Ahead of the 2024 budget, the Senate banking committee is calling on the federal government to beef up consumer protections for mortgage borrowers and bolster housing supply.
In the fall economic statement released last month, the federal government pledged to improve housing affordability with measures to accelerate new construction, reduce regulatory and zoning barriers, and increase the supply of available skilled trade labour.
It also promised to enhance guidance to financial institutions on working with borrowers in financial distress to provide mortgage relief.
In an interim report that examines housing affordability, the Standing Senate Committee on Banking, Commerce and the Economy set out 10 recommendations for government actions to combat rising financial strains in the housing market.
“While some of these suggestions were acknowledged in the government’s 2023 Fall Economic Statement, the committee calls on federal policymakers to consider the recommendations in full — and the expert testimony underlying them — ahead of the 2024 federal budget,” the committee said.
The senators called on federal financial regulators — the Office of the Superintendent of Financial Institutions (OSFI) and the Financial Consumer Agency of Canada — to strengthen consumer protections, ensure that financial institutions are offering “safe” mortgage products, and that firms are providing “fair and reasonable” relief measures to households that run into financial distress.
The Liberals proposed a renewed Canadian mortgage charter in last month’s mini-budget to help people hang on to their homes. The proposed measures would allow for temporary amortization extensions for mortgage holders at risk, as well as the waiving of certain fees and added costs.
Financial institutions would also be required to proactively reach out to vulnerable borrowers, and homeowners at risk would be able to make lump-sum payments to avoid negative amortization.
The Senate report also recommended that OSFI review banks’ capital requirements for loans to fund multi-unit residential housing projects.
And it suggested policy actions designed to encourage densification, reduce regulatory barriers to boosting the supply of affordable housing (including harmonizing building codes), and developing programs to increase productivity in the construction sector.
The fall economic statement said the government is earmarking $15 billion for low-cost loans to developers as well as $1 billion for affordable housing.
It is also expanding its recently announced measure to remove GST charges off rental developments to include co-op rental housing.
The Senate committee recommended the government consider housing affordability issues when setting immigration policy and target immigrants with building trade skills.
“Canada is failing to address the housing crisis. We need to accelerate the supply of homes across the country — immediately. Canadians are counting on the federal government to make that happen,” said committee chair Senator Pamela Wallin.
The committee also recommended stoking competition in the financial sector to help develop solutions for housing affordability strains by adopting “open banking” and considering the role of provincially regulated financial institutions (credit unions) in this market.
The Liberals said they would introduce legislation next year to facilitate open banking.
-With files from The Canadian Press