Speaking Notes for Evan Siddall, President and Chief Executive Officer Canada Mortgage and Housing Corporation
Board of Trade of Metropolitan Montréal
Palais des congrès de Montréal
1001 Place Jean-Paul-Riopelle
Check against delivery
Thank you Madame Labelle, and thanks to all of you for that warm welcome. It’s great to be here, in a city that holds a special place in my heart and in our nation’s history.
Montreal is for me the most Canadian of cities … a cosmopolitan city where French and English are spoken effortlessly, where hockey is a religious experience, where any culture can thrive, and where our founding peoples co-exist as an example to the world of tolerance and mutual affection.
I remember with great pride attending the rally at Place du Canada in 1995, when thousands of us begged you to remain with us within Canada. From one Anglo, thank you — even 20 years later — for keeping your distinct society as part of our country.
So I would like to begin by thanking the Board of Trade of Metropolitan Montréal for the opportunity to be here and to speak about something that is of great importance to me personally, and I believe to all Canadians. And that is “Why Housing Matters.”
Think for a moment about the many benefits that good housing brings us as individuals, as families and as communities. Not just in terms of keeping us dry and warm — essential in a climate like ours — but also in providing a safe, stable place to raise our families. And for the homeowners among us, helping us to build a store of wealth and financial security.
Today, I want to make the case that residential security — a place to call home — is a source of dignity with benefits that radiate to a family, a community, a world-class city like Montréal and a great country like ours.
So let’s take a few minutes to consider why housing matters. I’m also going to talk about some of the challenges facing our housing system, and about why CMHC is integral to the health of our housing system.
Perhaps the best place to start is with the pocket book. We know that shelter-related costs account for a significant draw on the budgets of Canadian households. For the average Canadian household, housing costs amount to a little over one-fifth of total income.
But for those who find themselves in the bottom 20 per cent of income earners, housing costs are a much greater burden, claiming closer to 40 per cent of their income — almost double the Canadian average, for the people who are least able to afford it.
This can make for difficult choices for low-income households. By reducing the resources available for other necessities — like food, healthcare and education — high shelter costs can make it harder for families to stay healthy and to support their children’s education and development.
The linkages between good housing and good health have recently been brought into sharp focus by Montréal’s Director of Public Health, Dr. Richard Massé, who I’m pleased to say is with us today.
Dr. Massé found that almost half of Montréal renters who spent more than 30 per cent of their income on rent reported having difficulty making ends meet every month, with one in four indicating they did not have enough food.1 His conclusion was direct and to the point:
“The problem caused by access to affordable housing prevents thousands of Montrealers from eating properly. We must quickly come up with solutions, because a poor diet can cause many health problems, including diabetes, high blood pressure, cardiovascular diseases, obesity and several cancers.”
Dr. Massé makes an important connection between affordable housing and diet — and it goes well beyond just that. In fact, the Canadian Paediatric Society has warned that “living in housing need can negatively affect all aspects of child and youth physical, mental, developmental and social health.”2
By depriving children of a quiet space to study, read and do homework, crowded living conditions can compromise their educational success.3 And where residential insecurity leads to frequent moves, children’s readiness for school, the continuity of their education and academic performance can be negatively impacted, with longer term consequences for future employment and earnings.
For example, researchers in the U.S. have found that residential instability is significantly associated with children’s readiness for school at the age of five.4 And that a move during childhood resulted in nearly a half-year loss in educational attainment; moving three or more times lowered later earnings by 52 per cent.5
Closer to home, a CMHC-funded survey of Habitat for Humanity homebuyers found that participants reported across-the-board improvements in their children’s well-being and school performance since obtaining their homes.6
Relatedly, a recently completed assessment of the “social return on investment” of Habitat for Humanity Canada’s activities documented a variety of positive impacts, including increased employment quality, a reduction in the use of food banks, and increased levels of voluntarism and civic engagement.7 It estimated that for every dollar spent on Habitat’s activities, about four dollars of benefits accrue to society.
Housing therefore matters so much more beyond providing shelter. When we help low-income households access the housing they need, we are doing more than putting a roof over their heads. We are helping to build a foundation for broader social and economic success for these families.
Research also tells us that both the type of housing intervention and the broader community context are important factors that mediate success.8
As not all households have the same needs, and market conditions vary from one location to another, a range of interventions, including rental assistance and renovation assistance to improve housing quality, have a place in the toolkit. And the importance of family and community supports, and of training, education and employment opportunities, are not to be underestimated.
Good housing doesn’t take the place of other key ingredients for success, but it demonstrably does provide the stability from which to leverage better outcomes. And its absence makes it that much harder for vulnerable Canadians to get ahead.
So, clearly, housing matters at a micro-economic level — to individual families and households. It also matters at the macro-economic level — to Canada’s broader economic and financial stability.
A strong housing sector supports a robust economy, in part by creating jobs for Canadians in the construction and renovation sector and generating spin-off benefits in related industries. Overall, housing added $334 billion to Canada’s Gross Domestic Product in 2014 — roughly one-sixth of GDP. And the construction sector itself accounts for about seven per cent of total employment in Canada.
Our review of the international research confirms that housing security and housing markets play an important role in supporting social and economic stability. It points to the benefits of housing affordability and ensuring stable, secure housing, both rental and ownership.9
The literature also suggests that, while tax policies favouring homeownership are popular in some advanced economies, too great an emphasis on homeownership over other forms of tenure can adversely affect economic stability. Among other things, this can encourage excessive leveraging, increased consumption at the expense of savings, and a shift in economic resources and capital away from other investments that might have a more powerful economic effect.
Indeed, some analysts have also questioned whether too much homeownership contributes to higher levels of unemployment— something referred to as the “Oswald hypothesis” after the work of the British economist.10 The thinking here is that homeowners are less likely to move than renters and that they are more likely to limit their job search to their local area. If true, this behaviour could lead to higher aggregate levels of unemployment.
We asked Dr. Mario Fortin, from the Université de Sherbrooke’s Department of Economics, to have a closer look at what the international research and data would suggest for Canada. He observed that international studies do indeed find a positive correlation between levels of homeownership and overall unemployment rates, and that homeowners are less mobile than renters.
At the same time, however, other research suggests that homeowners are not more likely to be unemployed than renters.11 There may be a number of reasons for this. Many of the personal conditions that enable people to become homeowners are also likely to improve their employability. And the need to make your mortgage payment is a strong motivator to stay employed.
In the end, we may have the balance in Canada “just right,” like Goldilocks in the old children’s tale.
So while housing can contribute to broader stability, problems in the housing sector can nonetheless be a sign of wider financial instability — or, in some cases, the cause of instability. The architecture of the housing financing systems of different countries can contribute to or hinder the financial stability of their housing markets.12
The clearest recent example is the U.S. in the period leading up to the global financial crisis, when lax lending standards, the renting out of an implicit government mortgage guarantee, regulatory weaknesses and other factors led to a collapse of housing markets, which in turn led to crisis in the entire global financial system.
The situation was different in Canada, where sound underwriting practices coupled with a robust policy and regulatory framework helped make housing a source of economic strength rather than instability.13
CMHC’s stabilizing presence also helped. We are not organized with the conflicts of interest inherent in the Fannie and Freddie models. Freed of the risks of losing our investors’ confidence, we continued to offer mortgage loan insurance and securitization programs throughout the economic downturn, so that qualified borrowers had uninterrupted access to financing to purchase homes and develop rental projects.
Through a temporary initiative called the Insured Mortgage Purchase Program, we also ensured that Canadian banks continued to have access to longer-term funds for lending to consumers, homebuyers and businesses. As a result, Canadian lenders avoided most of the liquidity problems that caused crisis in housing markets elsewhere.
We need to build on this success, not assuming the next battle will look like the last. In other forums, I’ve talked about work we are doing at CMHC to strengthen our financial system.
And while Canada has a robust housing system overall, a number of pressure points are currently on our radar.
Housing affordability is a key concern. While the majority of Canadians are well housed, about 20 per cent of households are unable to meet their housing needs in the marketplace. Since housing matters, we must ask how we can responsibly help.
Around 12.5 per cent of Canadian households, just under 1.6 million in total, are in core housing need. Here in Montreal, the figure is 13.3 per cent, or just over 200,000 households.
Housing affordability is far and away the most common reason for households falling into core housing need, affecting almost 90 per cent of households in need.
Worse still, First Nations reserve communities experience some of the most challenging housing conditions in Canada. As a country, our record on housing on-reserve leaves a lot to be desired. We must do better. And since Canada’s Aboriginal population is growing rapidly, we are falling further behind.