Mr. Speaker, I am usually the one rising on points of order about too much noise in this new interim chamber, which is beautiful but not very functional, as I like to remind members. I have been quoted in the Hill Times as having said that.
To return to budget 2019, as I mentioned, successive budgets have increased spending. I went back to previous years' budget documents. I went all the way back to budget 2016. I looked at budget 2015. There is actually a gap in this year's spending. What budget 2015 expected to spend this year was $302.6 billion. Instead, what the government is intent on spending is $329.4 billion, which is a gap of $27 billion between what the government expected to do in 2015 and what it is now expecting to do in 2019.
One of the great problems of the current government is its inability and maybe disinterest in controlling spending. Every solution requires gobs of new spending. Every problem requires gobs of new spending. Every single year, Canada's GDP growth keeps being revised downward. In the economy, there is a cycle of 10 to 12 years and we reach a recession. Sometimes they are short recessions; sometimes they are prolonged recessions.
Again to my Yiddish proverb, if we want to know what God thinks of money, we look at the people he has given it to and look at what they have done with it. The Liberals have achieved far too little for the money that they have spent.
I want to talk about the housing proposals inside the budget and some of the housing policies and ideas the government has put forward. The Liberals are far lacking in both what they should be trying to achieve for first-time homebuyers and the damage they have done by introducing the B-20 stress test and the Minister of Finance's stress test on insured mortgages. It is an issue I have raised in the House repeatedly. I have raised it at the finance committee repeatedly. I had Liberal MPs vote me down twice on a request to do a study of the B-20 stress test. The first time it was without saying a single word. They did not rebuff my argument on why it should be done. The second time, they did have an argument but it was not very strong.
In budget 2019, the first chapter of the budget that the BIA would implement is on housing. I am glad the Liberals have a chapter on housing because young first-time homebuyers across my riding deeply care about being able to achieve the dream of home ownership.
When I lived in Edmonton and purchased my first condo, for my wife and me it was one of the great achievements in our lives that we had put aside enough money and were able to qualify for a mortgage. We got a longer amortization of 35 years. Some people say that there are now 25-year amortization periods for insured mortgages, but there are still 30 years for the uninsured market, and there is a difference between the two.
Taxes have gone up. It is harder for people to accumulate savings over time in order to have a down payment. Now we have a successive series of government decisions, with policy direction being given to the CMHC, policy direction being given to chartered banks and lenders on insured mortgages, and the B-20 stress test, an OSFI rule that is given the blessing of the government, that are hurting opportunities to get into housing, especially for young people.
What I want to avoid is a situation where we eliminate an entire generation, a cohort of people, from being able to get into the type of home that suits their needs. That is different for different people at different times in their lives. When people are younger and starting a family they need a bit more space. When they are getting toward retirement, they want to downsize so they need to sell their house and move into something smaller that suits their needs.
When the government begins to introduce different policies and legislation, that starts to gum up the workings of the real estate markets. I say “markets”, plural, because there is no such thing as a single real estate market in Canada. We do not compare a home in Vancouver to a home in Calgary, to a home in Halifax, to a home in Ottawa. Those real estate choices are very local. They are things such as schools, access to public transit or perhaps there is a baseball diamond near a home as there is near mine so my kids can go and play there. Those are the choices that really matter to people.
The decision the government made with the B-20 stress test has heavily impacted the market. I am going to be referencing a TD Canada report and a CIBC economics report to make my point. There are defects inside the BIA. There are defects inside the budget and how the Liberals are trying to address the housing problem for young people, especially for first-time homebuyers.
Approximately 20% to 30% of first-time home buyers have been pushed out of the market by the B-20 stress test. The statistics have shown this, whether we use Statistics Canada, CREA, the Canadian Real Estate Association, or Build Canada. Build Toronto has shown there is a 100,000 unit gap in the last 10 years of built dwellings in the Toronto area.
When the B-20 was introduced, two reasons were given for it. OSFI said that the reason for introducing these much harsher stress tests, 2% to qualify for a mortgage, was to ensure the stability of the banks. What happened, according to TD, was that by introducing this rule, over the past year, 2018 and now into 2019, it had pushed lending to the B market, the B lending. That is not to say monoline lenders are bad, they just typically have higher interest rates, they offer different terms, and it is actually a 2% increase. In Toronto, in the GTA area, it is far higher.
What the government has done is it has moved into the unregulated market by introducing the B-20 stress test.
The second reason was given by the Minister of Finance in January. He said publicly that the reason was to reduce prices. That is not the reason this Parliament allows OSFI to regulate insurance, securitization and lending. The reason for that is the stability of chartered banks and large lenders.
OSFI regulations are not supposed to be used to manipulate prices in different real estate markets. That is mission creep. That is policy creep. It is far beyond the scope of what Parliament intended when it gave the government the ability to set regulations through this independent, autonomous regulator.
I always remind people that regulators are arm's length but within arm's reach. That is something I learned when I worked for the finance department in Alberta. They still have to abide by the wishes of the government and the general direction. The decision-making, the individual regulatory tools they have are truly up to the regulator to decide. However, this one in particular, the B-20, we know from TD Economics that the side effect was that a lot of people were pushed into mono lenders, B lenders, the unregulated market, which defeats the purpose of OSFI having introduced it.
Ahead of B-20, we know that mortgage origination started to soften well before. If we look back, and this is a CIBC economic report, going all the way back to the third quarter of 2013, we saw an increase in mortgage origination to about the first quarter of 2015, and then it started to slide downwards. It is proof apparent that this rule did not have to be introduced, because mortgage origination, people taking out new mortgages, was on its way down for well over a year before the Minister of Finance introduced his stress test on insured mortgages.
I have no idea why he would introduce a 2% stress test on insured mortgages, when it is on a fixed term. There was always a stress test on variable mortgages, because, reasonably put, if the government is offering insurance through the CMHC, or through Canada Guaranty or Genworth, two private providers, taxpayers are on the hook, because they are backing up that policy.
On variable rates, it makes sense to ensure that the lendee can actually pay it back in case something happens in the market, such as the interest rates go up. On a fixed rate, five-year mortgage, there is absolutely no reason to do that. Over a five-year period, on average, and Statistics Canada will bear this out, people's incomes go up, their ability to pay goes up, their circumstances change, but typically it is for the better.
We can look at CIBC Economics, and it is called “Mortgage stress test: the operation was a success, but” and then it goes into all the side effects of having introduced this rule. It is by Benjamin Tal.
I have another graphic about which I want to talk. One of the things I heard, and it is in the chapter in the budget, where it talks about housing, is the a worry about affordability. It is also a worry about Canadians taking on too much debt.
I sit on the Standing Committee on Finance, and I heard this repeatedly at committee from officials, Liberal members of Parliament and the CEO of CMHC, whom I will speak more of later. They worried that Canadians were taking out mortgages that were too big and were taking on too much debt. Chart 5 of the CIBC report notes that in 2012, in the third quarter, just under 50% of people had an average credit score of 751, which is an excellent credit rating. If a person's credit report says 751 or above, that is excellent.
The number has been creeping up as well. Well before B-20, it started to creep up to 50%, 51% and then to 52%. It is not that people were being irresponsible. In fact, the average credit score of those seeking a mortgage loan is going up. Nevertheless, the government has done nothing for unsecured loans. It is still just as easy to get a credit card.
Bank of Canada officials came to my office to explain the Bank of Canada's financial statements. I told them that if I got unsecured loan and spent $30,000 on a boat, the government would pat me on the back for consumer spending. If I then crashed the boat and claimed it on my insurance, the government would be extremely happy again because I might replace it with a new boat. That is $60,000 spent. However, the government is worried about mortgage debt.
In Canada, because of our culture, people are pretty conservative when it comes to borrowing, especially on their homes, delinquency rates are at historic lows. I think it is 0.15% in British Columbia and 0.23% in Ontario. Every statistic I can find from the major chartered banks and every trend line I see from economic shops show that although there was a lending problem, the lending problem was not directly related to the mortgages people were taking out; it was related to unsecured debt, such as credit cards, personal lines of credit and home equity lines of credit.
In fact, when the government introduced B-20, which is also in a report, there was a sudden spike in reverse mortgages, as people were taking more equity out of their homes. Interestingly, this number has been going up for about 10 to 15 years. It is a tool people use. Their homes are their savings so they take money out of them. There was a spike in January 2018. As soon as everybody knew the new stress test was coming, the number went up.
An interesting report came out of Toronto asking about housing. It asked what young people and their parents were doing. A third of parents admitted that they had given their kids an early inheritance gift of, on average, $50,000. This speaks to the problem of pricing in the greater Toronto area and the greater Vancouver area.
What the government and the Minister of Finance did was impose a one-size-fits-all policy, the B-20 stress test, across the board and across the country, as though every real estate market in the country has the exact same problems. Instead of introducing variants and designing a policy tool for specific problems, they went around whack-a-mole and hit everybody.
I know I have to be careful. I hear the parliamentary secretary got in trouble with Premier Doug Ford when he called for him to be whacked, although I did say “whack-a-mole”.
This is a policy tool. I am not saying people in housing should not be worried about what the government is doing in budget 2019, because the government has now given an answer to the problem. Its answer to the problem was to introduce shared equity mortgages. In the BIA, it is introducing a mechanism by which the CMHC will be a Crown agent acting on behalf of the government.
For those listening at home this late in the evening, who perhaps have insomnia, the Crown borrowing program will allow the government to borrow $1.25 billion to buy shared equity stakes between 5% and 10%, depending on whether a house is new. A new home gets 10% and one that already exists gets 5%. The government says this will help 100,000 first-time homebuyers.
When I asked Department of Finance officials where they got this number, they said from CMHC. When I asked CMHC officials where they got this number, they said from the Department of Finance. Nobody could explain to me where this 100,000 number came from. The CEO of CMHC gave it his best shot. The only way this number makes sense is if we look at insurance mortgages and assume that over the next three years, we will only be able to help about 30,000 to 40,000 people. Actually, the Minister of Finance said the same thing in Toronto.
Then I went to MLS listings online to find what kinds of properties were out there. In the greater Toronto area, I found about 500 properties out of 20,000 listings that these shared equity mortgages could potentially apply to, and I specifically excluded those with parking spots, which are very expensive in the greater Toronto area, especially downtown. They are quite expensive to get, but that is not the goal of this. We do not want anybody living in a parking spot in a tower in downtown Toronto. That is not our goal.