Thank you, Mr. Chair.
As you know, CHBA is the voice of Canada's residential construction industry—new construction, renovation and land development. With over 9,000 member firms across the country, we represent an industry that is the source of 1.2 million jobs and 160 billion dollars' worth of economic activity.
The recent election campaign confirmed how concerned Canadians are about housing affordability. It showed the dream of home ownership is still very much alive in Canada, and the next generation of new Canadians is very concerned about home ownership slipping away. It doesn't have to be this way. We can protect the financial system, and, in fact, strengthen it through policy adjustments around housing.
We know there have been successive demand-side measures to address financial system vulnerabilities, but we also know these have had an impact. The problem is that the impact in some cases has been quite severe, and it's definitely time to recalibrate the system accordingly.
CHBA estimates that 147,000 potential buyers have been knocked out of the market by the stress test. About half of those are first-time buyers. Arrears rates have gone up in some struggling areas. Overall, they continue to be below one-quarter of 1% nationally, and young Canadians have the lowest arrears rate of any cohort. The mortgage system right now is penalizing the wrong group.
We, therefore, continue to recommend adjustments to the stress test to reduce it the longer the term of the mortgage. Leave it at 2% for one-year terms, but decrease it over the longer term down to 0.75% for five-year terms. To encourage even longer-term mortgages, as promoted by the Bank of Canada, there is no need to stress-test seven-year and 10-year terms. This will maintain financial system stability, promote longer mortgage terms and help more well-qualified Canadians achieve home ownership.
We are pleased to see the federal government is committed to review the stress test with a view to making it more dynamic. We encourage the minister to expand consultations beyond just the financial institutions to ensure industry voices are part of the review.
In addition, regarding first-time buyers, we still recommend a return to 30-year amortizations for insured mortgages. The millennial generation, who are now well into their careers, are ready to get a foothold into housing, and can do so responsibly. Given that most will move up the market, the idea that they shouldn't have a 30-year mortgage is a fallacy, since most will take on another 25-year mortgage in a move-up home in a few years anyway, if all goes well. The average time to pay off a 25-year mortgage is also only about 17 years in Canada. Again, we are penalizing the wrong group when we prevent entry into home ownership. All that said, demand-side measures have been a problem, but fixing them alone is not a solution by itself. Prices are affected by both demand and supply factors.
The federal government can set up its leadership to work with the provinces and municipalities to increase market rate housing supply where we see so much in the way of shortages and resultant price increases that are rightly so concerning to Canadians.
We need more homes that meet Canadians' needs in the places they work and want to live, and this includes units for both ownership and rental. A rental can be best spurred on by tax reform, but I'll leave that discussion for another time. Governments at all levels need to target getting more housing supply online using the various levers at their disposal.
The year 2019 saw a decline in housing starts of over 4,000 units nationally, compared to 2018, at a time when we all acknowledge we need more, not less housing supply. We're also seeing severe declines in the value of building permits in western Canada, contributing to weakening local economies and job losses in residential construction at a time when those jobs and economic activity are so desperately needed. It's time to enact policy to help turn that around.
Like housing affordability, climate change emerged as an important issue for Canadians during the election. Undoubtedly, there is an important role that housing can play, but smart policies are required to ensure that addressing climate change doesn't further erode housing affordability.
CHBA and our membership have always been leaders in energy efficiency, and we continue to do so with our net-zero home-labelling program. Our leading-edge builders are pioneering this space to find best approaches to meet these goals by building net-zero houses for Canadians who want to invest in their homes that way, but the affordability gap that still exists must be closed before code changes and regulations are made. Further R and D and innovation are needed for higher levels of energy performance to be affordable for all.
We are calling on government not to go to extreme levels of energy performance and code until they are affordable for consumers. We're also calling for affordability to be enshrined as a core objective in the National Building Code for energy efficiency and for all other code changes.
Very importantly, CHBA welcomed the recognition in the election campaign of the impact that home energy retrofits can have in helping to meet Canada's climate change goals. We have long called for home energy labelling at the time of resale and an energy retrofit tax credit, both using the Government of Canada's EnerGuide labelling system. We encourage more support for the EnerGuide rating system for houses, expanding and promoting this system as the backbone of all currently proposed housing incentives, tax credits and other energy efficiency initiatives by governments, utilities and all other organizations to build on the same system to maximize results. For instance, the new interest-free retrofit loan program should certainly require the use of the EnerGuide rating system.
Elections sent a clear message. Canadians want a government that works together and works for them. Budget 2020 is an opportunity to do just that. All parties rightly identified housing affordability, home ownership and climate change as key concerns in their platforms. CHBA looks forward to working with you to bring those solutions to these key issues for Canadians.
Thank you.