Yes. It is also irrelevant, as my colleague says.
As I was saying-and I expect the hon. member for Middlesex East knows about as much about housing costs as I know-costs for housing in 1966 increased at a greater rate than incomes and wages increased-taking into account even the Pearson 30 per cent formula for wage settlements. Here we see history repeating itself. In 1956-57 when costs advanced more quickly than incomes, we had a similar situation. In the year 1956-57 as in 1966-67 a Liberal government was in power, and I doubt whether these similar situations occurred through coincidence. It seems to me that here emphasis has again been put on the wrong priorities and no regard has been paid to the pocketbook of the little fellow who desperately needs a house.
In 1966 construction costs, per square foot for bungalows averaged $12.56. The increase over the year 1965 was from 8.1 per cent to 12.4 per cent, depending on location, and this compares-to answer my hon. friend's question indirectly-with an average annual increase of 1.4 per cent only for the ten years 1956 to 1966. Just think of it-costs rose in one year by as much as they had risen in the previous six years. In all fairness these increased costs cannot all be blamed on the government; nevertheless because of its lack of enlightened planning it has contributed toward this increase. Almost everything that has been done in housing has been done to take the easy way out.
I talked before of the increased C.M.H.C. ceiling, and I must mention in fairness that legislation was brought in last year providing for national housing money for older homes. The government also changed the ratio for calculating rental housing loans to 90 per cent of lending value from 85 per cent of lending value. This is not enough, certainly, "to excite the daring". A borrower needs 5 per cent less down payment, but the price of the house has increased by 8.1 per cent. That is not much of a gain, and the poor borrower is obligated for a bigger mortgage, and probably for a longer period.
I shall now speak of what the government did not do. It did not call more than just the organizational meeting of the committee of
May 18. 1967 COMMONS
this house on housing. There was one meeting, after which the committee was promptly disbanded because the government had not sent it a single thing to do.
[DOT] (4:40 p.m.)
Now a few words on the subject of the cost of money. The extent to which money and the cost of money affect the cost of residential accommodation is not often realized. Virtually all single family dwellings and apartment buildings in our metropolitan area, and indeed in every area are mortgaged in value to an extent ranging from 70 to 85 per cent. For every $10,000 of mortgage amortized over 30 years at the National Housing Act rate of per cent, the debtor pays back $24,300. In other words, he pays back almost two and a half times as much in total as the original debt. While there has been a great deal said in the past six months about how tight money is and how more money should be made avail-ble, there is not enough being said about the cost of this money and its effect on the cost of residential accommodation.
A loan of $10,000 amortized at 7J per cent over 30 years carries exactly the same debt service as $11,100 over the same period amortized at 6i per cent. In other words, the one per cent increase in interest costs has had the same effect as an increase in building costs of 11 per cent. We must bear in mind that buildings available be for rent or sale today were, for the most part, mortgaged prior to the time of these higher interest rates, enabling us to say that the present cost of housing accommodation does not yet reflect the higher cost of money which has occurred within the past year. This added cost must be borne by the renting or buying public in the months ahead, and must of course support the proposition that costs have not yet reached a peak but will continue to rise due to this pressure.
The federal government, I believe, can assist the mortgage market to a very marked degree. The present policy of Central Mortgage and Housing Corporation is to tie the National Housing Act rate to the long term yield of Dominion of Canada bonds. To the extent that this policy, recently adopted, induces a greater flow of mortgage money to the residential mortgage market, it is a good policy. I cannot, however, accept the principle that a 1J per cent differential between the National Housing Act rate and Dominion of Canada bonds is reasonable, bearing in mind that the security of both is identical. The major difference between a government-guaranteed National Housing Act mortgage
The Address-Mr. McCutcheon and a Dominion of Canada bond lies in the liquidity of the investment and in its cost of administration. I believe that the federal government can, through C.M.H.C. or its subsidiary, incorporate and operate a mortgage bank for the trading of mortgages. While it may be too much to expect that the future will see a National Housing Act mortgage being traded over the counter with the same kind of movement and price that exists today with a Dominion of Canada bond, I believe that substantial narrowing of this differential can be obtained with reasonable market conditions.
If trading in mortgage money were to operate on almost an over-the-counter basis, as is the case with the bonds, the construction industry could plan for much longer periods at a time. This would mean a great improvement in efficiency as well as lower money costs and I firmly believe this is one way-indeed, it may be the only way-in which we can make the best of a bad situation. The construction industry admits to its own inefficiency of operation in many instances; but while admitting that improvements could be made, it quickly points out that the present method of financing each year's operation after a mad scramble each spring for funds is one of the main causes of present difficulties. Those directly concerned do not know whether they have enough money to operate for a year, so their employees are faced with lay-offs. And they do not know how much work will be available next year.
The government tried the $500 winter incentive plan, which obviously failed to work. I think the answer to improved efficiency in the construction industry, hopefully with lower costs, will be found by making a regular, planned flow of mortgage money available and allotting it over a longer period than is now the case, when only a season to season supply or forecast is available.
This may be the case-if the government does not decide in its wisdom on a tight money supply for next year or the latter part of the present year. There are many "ifs". I maintain that planning in all its phases, including financing, should be on a two to five year basis. Housing should not bear the brunt of any artificial tinkering with a supply of funds for the industry. House mortgage funds should not be used to dampen a business cycle or to accelerate one. There should be a steady flow based only on demand.
Regardless of any so-called lack of criticism of the federal government as reported by the
May 18, 1967
The Address-Mr. McCutcheon minister, only the federal government has the facilities to be able to envision a nationwide situation. Provinces and municipalities just cannot have this type of over-all perception.
In my opinion we missed a golden opportunity to rationalize our house building requirements when in our haste to implement the Canada Pension Plan we let the funding of the plan slip through our fingers, as it were, and allowed the provinces first claim on the assets.
This fund, which we are aware is only short lived, could have provided the massive injection our housing industry required on a temporary basis, that is to say, until we got caught up. Then in an orderly fashion the mortgage bank concept could have taken over. What a tremendous incentive it would be. How in keeping with a security program, that the funds collected under the pension plan could be used to provide homes for the population-the same homes, in many cases, which would shelter pensioners in their old age.
Another area of great concern is the tremendous cost of legal fees in connection with almost every house or property transaction. Time is money, and too often there are almost interminable delays in conveyancing. Naturally, delays can be very expensive. I do not think we can afford this luxury much longer and unless some streamlining can be achieved the system of land titles will have to be overhauled.
I think the provision of title insurance should be examined to see whether reasonable reductions in cost could be obtained by this method. The lawyer members of this chamber may not agree.
[DOT] (4:50 p.m.)
It is my opinion that lot sizes can and should be reduced. Through arbitrarily fixing minimum standards for lot sizes, in Canada we have added miles and miles of sewers, pavements and other services, so much so that our municipalities cannot stand the costs of servicing land for development. It does not matter who was responsible for these things in the first place. It seems to me that now each government level says, "This is not our department. We cannot do anything about it." Surely it is time we quit passing the buck. We are all in this mess together, all levels of government, and the thing to do is to pull together to get us out of it.
I suggest that it is just as important, yes more important, to Canadians to have the price of housing lowered as it is to have the
moneylenders back in the business at a very high rate of interest. With this in mind I suggest to the Minister of Finance (Mr. Sharp)-and possibly since he is not in the chamber now the Minister of Justice (Mr. Trudeau) will convey the message to him -that he should have another look at the tax on building materials.
Much has been heard about removing this tax. I am not suggesting that. I am suggesting something else, a relocation of it. I presume that the government will find it necessary to continue collecting this tax. You do not forget $180 million just overnight, but I submit to the minister that this tax should apply at the retail level rather than at the manufacturer's level. Why should Canadians have to pay a percentage profit markup on a federal tax at every level of business-first the jobber, then the wholesaler, then the retailer? This tax by the time it hits the consumer has been marked up at least 50 per cent, and then in most of the provinces we add on a sales tax.
I would suggest that the Minister of Finance give some thought to relocating this tax. I think he could automatically reduce it by 50 per cent and the government would not be out anything, but it would be very helpful towards lowering the price of housing. In summary, Mr. Speaker, if the relocation and reduction of the tax were accomplished, if the construction industry could be encouraged to improve efficiency by a few percentage points through long range government planning, with a reduction in mortgage rates obtained-and believe me, Mr. Speaker, all these things are possible-then a 10 per cent reduction in housing costs would be quite possible and no better project could be envisaged for this the centennial parliament.
Topic: SPEECH FROM THE THRONE
Subtopic: CONTINUATION OF DEBATE ON ADDRESS IN REPLY