Housing’s Key Role in Canada’s Economic Future - Eric DenOuden's Inaugural Address
Canadian Home Builders’ Association 74th National Conference
St. John’s, Newfoundland and Labrador
May 10, 2017
Distinguished guests, friends and colleagues – I am very honoured to stand here today, as the President of the Canadian Home Builders’ Association.
I want to begin my remarks by recognizing and thanking Bob Finnigan for his tremendous work as our President over the last year.
Bob and I have worked together for some time now, and his enthusiasm for our industry and what we contribute to the lives of Canadians has always been an inspiration.
Bob’s leadership of our Executive team over the last year has been tremendous. And between meetings, Bob has put in countless hours visiting with members at the local and provincial levels across the country. Having set such a ‘high bar’, he’ll be a hard act to follow.
Bob, on behalf of all the members of our Association, I want to thank you for your incredible commitment and hard work over the last year. I look forward to continuing our work together during my Presidential term.
I’d also like to take this moment to thank Kevin, as CEO of our national association, and his staff, for all of their continuing hard work. As I start my presidency, I know I have a great team at the national office supporting me, and all of us, in pursuing the best interests of our membership.
Kevin continues to build a more dynamic national association, while increasing the level and effectiveness of collaboration between CHBA nationally, and our local and provincial Associations. In this effort, he is joined by the professional staff at HBAs across the country, and I also want to thank them for their continuing contributions to making our Association the powerhouse that it is. I look forward to visiting with many of you in your home towns over the coming year.
As I take on the role of CHBA President, I am mindful that this year has very special importance. As highlighted by Kevin, our country is 150 years young this year, and starting next January, our Association will be marking it’s 75th anniversary.
Both of these events are significant and deeply meaningful. And both deserve celebration for what has been achieved, and reflection on where we go from here.
We are blessed to live in a country that is often described as being the envy of the world.
Whether measured in terms of quality of life, diversity, educational achievement, openness to newcomers, natural resources or the sheer physical beauty of the land, Canada is perennially at the top of the list.
We should feel proud of what we have, and of our accomplishments, while at the same time remaining deeply grateful for what providence has granted to us. We are incredibly fortunate to call this place ‘home’.
The history of our country and that of our industry are very closely intertwined.
At the northern tip of the island we stand on today is the L’Anse aux Meadows (Lance – O –Meadows) National Historic Site, where the first European visitors to North America landed over 1,000 years ago.
We know this because their most enduring action was to build homes from the materials at hand to shelter themselves against the elements.
In much the same way, home building has defined the development of Canada ever since, and will continue to mark our progress as a nation into the future.
Canada has been formed by attracting newcomers from around the world, and by building great communities and great homes. My own parents came to Canada from Holland and built a wonderful life here for our family, and were a part of our industry – a tradition that I and my children are continuing.
And for almost 75 years, our Association has brought together the men and women who built Canada’s communities to work for a common purpose.
To look for better construction and renovation methods, better ways to create communities, to push for innovations, and to work with governments to ensure Canadians have the housing choices they seek, in the places they love, at a price they can afford to pay.
Today, each of us carry on that legacy through our businesses, and through the important work we do as volunteers within the CHBA ‘family’ across the country. We should be very proud of this.
Everybody engaged in our association is important to this legacy. And this goes well beyond the builder, renovator and developer members. Whether you are a tradesperson, a supplier, a manufacturer, provide technical or legal services, or are a mortgage lender – you are critical to the process. Without you, we couldn’t build new homes, renovate existing ones or develop new neighbourhoods.
Everyone in the supply and service chain is a valued part of our industry and our Association. Our new national second vice president, John Meinen, has always been a big promoter of members hiring members—something we should always keep in mind, since our Association is about that entire supply chain.
Now, as I begin my term as your National President, I am mindful of the critical role our industry has played in Canada’s development, and which it must play in our nations future.
To this end, I want to touch on some important housing issues that are consistently at the forefront of our concerns—such as affordability, infrastructure investment, regulation, and taxation—but I want to do so from a somewhat broader perspective.
Each of these issues directly impacts the housing choices available to Canadians, and, in no small measure, influences their ability to achieve the most central of middle-class goals – home ownership.
To fully appreciate the importance of governments ‘getting it right’ when it comes to housing, I want to suggest two overarching themes that encompass the issues that most concern CHBA and our members.
The first of these is international competitiveness. Housing will play an increasingly strategic role in Canada’s future international competitiveness. Canada’s esteemed ‘quality of life’ which attracts the best and brightest from around the world owes much to the quality of the houses they can rent and buy here, in the great communities that we build and maintain.
The second is innovation. When governments develop an ‘innovation agenda’ to support our country’s future economic growth and prosperity, housing needs to be ‘front and centre’ within these plans.
We must seek technical innovations that allow us to build better home that are also more affordable. But we must also look for innovation not only in technology, but in processes.
We need innovation in the way governments regulate residential development, so we can deliver the homes Canadians need – better, faster and more economically – and without the unnecessary hurdles that cost time and money.
Today, as Kevin mentioned, the work we do provides jobs for over one million Canadians, pays almost $60 billion in wages and contributes more than $138 billion to our economy. Home building, renovation and community development are major economic pillars in every community from coast to coast.
But beyond this enormous economic benefit, the work we do is fundamentally linked to Canada’s broader competitiveness and success.
That brings me to my first theme. Governments need to better recognize the strategic role that housing plays in our economic future. Particularly when they enact policies that impact our ability to deliver the homes Canadians want and need, at a price they can afford to pay.
Consider this – when elected leaders talk about Canada’s future economic success, our country’s quality of life is always put forward as a distinct strategic advantage. We are an open and welcoming society, we value the contributions made by newcomers to Canada, and we put emphasis on the importance of attracting the ‘best and the brightest’ from around the world.
This ‘quality of life’ we so highly value is fundamentally rooted in the quality of our communities – safe, secure and comfortable cities and towns where people can settle down and raise a family. And these cities and towns have always provided those working hard to join the middle-class a decent chance to own a home that meets their family’s needs.
When CHBA highlights the critical importance of affordability – that’s what we’re talking about. Affordability is the most accurate measure of how well Canada is delivering on our promised ‘quality of life’.
Today, in significant ways, Canada’s policies are failing to meet this challenge.
In a recent Globe and Mail article, the Director of Cities at the Rotman School of Management noted that, in Canada “the clustering of industry, economic activity and talented people in cities . . . is the fundamental engine of innovation and economic growth.”
He went on to note that the same forces that power the growth of our great cities have generated a crisis of gentrification, rising inequality and increasingly unaffordable urban housing.
This significant decline in affordability has two primary roots:
- When our cities achieve economic success – a very positive thing – they attract increasing numbers of newcomers every year. These are conditions we’d like to see in every city in Canada – it’s what the competitive success that governments talk about actually looks like.
- The second factor is the not-uncommon failure of governments to support such economic growth through coherent, forward-looking housing and development policies. From infrastructure investment, to transit, to land planning – in too many communities there has been a longstanding misalignment between economic growth and housing development, largely resulting from government policy decisions.
Let’s be clear – all governments in Canada want our cities to achieve economic success. When governments talk about strengthening the middle-class, that’s exactly how it needs to happen. New industry, new businesses, lots of innovation and lots of new jobs that pay well.
The piece that needs to be added to that formula is housing affordability and choice – because this is the key to maintaining the quality of life we all see as being so important to Canada’s future economic success.
When it comes to affordability, there are a range of policy solutions available to governments – all of which CHBA has been promoting for some time.
- The development of a National Housing Strategy by the federal government needs to encompass the full housing continuum – from social housing through to market rental and home ownership. Given that Canada’s ‘quality of life’ is a strategic competitive advantage, anything less than this will be a missed opportunity.
- The funding collaboration between all three levels of government around infrastructure and transit needs to apply a ‘housing lens’ that incorporates affordability as a clear goal. Particularly in relation to transit investments, there is a pressing need to integrate planning to take advantage of valuable opportunities such as transit-oriented development that can provide the wider range of housing options required to build ‘complete communities’ with a place for everyone, and means to easily commute and get around.
- The compounding taxation of new housing needs to be addressed. Over-taxation of new homes is a huge problem that simply undermines affordability and locks more and more Canadians out of home ownership. Development should pay its fair share, but no more than that.
- Similarly, new market housing should not have to pay for social housing. Supporting those in need is a community responsibility that should be shared by the whole community, not just new home buyers.
- And very importantly, we need to make sure that the mortgage system works to support well qualified first-time homebuyers getting into their first homes—homeownership has long been the cornerstone of the middle-class, and we need to ensure we have a stable and supportive mortgage system that continues to nurture that.
These approaches simply make sense given the key role that affordability and choice play in creating economically competitive cities. If we want economic success and quality of life, this must be the framework governments apply.
A key resource needed to support better housing policy is better information and data. As governments have learned over the last few years, their ability to understand market conditions is often constrained by a significant lack of such data.
In this area, CHBA was encouraged that this year’s federal budget included significant funding to address many existing ‘data gaps’, and we look forward to seeing the results of this investment as early as this fall, when Statistics Canada unveils its new Housing Statistics Framework.
Given that Canada’s renowned ‘quality of life’ is a strategic competitive advantage in today’s world, it follows that housing affordability and choice must play a central role in our future economic success.
We need government policy-making to align with this reality. Affordability should not be something governments react to when they sense a crisis, it needs to be a central goal they pursue, so that such crises don’t occur.
This means we need innovative thinking, so let me move on to my second theme – the importance of including housing in Canada’s innovation agenda.
For Canada to truly embrace the importance of innovation to our economic future, we need to take a more holistic view.
Certainly, the promise of cutting-edge technologies like artificial intelligence and quantum computing are incredibly exciting, and it’s fantastic that our country is a world leader in these areas.
But true innovation involves more than creating what doesn’t exist, it means improving that which already does. It’s not just about new products and materials, it’s also about making existing parts of our economy more efficient and productive.
CHBA has called on government to take this approach in some key areas related to housing, from energy efficiency, to building codes and development regulations, to how we help those in housing need.
In each area, what we are recommending is a sharp focus on finding new, more efficient, more effective, and more innovative ways of doing things.
To remain competitive internationally, industry has had to learn how to do things, ‘better, faster and cheaper’. Why can’t governments apply this same approach in other areas that have a profound impact on housing affordability and choice?
Areas like regulation, urban planning and development, and the provision of housing assistance.
In every case, innovation can unlock greater efficiency and better support economic growth.
For instance, the federal government has adopted the ‘aspirational goal’ of having all new homes built Net Zero Ready by 2030, and intends to see this in code. This time-bound goal gives no consideration to affordability impacts, other than suggesting that our industry ‘will need time to adjust’.
The fact is, we can build Net Zero Ready homes today, with current technology. CHBA is pleased through our new Net Zero program to be recognizing the innovation leaders in our Association who are voluntarily reaching these high levels of energy performance today.
But what we can’t do yet is build such homes so they are within the financial reach of all new home buyers, not just those willing to invest extra in this advanced technology and know-how.
If the government were to truly embrace innovation, their goal should be to work with our industry so that we can build Net Zero Ready homes for the same, or lower, cost as today’s homes. This is the goal that CHBA has challenged the government to adopt.
CHBA has called for the government to invest in the R&D needed to achieve this, using the Association’s current voluntary Net Zero initiative as the testing ground for new innovations.
We are taking much the same approach to the development of all building codes and standards at the national level.
While Canada has one of the best national code systems in the world, it’s time to rethink some fundamental aspects of how we further develop these codes.
Built-up over decades, the scope of the National Building Code and all of the supplemental standards it references has grown, and its sheer complexity has become a barrier to its efficient application.
And today, we see the role of the NBC changing, as governments increasingly turn to the code to achieve social objectives, from climate change mitigation, to accommodating those with special needs, to reducing the risks faced by property insurers.
In isolation, all of these goals are commendable. But taken together, they pose a significant and growing threat to housing affordability.
What is lacking is a more holistic approach that considers the cumulative cost impacts of building code requirements on the average Canadian home buyer. Without this, the risk is that we’ll end up building ‘perfect’ homes that no one can afford to live in.
This is another area where innovation is needed. Governments should dare to be truly innovative and adopt CHBA’s goal of building better homes for the same cost, or less.
To achieve this, we will need to rethink how we develop codes, and what sort of R&D is essential in order to achieve improvements without adding additional complexity or cost. In short, we’ll need a far more innovative system where code changes are viewed in their totality, not in isolation, and the overall code becomes simpler and more efficient.
Another example of innovative thinking, and one that is already beginning to be applied, is how we help those in “housing need”.
Traditional approaches to social housing focus on homes, not people. Yet even with ramped-up social housing investments by the federal government, there is simply no way Canada can build its way out of the current social housing backlog. At current rates of construction, it would take many decades to clear existing waiting lists with social housing providers.
For a number of years, CHBA has pointed to the need for more innovative and efficient approaches, including the use of portable housing benefits. Most low-income households have adequate housing – the problem is they can’t afford the rent. It is, at its core, not a housing problem but an income problem. Portable housing benefits simply help close the gap between what these families can afford and the rent they must pay.
And this has the advantage of portability – so that if a better job comes up in another area or region, they can move, and take their assistance along with them.
Perhaps most significantly, this approach is far less expensive than building new social housing units, so it can help far more people, and do so immediately, not years in the future. It also means that more market-rate purpose-built rental can come on line without public subsidy or excessive affordable housing requirements that have consistently proven problematic.
Over the last year, CHBA has been working in collaboration with other organizations, from apartment owners to housing advocates, to promote this innovative concept to governments. And I’m pleased to see that the federal government and some provinces are beginning to take up the approach. This is certainly an area in need of innovation, and it’s good to see it begin to happen.
A final and critical area where some innovative thinking is long overdue is in how new residential development is regulated and approved.
Amid unending media speculation on the causes of price escalation in markets like the Greater Toronto Area and Vancouver, its easy to lose sight of how the fundamentals of supply and demand play out in every market, and how overly complex and slow regulatory processes can impact affordability everywhere.
When my father bought a building lot in the Quinte region to build my childhood home in the late 1950s, it cost him $600. Back then, that was about ten-weeks total wages for him as a cabinet maker.
Today, one of my carpenters would need two years of total income to buy a building lot that was comparable. That’s 10 times longer.
Regulation is a good part of the reason why this is now the case. When I began as a developer in 1986, getting raw land approved and into development took anywhere from six months to two years. Today, three to four years would be considered fast.
That protracted timeframe has a cost, which is paid by the eventual homebuyer.
Now I live and work in a smaller centre, where things are still somewhat simpler. In larger, more economically dynamic urban areas that are seeing strong population growth, the inability of regulatory processes to react to market demand has more pronounced impacts. Ironically, in many cases, the larger the city and the demand, the longer the approval process to develop and build.
Regulation and policy have also now led to the types of housing units allowed to be built being misaligned with what families are looking for. For instance, a recent Ryerson University report noted that, over the last five years, there has been a “marked mismatch” between the types of homes built in the GTA and the type of homes buyers are looking for.
Ryerson lays the blame for this ‘mismatch’ squarely at the feet of government, as it directly results from planning policy that ignores market demand. In the GTA, policy-enforced undersupply of ground-oriented, family-friendly homes is, according to the researchers, a major factor behind soaring home prices in that region.
This speaks to the overriding importance of supply and demand factors in housing market performance. While market-blind policies aimed at densification may support construction of a sufficient overall number of units, if they result in a chronic shortage of homes suited to young families, prices in this segment will continue to escalate.
The solution to this is not more government meddling in housing markets to try to temper demand, but in allowing our industry to build the homes that people want and need.
What builders in our larger cities know best is that the sheer complexity of the development approvals process, combined with lagging infrastructure, means that it can take a great many years to get a project underway. At the end of the day, we can only build what we are allowed to build, and even then, only once the approvals process is finally completed.
Inefficient and overly-costly regulation exists in cities across the country. We see this reflected in escalating prices for those homes in shortest supply.
And reflected in what CHBA refers to as the ‘missing middle’ – the lack of new ground-oriented multi-family homes like towns, and row homes that could offer a level of affordability better-aligned with the needs of younger first-time buyers and families, especially in larger urban centres.
All of these things are symptoms of a regulatory system that is clearly broken and is failing to meet the public interest. It takes too long, it costs too much and it doesn’t deliver what people want and need.
Surely, this is an area where some innovation is long overdue?
The challenge is on how to address the legitimate goals of government concerning the future form and composition of our cities, but do so in a far more economically efficient way. What we need is a regulatory regime that is ‘faster, cheaper and delivers better results’.
In saying this, I’m not arguing against the overarching planning goals that governments are putting into place. I’m simply suggesting we need better, and more innovative, ways of reaching these goals.
We need approaches that don’t produce the sort of supply/demand imbalances we see in Canada’s most economically successful cities – conditions which severely impact younger families, and new Canadians, who are striving to achieve a middle-class lifestyle.
We also need to recognize that the housing markets across Canada are very different. While some are strong, others remain weak. We need policies that will ensure a strong residential construction sector in all parts of the country, and that will ensure well-qualified young Canadians and new Canadians can still attain that key aspect of the middle-class Canadian dream: homeownership.
Over the coming year, I’m looking forward to working with your Board of Directors, the Executive Committee and leaders from our Provincial and local Association to engage with government on these important issues, and how best to address them.
We need governments to see housing as the strategic asset it is, and recognize the need to support innovation in both building technology and in regulation that can allow us to provide great homes that more Canadians can afford to own.
As an Association, our job is to serve all facets of the residential construction industry, and all of its customers. Whether we are community developers, home builders, renovators, trades, allied professionals, lenders, or other service providers, we all benefit when Canadians invest in their homes.
And through our Association, we work together to make this possible.
By working together, we are stronger. Over the last year, issues like the drywall tariff dispute showed, once again, how effective such collaboration can be. I look forward to contributing to the high level of collaboration that exists between local, provincial and national levels on the issues that matter most to our members.
I want to close by thanking all of you for providing me with the opportunity to lead this great organization over the coming year.
I particularly want to thank my wife, Toni, and the staff of my company, for taking up the slack, and making it possible.
It is both a privilege and an honour to serve as your national President, and I will do my utmost to fulfill the important duty you have entrusted me with.