where we operated with a third of the housing and we operated around $34 million, and that all went back into the housing. The CRF isn't seeing any money from this housing agency.

The mandate is to pour every cent back into the housing. The department has allowed us a nice bit of flex within this because the defence budget is of a size, $83 million, whereby if we miss a little because there are some vacancy rates, and we're a little higher or a little bit lower, we can actually slip money into the next fiscal year because we're only talking about a million here, a million there.

Morrie has just reminded me here that in terms of the sales of housing, which we've only done in one location, the department has done it, $1.6 million from the sale of housing in Cold Lake went into the consolidated revenue fund. But on an annualizing basis. we pour it all back into the housing. There is no profit motive at all.

Mr. David Pratt: Mr. Evans, based on what you've seen with the Australian forces, what's the level of satisfaction that exists within the rank and file in terms of their housing needs, and would you say that housing is an issue with them or not an issue?

Mr. Morrie Evans: There's no question that housing is a very major issue with all ranks within the military. The condition, the lack of amenities, and of course the constant concern about the rents are issues that we hear of on a daily basis. I've been to every site, most of them twice and several of them more times than that; on each visit, in each place, I take the opportunity to talk to families, and it is a common theme. It is a really major issue as far as families are concerned.

Mr. David Pratt: Notwithstanding the improvements that have been made?

Mr. Morrie Evans: The improvements that have been made are virtually non-existent. All we are able to do at this point is barely keep—

Mr. Mike Nelson: In Australia.

Mr. Morrie Evans: I'm sorry. In Australia the level of satisfaction is very good. We surveyed families there, and I think the last survey I saw last year was 92% satisfaction.

The Chairman: Thank you. Mr. Benoit.

Mr. Leon E. Benoit (Lakeland, Ref.): Thank you, Mr. Chairman. Good afternoon, gentlemen.

I'd like to ask a broad question. Your special operating agency has been operating a year and a half now. I'm wondering who things are better for. Are they better for the military budget? Are they better for the families in the forces? Are things better for taxpayers generally? Who really has this change made things better for?

Mr. Mike Nelson: Let me talk first from an economic perspective. The Auditor General identified in his 1994 report that—and I forget the exact number, it was somewhere between $20 million and $30 million—more was going out than was being collected in rent. The taxpayers of Canada were carrying that, of course. So from a quick economic perspective, since we break even, the people of Canada are paying $30 million less for housing than they were before CFHA arrived.

In terms of the folks who are in the housing today, notwithstanding the fact that you've received some very valid complaints from those who have come out to testify—without saying I'm going to haul out a sheaf of letters here saying how wonderful we are—people generally speaking are responding well to the way that we're implementing a smile in many cases. You've seen that, luckily, at some bases, so I don't have to stand up here and have you say, “Well, Mike, we haven't seen that anywhere”. So we're making some progress.

• 1655

I think we can benefit the people in the future just with what's going on here today. If this committee had asked somebody four years ago in the department, there would have been no somebody here to answer the questions about what we should do in the future. So I think just by creating an agency whose job it was in the first instance to get our arms around the problem...I think if we can solve the problem for the future through the efforts of your committee and through the efforts of my agency, then somebody is going to benefit.

I have to say that as you go around to the various bases, you find that the amount that has changed radically in the past year and a half is small. I think we're smiling more than our predecessors were and I think we're taking a better economic look at the situation, but it's the future that I've got my eye on. I wouldn't say right now that things have radically changed.

Mr. Leon Benoit: One thing that the Auditor General pointed to in 1994 was that five different sections of NDHQ were involved in housing. How many are involved now in any way at all with housing, on the base, off the base and so on?

Mr. Mike Nelson: If you count the accommodation assistance allowance and the benefit system, that's one. That's Colonel Pierre Lemay. And we have everything else.

Mr. Leon Benoit: So there would be no other section of NDHQ that deals with housing, period.

Mr. Mike Nelson: Except administratively, in a pass-through, for instance, like the way rent is collected. When someone moves into a house we generate a form that goes through and the rent comes off the member's pay. That ricochets through the finance system and then eventually gets back to us.

But in terms of decision making, which is what I believe the Auditor General is referring to, the fact that we had people over here making decisions about housing who didn't know what was going on over there...literally, now there is no one. It has been a success story to the extent that at least we control all the levers.

Mr. Leon Benoit: Are you aware of whether there's been any kind of—I hate to say study—evaluation of how much administration is still left inside NDHQ in regard to housing? As you said, there's still the administration to be done with each particular case, and I'm just wondering whether the savings are as great as you have said or whether a lot of that cost is still there inside the department and is just not being accounted for under this budget.

Mr. Mike Nelson: Actually, every year, because we're a fully revenue dependent organization, we ask the bases and the National Defence Headquarters ADMs to bill us for the amount of time that they've spent on housing matters. I get a bill from every base for the amount of people who have done transactions, I get a bill from the lawyers in DND for the amount of time they've spent on it and I get a bill from the personnel people. And all of that comes away from the $83 million that I collect.

So I'm pretty confident that we're actually accounting for the amount of effort that is spent on housing, exclusive, as I said, of the compensation and benefits programs, the HEAP and HOAP and the things that Colonel Lemay administers. But because people actually have the wonderful opportunity to send me a bill for the amount of time they spend on it, I know where all the money's being spent. I'm pretty confident about that.

The Chairman: Thank you, Mr. Benoit.

[Translation]

Ms. Venne.

Ms. Pierrette Venne: I would like to ask you, Gentlemen, what is the general condition of family housing at Saint-Hubert. You of course understand that I'm particularly interested in that because it's in my county, but also because the base at Saint-Hubert has been practically closed. Almost all the buildings at Saint-Hubert have been put up for sale, given over to the Canada Real Estate Company, which is looking after selling them. However, family houses were kept. I imagine they must be in good condition since it was decided to keep them. I would like to have your opinion on that subject.

[English]

Mr. Mike Nelson: I'll ask Morrie to comment on the condition of the houses and then I'll say a word about the possible future of that site.

Mr. Morrie Evans: The housing in Saint-Hubert is about middle-of-the-road in terms of condition. It's not good, nor is it amongst our worst. We do have a couple of serious problems with those houses that we are addressing currently, problems mainly related to electrical wiring. The insulation on the wiring is failing quite rapidly. So we're investing $300,000 in rectifying those problems.

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As far as the overall condition is concerned, they are middle-of-the-road. The reason we still have them is largely that there is a housing need. Families were concerned that with the closure of the base they would have no housing, so until a longer-term solution is resolved, we've retained that housing to provide that service.

[Translation]

Ms. Pierrette Venne: But when you say that there's a need for housing, what do you mean exactly? At Saint-Hubert, I must tell you honestly that there are lots of houses for rent or for sale to military personnel. I don't understand exactly what you mean when you say that there's a need for houses and that's why they were kept at Saint-Hubert.

[English]

Mr. Morrie Evans: I think one of the predicaments we find ourselves in is that when you look at a market like Montreal, where there is a lot of housing available and it is reasonably priced, the immediate impression is that there is enough housing in the community and therefore we don't need to retain our married quarters. The problem is, along the lines other folks have talked about this afternoon, military families still feel a vulnerability about going out into the marketplace and finding their own accommodation.

What we're seeking to do is to find an evolutionary process whereby we do the marketing, we explain, we demonstrate, we show the advantages, and we gradually convince people that it is in fact not a dangerous place to go out into, rather than the revolutionary approach of simply saying it's not economically viable so we'll shut the place down and you go and find your own accommodation.

So in line with all of the other sides, we're approaching it the same way. We're trying to find an evolutionary way of demonstrating, explaining, and marketing the solution rather than imposing one.

[Translation]

Ms. Pierrette Venne: Then, it's not so much that there's a need for housing but rather that it has to be explained to military personnel, like you say, that it's not dangerous to go out into the market that's already there. On the other hand, soldiers have told us that they only had a week to find housing at a new base. Perhaps you should be thinking about helping them by giving them a little more time to find a suitable house. Anyway, that's my opinion.

I see that the Ministry's houses are between 30 and 40 years old. I must tell you that I've seen apartment buildings that were 30, 40 years old or older. They were certainly livable and easy to rent.

Why are some houses in the rundown state you describe? Some we saw were, but certainly not all. I can say that occasionally I saw one or two that were rundown, but I couldn't say that the majority of those I saw were, contrary to what you are telling us.

I would like to know why they're in such bad condition. Is it because the occupants, that is the soldiers, weren't held responsible, or simply because the owner didn't take care of them? Something was certainly wrong somewhere and I'd like to know where.

[English]

Mr. Mike Nelson: One of the things that has to be done to real estate—and I agree, there's lots of housing in Ottawa, and all across Canada, that is older than that—is that you need to do maintenance over time, continually, to the major components in order to ensure, as you would know, that housing built 40 years ago has had an electrical system upgrade, has had a new roof so that the water doesn't penetrate into the walls, and things of this nature.

What has happened over time is that before CFHA, there was no link between the rent coming up and the money that went down to the base commanders. Each base commander at each individual base would just get a pot of money. That money could either go to the operational parts of the base or to the housing. So at every base there would have been different demands on the base commander for money.

Maybe we need to fix up the hangars this year instead of the houses. That's why, when you go around to the different sites, you see radically different conditions. In Bagotville, for instance, the housing is in relatively good condition, but at some other sites it's in terrible condition.

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More than likely, over time, the demands on the base commanders were different and they didn't have an amount of money that said here's the rent, spend the rent on the houses—which is the luxury CFHA has. We get the rent and we spend it on the houses. Nobody says we need to fix up the hangars this year.

The Chairman: Merci beaucoup, Madame Venne.

Mr. Hanger.

Mr. Art Hanger: Thank you, Mr. Chairman.

The next comment I'm going to make is no reflection on CFHA, but I think the $30-million so-called saving is more of a $30-million burden to the people living in those quarters. I would suggest that $30 million would probably alleviate some of their concerns when it comes to housing. I don't really see it as a saving. I think it's more of an impact on frustration, especially for the wives and the families left behind when their husbands are deployed somewhere, or vice versa.

Mr. Mike Nelson: The actual amount of money we're putting into the housing is not much different from what was being put in before. It's just that the overhead is about $30 million less. But I wouldn't disagree for a second that if I had $30 million a year more in my hand, I know where it would go.

Mr. Art Hanger: Are you reducing the rents where housing is clearly substandard?

Mr. Mike Nelson: Canada Mortgage and Housing Corporation comes in every year and does an evaluation of the housing stock. They evaluate it in its present condition. As we instruct them, and as has been done for years, they say, this is a 40- to 50-year-old house; this is what it's worth in this economy.

That's not the end of the story, though. That sets what's called the base shelter value. From the base shelter value is subtracted—and I won't go into this, because it is just arcane how rents are calculated. The most important one, to answer your question, is that in the government policy—not just for the military but for all government housing—there are allowances whereby you can subtract a percentage of the rent if, for instance, someone has a leaky basement, just to take leaky basements as an instance. The problem is that because for years it was within the discretion of the individual bases to do this, one person's leaky basement was another person's ice rink in the winter in Cold Lake.

What we're trying to do is develop a standard, which we're going to be implementing this year, that as you go around from base to base, if you're getting a discount...5% to 25% of a person's rent can be discounted if they have a wet basement or a severe maintenance problem like that.

Mr. Art Hanger: That's going to happen, or is it already happening?

Mr. Mike Nelson: It's happening at different sites across Canada. The rent people are paying is not necessarily—in fact, rarely—the rent CMHC has actually set. If the rent goes up a certain amount each year, they don't pay the entire amount. Their rent increases are phased in over time.

Mr. Art Hanger: It seems like some of it is still pretty high for some of those structures.

From the way things look, it doesn't appear that you're going to get a handle on this in the very near future, until the department and the government decide what numbers are going to be final on military personnel, to see where it all shakes out. It seems this struggle is going to continue for a while. It's going to be discouraging for many, and because it's discouraging for families, for those serving the military, there are going to be more people quitting, until the bottom numbers level out at whatever when the decision is made to start building it all up.

To me, it has just been more of an exercise in procrastination, with the intent of maybe looking at encouraging members to pack up and go.

Mr. Mike Nelson: My only reply to that—because much of it is outside my realm—is I'm not discouraged. I'm incredibly encouraged by what this committee is doing. It's the best hope that I've had in a long time for solving the problem.

Mr. Art Hanger: I appreciate that. I'm looking at it from the point of view of how many of those members must feel about their living standards and the lack of speed, if you will, on the part of government to do something about it.

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Do I have time for one more?

The Chairman: I'm sorry, no, you don't.

Mr. Richardson.

Mr. John Richardson: Thank you, Mr. Chairman.

Mr. Nelson, thanks very much for coming before the committee. You'll see everything from skeptics to non-believers to people who are hoping like hell you can do something to make this thing work.

We know you've conceptualized what you would like to do. It is going to take a lot of team play in National Defence Headquarters to work with you to see that we do have a plan that is fulfillable and reasonable and that in the long run members of the armed forces will be well housed and will enjoy the housing much better than some of them are now because of the variations in quality from one side of the country to the other.

I would like to hear from you, other than what's in your official speaking notes, because I think the committee would like to hear it, the kind of mechanical steps you have to take to realize the kind of team that's necessary and the kind of licence required through your association with Treasury Board and through the comptrollers in the armed forces, to see that you have the budget and the decision-making authorities to realize the concept of operations that you'd like to put into place.

Could you share that with us?

Mr. Mike Nelson: A first and terribly important step, which can be done in parallel with talking with Treasury Board, is that we have to get a handle on what the housing requirement is and the exact state of the housing around the country. The question “Exactly how much money do you need?” is a very important question that I need to be able to answer so that I don't just ask for a carte blanche wherever I go.

This year we will proceed with this in any event, optimistic as I am. We'll be undertaking a stock-taking to answer the question of how much it would take to fix the existing portfolio to a much better degree of precision than the $200 million number I gave you. That's an important first step, because everything I've heard from Treasury Board so far has said, “We want your business case before we'll consider giving you a blank cheque”. I don't think any of us would blame them for that.

That's an important first step, which I can take with the department in the near future.

Engaging the board is something we've already done. I think on Thursday morning you may wish to explore that even more with the board. As I understand it, the forms of government start to get more complex as you move away from the departmental form. For example, to create a special operating agency, essentially all you need is what was done a couple of years ago—that is, the approval of Treasury Board ministers. As we start to move into the new special agencies—the service agencies, for example, such as the Revenue Canada agency, or the Parks agency—then you start to need to be able to get the folks and machinery of government involved, I would expect, and to really understand how much power we need to have in the real property area.

If you choose to make a recommendation from this committee that we proceed with an agency of some kind that is further empowered, then I would expect that the next important step would be moving to Treasury Board and engaging the Privy Council Office to start looking at exactly what you need to put in place, whether it's legislation, for example, for a crown corporation, a service agency, or anything along those lines. Everything I'm understanding so far says that by staying inside the departmental forum, we can't get there from here.

Mr. John Richardson: That's what I gathered as well from the Treasury Board people when I was talking to them. You would have to present your business case. The case would have to show that you'd become autonomous or semi-autonomous but you would be in the reporting line because of the association with Defence. You would have some reporting requirements to Defence for your operation as well, but you'd be fiscally responsible to Treasury Board. That's the summary I gathered after about three hours of discussion.

• 1715

I hope that it does come off, because all of us have seen some pretty sad situations. It's not your fault. Some of those things have been sitting around since 1942, to now, with some maintenance, but not what I would call overwhelming maintenance. That's an understatement.

Certainly one of the things that's happening is that you are caught in this downsizing, and that has to be an impact. You're inheriting a lot of major mistakes that were made. When Gagetown was built up, they built too many PMQs. They probably thought they were going to have a division sitting there, or something like that, but that never happened. We've been stuck with all those PMQs there for years, uninhabited.

I hope we do get a handle on it—that you have enough executive quickness to operate it, to show a profit, and that the profit is ploughed back in to the best interests of the armed forces personnel.

We're all pulling for that on this committee. There's no party that's against this—to my knowledge, that is. So if it comes off.... On Thursday you'll have another chance to hear the Treasury Board side of it, and I hope we all come prepared to put some shots to them to clarify their position for us.

Mr. Mike Nelson: I appreciate that, and I'm very, very grateful for the efforts of this committee to try to do what we are trying to do, which is just make it better for the folks that are out there in the Canadian Forces. Thank you very much.

The Chairman: Thank you very much. I'd like to thank the witnesses for coming in and discussing what we feel is a very important part of our report.

Before we go, I believe David has a very quick motion to present.

Mr. David Pratt: Mr. Chair, this springs from one of the briefings we had this morning, which I think members of the committee found extremely interesting. The motion is as follows: that the Standing Committee on National Defence and Veterans Affairs invite the Standing Committee on Foreign Affairs and International Trade to attend a special joint briefing, before SCONDVA travels to Bosnia, on the Medak pocket operation of September 1993, so that members of both committees will have a working appreciation of Canada's peacekeeping efforts and the role of the Canadian Forces.

The Chairman: Any objections?

(Motion agreed to)

The Chairman: Thank you very much, everyone. The meeting is adjourned.