October 3, 2016
Toronto – Location MRO
National Housing News Conference
Opening Remarks by the Hon. Bill Morneau, PC, MP
Thank you for joining me here today.
As Minister of Finance, one of my responsibilities is to ensure our country has a healthy, competitive and stable housing market.
One of my very first decisions after we came into office was to take action on addressing pockets of risk in the Toronto and Vancouver markets by raising the minimum down payment for homes across Canada priced above $500,000.
Since then, I have been actively engaged with my officials and various government agencies, including the Office of the Superintendent of Financial Institutions and Canada Mortgage and Housing Corporation in what I have previously described as a “deep dive”.
We also continue to work with Provinces and Municipalities to get a better understanding of local realities.
There are many factors that have contributed to rapidly rising house prices, including strong economic fundamentals and persistently low interest rates.
For many years, and especially since the financial crisis of 2008, low interest rates have gradually changed the way both lenders and borrowers view debt and indebtedness.
As these attitudes and behaviours have changed, some households began carrying high debt loads and pockets of risk have begun to emerge.
Exceptionally strong activity in certain markets – particularly Toronto and Vancouver – mean that people are concerned about the state of the housing market.
Across the country many middle class families looking to buy their first home see prices climbing, often out of their reach.
Some are taking on high levels of debt in a rush to buy before it’s too late.
Those who already own their homes want to know that the market is stable and that their most important investment is safe.
Affordability is an issue that concerns many middle class families, particularly here in Toronto and in BC’s lower mainland. It is real, and we do not take it lightly.
Federal government policy cannot control house prices directly, but it does have a role in ensuring that housing markets are stable and functioning efficiently, and in working with provinces and municipalities to provide affordable housing to meet the needs of our most vulnerable citizens, and in ensuring that institutions and individuals are conducting their business fairly and by the rules.
Our Government is very active on these issues.
The Canada Revenue Agency, under the Leadership of Minister Lebouthillier, is conducting audits related to real estate property transactions across the country, especially in the Greater Toronto Area and in Metro Vancouver.
As you heard from Jean-Yves Duclos, the Minister of Families, Children and Social Development, at last Friday’s Toronto Housing Forum, our Government is actively developing a National Housing Strategy.
In the last budget we committed $2.3 billion in affordable housing, and will continue to work closely with the provinces and municipalities on finding solutions.
Ultimately, the long-term financial security of Canadian families depends on sustainable debt levels and stable housing markets.
The federal government is serious about its responsibilities, including making sure that our housing policy framework remains healthy, competitive and stable protecting all Canadians and the economy from potential excess housing market volatility.
Overall, I believe the housing market is sound, but as Minister of Finance, I want to make sure we are proactive in assessing and addressing the factors that could lead to excess risk.
That is why today I am announcing complementary measures designed to bring greater consistency to mortgage rules, reduce risk for taxpayers and ensure everyone is playing by the rules.
The first set of measures is meant to ensure that Canadians are taking on mortgages they can afford, even if interest rates go up or their income drops in the future.
First, effective October 17, 2016, all new insured mortgages will need to undergo a mortgage rate stress test by lenders that is more robust than what is often currently applied. This includes fixed-rate mortgages with terms of 5 years (and greater) that were previously excluded from this requirement.
Second, effective November 30, 2016, mortgage loans that lenders insure using portfolio insurance and other discretionary low loan-to-value ratio mortgage insurance will need to meet loan eligibility criteria that previously only applied to highly leveraged insured mortgages.
These measures will apply to new mortgage insurance applications and will not affect Canadians with existing mortgages.
The government is taking a long-term view of the way the mortgage market functions. I’ve asked my officials to examine whether the distribution of risk in Canada’s housing finance system is balanced. So, in addition to these measures, we will be launching a consultation with market participants this fall on lender risk sharing. This is a potential policy option that would require mortgage lenders to manage a portion of loan losses on insured mortgages that default, rather than transferring virtually all the risk onto the taxpayer via the government guarantee for mortgage insurers.
Finally, a few minutes ago, the Government tabled a Notice of Ways and Means Motion in the House of Commons to close tax loopholes and improve tax compliance with regard to the principal residence exemption from capital gains tax.
We will ensure that the principal residence exemption is available only to Canadian residents, and that families are able to designate only one property as the family’s principal residence for any given year, as intended.
We will also ensure that the Canada Revenue Agency is able to assess income tax owing in cases where taxpayers do not report the sale of a property as required under the tax rules.
The measures will improve the integrity of the tax system, and ensure improved tax fairness for homeowners.
Ensuring a sound and stable housing market and financial security for Canadian families is part of our plan for long-term economic growth; a plan based on the notion that when you have an economy that works for the middle class, you have a country that works for everyone.
As we look to the future with the goal of creating growth that benefits us all, nothing could be more crucial than protecting what for many Canadians is the most important investment they will ever make.
I am happy to take your questions.