Habitat III Summit Networking Event “Bridging the Affordability Gap: Inclusive Housing Finance in the New Urban Agenda”

Speaking Notes for Evan Siddall, President and Chief Executive Officer, Canada Mortgage and Housing Corporation

Casa de la Cultura Ecuatoriana
Quito, Ecuador

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Good afternoon everyone, and welcome to what I’m sure will be an energetic and informative discussion of how inclusive housing finance can help all of us achieve the housing goals of the New Urban Agenda. As I hope to explain, this idea is at the very heart of our current thinking in Canada.

Canada has a well-established housing finance system that has withstood the test of time, including periods of severe economic stress. Nevertheless, we are continually looking for ways to strengthen the system to make it even more resilient.

I am pleased to have the opportunity to share some elements of the Canadian system with you today, and I am also looking forward to hearing from the other panellists. Events such as this one allow us to share best practices and learn from one another.

As Canada’s national housing agency, Canada Mortgage and Housing Corporation, which I have the honour of leading, is well-respected internationally for its expertise on housing finance issues.

In fact, we have worked on projects with a number of countries represented on the panel today.

After a period of absence, it’s good to be back among our international colleagues and friends.

CMHC is a unique entity in the world of housing policy and housing finance. We conduct commercial operations as well as some purely public sector activities. CMHC is the result of some real alchemy — and it works.

CMHC’s mission is clear: "We help Canadians meet their housing needs." We focus on needs, not wants and we aim to meet those needs. This is a call to action that rests at the core of our work.

Our legislative mandate has two complementary aspects: we are expected to facilitate access to housing while also contributing to the stability of Canada’s financial system.

One of the key ways we do this is through our housing finance activities. Our mortgage loan insurance and securitization programs are cornerstones of Canada’s stable and efficient housing finance system.

Mortgage loan insurance is mandatory in Canada when the buyer of a home has less than a 20 per cent down payment. This helps bridge the affordability gap for moderate-income households trying to access homeownership.

Under the Canadian system, the mortgage lender is insured against loss if a borrower defaults. This backstop allows qualified borrowers to purchase homes with as little as a five per cent down payment and at interest rates comparable to those with larger down payments.

Some commentators have opined that our government and CMHC are assuming too much responsibility for housing risk. We have recently announced the exploration of a potential modest re-allocation of risks in Canada. A strong system can be strengthened.

CMHC exists to help all Canadians. That means we serve all parts of our vast country, and support all forms of housing.

For example, CMHC is the only mortgage insurer in Canada for large multi-unit residential properties. Our support for these forms of housing is crucial, as it helps ensure that Canadians have access to a range of rental housing options.

CMHC’s securitization programs are also an essential component of the stability of Canada’s housing finance system, as they facilitate the supply of reliable funding for mortgage lending, which is a challenge in many countries.

As a public insurer, CMHC structures some of our insurance products to support broad public policy objectives, such as facilitating the development of affordable rental housing.

Why is this important? Many Canadian cities lack a supply of affordable rental housing and have large demand pressures from population growth and the rising cost of homeownership. This drives up rental rates and impacts the ability of middle-class Canadians to live in the communities in which they work and use services.

A stable supply of affordable rental housing is critical to achieving broader social policy objectives related to poverty reduction and supporting the middle class.

The demand for affordable rental housing is expected to continue to increase due to a growing population of seniors in Canada, migration of young professionals to larger cities, greater labour mobility, and continued immigration.

CMHC has been supporting such developments for some time, by offering ways to lower financing costs for loans to create affordable multi-unit housing.

These include loan-to-value ratios of up to 95 per cent — which is 10 per cent higher than allowed for similar market housing, as well as reduced insurance premiums and greater flexibility in cash flow requirements and loan advancing.

The higher the level of affordability, the greater the financing flexibilities offered by CMHC.

There has been a lack of investment in rental housing in Canada for the past number of years, in favour of homeownership and condominium developments.

To address this issue, the Government of Canada has introduced two new initiatives to encourage more rental development, especially at the mid-rental range, to complement social housing programs and address a gap where middle-income earners are being priced out of the cities in which they work.

Just three weeks ago, CMHC launched a new Affordable Rental Housing Innovation Fund that offers financial support for exceptional ideas and funding models for the rental housing sector.

Funding is available to eligible individuals, corporations and organizations that want to build affordable rental housing in Canada in response to demonstrated community need.

The Fund is expected to help create up to 4,000 new affordable units over five years, reducing the number of Canadians living in housing need and the reliance on long-term government subsidies.

CMHC is also working on the design of a proposed Affordable Rental Housing Financing Initiative, which will provide up to $2.5 billion in low-cost loans over five years to municipalities and housing developers during the earliest phase of development.

Why the focus on innovation?

Canada has a system dominated by many small affordable housing providers, often non-profit, community based organizations. Because they are smaller and many have relied on government subsidies, they often do not have the resources needed to innovate.

But Canada believes that innovation is key to better housing outcomes. While we are beginning to see some pockets of innovation, the time is ripe to encourage more.

The focus on innovation will also help develop new models and approaches that put housing at the heart of the urban agenda and achieve improved outcomes for all.

So that’s where we stand today. Where are we going? CMHC has been given the great privilege of developing a National Housing Strategy for Canada, the first in 40 years.

To support our Minister, the Honourable Jean-Yves Duclos, we have reached out to Canadians, the provinces and territories, Indigenous governments and organizations, municipalities, key stakeholders and housing experts to identify innovative new ways to improve housing, socio-economic and environmental outcomes for all Canadians.

I encourage you to visit the National Housing Strategy web site at Let’sTalkHousing.ca. You will see that housing affordability is a key theme for the consultations, as are the issues of inclusiveness, sustainability and flexibility.

For example, we have been seeking stakeholder input on how innovative or social financing approaches could be introduced to support the construction and renewal of affordable rental housing.

We are also seeking input on how governments and others can address the barrier of high land prices in many Canadian cities.

In this regard, the Government of Canada is currently conducting an inventory of surplus federal lands and buildings that could be made available at low or no cost for affordable housing.

Consultations on the National Housing Strategy will end this week. Minister Duclos will release a report on what we have heard on November 22 — which is National Housing Day in Canada — at which time he will also announce next steps towards establishing a new vision for housing in Canada.

So as you can see Canada is already using a number of different approaches to bridge the gap in the supply of affordable housing for Canadians. At the same time, we know that more needs to be done, and we continue to seek innovative new approaches.

I look forward to hearing this afternoon about strategies that have proven effective in other jurisdictions. And of course I will be pleased to answer any questions you may have on Canada’s housing finance system.

Once last thing before I close: CMHC has recently created a Housing Finance Centre of Excellence to build an international community of experts who regularly exchange information and knowledge and undertake research on housing finance challenges and opportunities.

We did this following a very successful international Housing Finance Symposium, which we held in Ottawa a few weeks ago.

Ultimately, our goal is to make a difference in the real world, so that countries have stronger housing finance systems and our citizens have better access to housing, with the wealth generation and other socio-economic benefits that come with it. This is certainly consistent with the goals of the New Urban Agenda.

While the Centre of Excellence will be housed within CMHC, it is meant to be international in scope. We hope you will make it your own by joining and actively engaging in the Centre. You can find more information by searching “housing finance” on LinkedIn.

Thank you.