Why Housing Affordability in Ottawa Matters

Speaking Notes for Romy Bowers, President and Chief Executive Officer, Canada Mortgage and Housing Corporation

Ottawa Business Journal’s CEO Talk Series
Ottawa, Ontario

Check against delivery

Thank you / Merci.

It’s a pleasure to be here in Ottawa, on the traditional unceded territory of the Algonquin Anishnaabeg peoples.

It’s especially exciting for me to be at my first in-person speaking engagement since I became CEO of CMHC last April.

Video conferences have given me the chance to meet with many different groups across the country, but nothing is more energizing than a live event.

Before I joined CMHC, much of my career was in risk management in the financial sector. I was working in the Treasury at the Bank of Montreal during the 2008 financial crisis. This gave me an appreciation of strong risk management and how it minimized the impact of the recession in Canada.

It also gave me a chance to see first-hand the amazing work that CMHC did to support the banking sector through the crisis. Seven years later, I was working in Chicago when I was approached to become CMHC’s Chief Risk Officer. I loved banking, but coming to CMHC was the best career decision I’ve ever made.

Many people don’t realize this, but CMHC is one of Canada’s largest financial institutions. Working there gives me the chance to stay involved in the financial sector.

At the same time, it gives me a chance to serve Canadians through our housing policies and programs.

Because as Canada’s national housing agency, CMHC exists to house Canadians.

Our commercial products, like mortgage loan insurance, play an important role in supporting a stable, well-functioning housing finance system.

Our research and policy experts provide trusted knowledge so that all participants of the housing system can make better decisions.

And our affordable housing programs, offered through the multi-billion dollar National Housing Strategy, create homes for Canadians along the housing continuum. From shelters and transitional housing, to market-rate rental housing to community or social housing.

In the past year alone, we’ve supported several developments in Ottawa.

Large-scale projects like the recently announced Dream Lebreton development. This will be Canada’s largest residential zero-carbon development project. It will also provide much needed housing in the city centre — both for middle income workers, and for vulnerable populations — along with retail space and community and health services.

We’ve also supported smaller but vital projects like Veterans House, on the former CFB Rockcliffe lands. This project by Multifaith Housing Initiative, provides homes for veterans experiencing or at risk of experiencing homelessness.

Bill Beaton, one of the residents of Veterans House, said that having a permanent home after going without one completely turned his life around. He hopes it will become a model for future veterans’ residences.

These are just a handful of examples. But they give you an idea of the range of projects we’re supporting in Ottawa — and all provide much needed rental housing in the city. A lack of supply is one of the factors feeding the housing crisis we face in this country today.

For me, as CEO, this is an especially interesting and challenging time to be leading CMHC.

We’ve set ourselves a bold aspiration:  to ensure that by 2030 everyone in Canada has a home that they can afford and that meets their needs.

This aspiration is compelling because it is so essential for creating a Canada that is truly equitable. A place where everyone can fulfill their potential and thrive.

But it’s also increasingly elusive.

Canada’s housing market has been remarkably robust for some time now. But that has exposed some serious weaknesses for both renters and buyers.

Despite historically declining or low interest rates, shelter costs as a percent of disposable incomes have been slowly trending up since the early 2000s.

In fact we’re actually seeing two affordability crises. One affecting households, renting and buying, who are finding it increasingly hard to access market housing.

And another affecting vulnerable populations who are struggling to have even their most basic housing needs met.

The first is the result of a long, continued trend of escalating house prices — which is worse now than at any time over the past 30 years.

Fast-rising prices aren’t new in cities like Toronto and Vancouver. But what is new is that the problem is growing, and expanding to cities and towns across the country, including Ottawa. And the COVID pandemic has only made matters worse.

For example, for the past 20 years, the average price growth of homes in Ottawa is 6% per year. But in the last two years, we’ve seen a jump to about 20% per year.

That means the average price is 46% higher than before the pandemic.

This is the result of many factors:

• pent-up demand after the initial waves of the pandemic;
• low interest rates;
• buyers looking for larger homes with more property to better accommodate their work from home;
• the resiliency of Ottawa’s strong public sector and IT sector; and
• a severe lack of housing supply.

The situation isn’t much better for those renting.

At face value, Ottawa’s vacancy rate of 3.5% doesn’t look especially low. But for rental units that low to low-mid income households can afford, the vacancy rate is close to 0%.

In other words, it’s next to impossible to find a 2-bedroom apartment for under $1,200 per month. That’s a real issue for those in the city who work in lower paying service jobs, for example.

So why do high housing costs and a lack of affordable housing matter?

They matter for businesses like yours because they translate into higher costs for your brick-and-mortar locations.

They matter because high housing prices mean your clients may have less money to spend on your goods and services. And rising interest rates will make matters worse. Especially as Canadian households now owe a record levels of debt — $1.86 for every dollar of disposable income earned. This is a near historical peak.
But they also matter for your employees, and ultimately the economy of the city.

During the pandemic Ottawa experienced a trend seen in other cities — a migration away from the city to less expensive markets. In some cases, people moved to rural areas or small towns in the region, or in Ottawa’s case, across the river to Gatineau.

The ability to work from home made this migration a viable option. And if the work-from-home trend continues as we emerge from the pandemic, we may see this continue — especially here.

That’s because close to 50% of Ottawa’s current workforce can easily work remotely.

A large part of the city’s workforce — more than in any other city in Canada — works in the finance and insurance, IT, and public administration sectors.

This is good news for those workers who can live in locations with lower housing costs, and for the businesses in those locations.  But it could have a negative impact on businesses in Ottawa that rely on local consumers.

These trends affect homeowners and middle-income households, but meanwhile the lack of supply of affordable rental housing for lower income people is just as severe, and perhaps more dire.

Some 13% of Canadian households are in core housing need. This means they are spending more than 30% of their income on housing, or are living in inadequate, unsuitable housing.

Chronic homelessness also continues to be a serious problem. On any given night, as many as 35,000 people across the country may be experiencing homelessness.

That is a quick overview of the affordability challenges — but why is this happening, and what can we do about it?

Canada’s housing system is complex and there are several reasons for the steep, continued price escalation.

However, the main problem is that supply simply isn’t keeping pace with demand. And it hasn’t been for years.

Demand for all types of homes has surged across Canada, especially in fast-growing major cities and large economic regions.

We have the fastest population growth of any G7 nation — and need to match this growth with more homes. This summer, CMHC will be releasing an in-depth report that uses the latest indicators to assess how much housing supply will be needed in the coming years.

The answer then seems simple: build more housing. And that’s what we continue to encourage at CMHC through the National Housing Strategy and its suite of supply-oriented programs. The federal government’s 10-year, more than $72-billion strategy aims to create 180,000 new units, but even that won’t solve the housing supply crunch.

More will be needed, and money alone won’t fix the problem.

Because even closing the current supply gap won’t be enough. We need to ensure supply is more responsive to inevitable future increase in demand.

Otherwise, the problem will only get worse.

We need to address of the factors that are slowing supply's response to increased demand.

These barriers include inflexible processes and long timelines in the preconstruction phase at the municipal level. The federal government is proposing Housing Accelerator Fund that would help cities to speed up these processes — and we’ll likely hear more details about this in the next federal budget.

And then, there is the issue of NIMBY-ism. Cities are struggling to find the right balance between community engagement and expediting approvals for development.

The concerns of existing homeowners often win out over housing projects that align with the demands of population growth, climate, and equitable access to the economic opportunities of our cities.

A couple of weeks ago, we supported a national housing supply summit hosted by the federal government and the Federation of Canadian Municipalities. This brought together partners from all orders of government as well as the non-profit and private sectors, to discuss ways to unlock supply barriers.

It was clear that there’s no single, magic approach that will solve our housing issues. But it was also clear that we do need to work together to solve them. It’s our country’s future economic strength and social cohesion that’s at stake.

In his recent book, Values, Mark Carney argues that the public sector can provide a foundation for solutions to our current-day problems. But the private sector’s ability to finance, explore and operationalize will be the driving force.

And I agree — especially in the case of housing, where most of the supply comes from the private market.

I’ve been bringing this message to many different partners. Recently, three financial institutions — the Bank of Montreal, Scotiabank and Vancity Community Investment Bank — collectively committed over $22 billion dollars in funding to finance affordable housing projects over the next decade.

We’re also connecting with smaller private sector partners who are looking at the problem from different angles and bringing new solutions to the table.

For example, a company called HelpSeeker has developed an app that matches Canadians in need with essential social services and supports, like housing, in their local community. We’re also seeing innovations like modular housing and green bonds.

Green housing is another area that is ripe for collaborations. Earlier I mentioned the Dream Lebreton development which will use green technologies like wastewater energy and solar power-generating systems to create a zero-carbon development.

But there is also large stock of aging apartment buildings that need deep retrofits to be more energy efficient and climate compatible, without displacing the residents.

That’s something that several partners — architects, developers, and researchers — came together to explore through one of our Solutions Labs. Their approach has led to several apartment tower rehabilitations. The most ambitious retrofit to date is the 18-storey Ken Soble Tower in Hamilton, Ontario.

So I want to close by challenging you to think about how you, as Ottawa’s business community, can contribute.

You have influence. You understand Ottawa’s unique challenges. You have diverse expertise and reputation for innovation.

And most importantly you have a stake in making housing more affordable.

What do you see as some of the housing challenges in Ottawa? What are some potential solutions?

There are new ideas to be found in so many places — from the country’s largest corporations, to councils in rural municipalities, to community organizations and grassroots movements. But even the most promising ideas won’t achieve success without the right support.

If you have a solution to propose, you can count on CMHC to support your work to the best of our abilities. You can count on us for expertise and advice.

We’d be happy to work with you to connect you with other partners or funding support.

Because we will all benefit from building stronger communities. We’ll all win by making Canada’s housing system more affordable, sustainable, inclusive and climate compatible in the years ahead.

Thank you for the invitation today. And thanks for taking the time to learn about why CMHC is so passionate about what we do.