On Tuesday, CMHC President and CEO Evan Siddall joined MPC President and CEO Paul Taylor for what was billed as their final public conversation before Siddall’s departure at the end of 2020, which has proven to be a very challenging year.
It was well noted throughout the conversation, conducted live, online for 450+ participants, that Siddall and Taylor, while disagreeing on policy, have a mutually respectful relationship. Over the past several years, they have discussed issues and tried to find common ground when it comes to the needs of MPC members and their clients.
Siddall began by assuring the audience that the misconception that he is anti-homeownership is just that: a misconception. As he said, “I support homeownership for people who can afford it.” He also reassured the audience that he appreciates the service the mortgage broker channel provides Canadians, saying, “You help people understand what they can afford,” which “has real value to people.”
He stated that his foundational fears for the housing market are based on his Wall Street experience, his “first-hand” experience during the 2008 global financial crisis and his desire to avoid a repeat situation. He began his CMHC tenure in 2014, coincidentally while on a visit to Detroit, where he took the time to visit its “burnt out neighbourhoods… to see what we wrought.” Once firmly at the CMHC helm, Siddall was engaged with and learned from “Indigenous communities, victims of domestic violence, black leaders telling me stories of being turned away by landlords, etc.” Those experiences, he noted, “affected me.”
Siddall mentioned that, collectively, Canadian governments “spend 15 times” more to help owners than they spend to help renters, a statistic he stated from a research report that includes calculations about down payment assistance programs, mortgage insurance and other programs. Taylor, for his part, challenged the statistic. Taylor noted that mortgage insurance is paid for by premiums, and Siddall responded that “government guarantees have an implicit cost.” Taylor noted that while Canada may be unique in having a government backstopping such insurance, such a guarantee keeps liquidity flowing and has “held us in such good financial stead in times of crisis.”
From there, Siddall’s comments led to his opinion of supply versus demand: “The reason people can’t afford a home is not the stress test. It’s that prices are too high.” Siddall defended the stress test as smart “macroprudential” policy.
Through the stress test and GDS/TDS reductions, the government and CMHC, according to Taylor, is effectively forcing renters to remain renters for longer than they wish, and “we are holding people back from a potentially stronger personal financial foundation down the road.” With a well-capitalized class taking advantage of unbelievably low interest rates, and with an increased supply of homes in downtown areas that normally would be used by investors as short-term rentals like Airbnb, Taylor noted that “now is the perfect time for renters to become owner-occupiers,” and supports for these prospective homeowners should not be discouraged.
Siddall countered with why he believes some Canadians should not be homeowners. “The people who are going to get hurt” by a housing price downturn “are the last people in [to homeownership]. At some point, this game of musical chairs ends,” Siddall said. Both Siddall and Taylor agreed that the most important contributing factor to people losing their homes is unemployment. When it comes to who the stress test affects most, “these are the very people currently receiving wage supports” like CERB, and “the government cannot continue to employ 25 percent of our labor force,” said Siddall.
Taylor noted that first-time homebuyers will always be the ones most at risk, and have always been because of their levels of debt as they enter homeownership.
Siddall went on to suggest that Baby Boomers and Gen Xers should shoulder the blame for housing inequality. “Their wealth gains are your clients’ lack of affordability. It’s not the government’s fault. We need to find a way to address the balance.” (Of note, Siddall earlier went to great pains to say there was no capital gains tax proposal on the government’s table: “I tread here gently, because it’s not under consideration, tax-free capital gains on principal residences come at a cost.”)
In discussing Siddall’s legacy, Taylor noted and lauded the National Housing Strategy. Siddall said he’s proud that the discussion has changed from inducing demand to increasing supply, with CMHC “becoming a policy powerhouse” on his watch.
Siddall would like the next leader to adopt what he has brought to the role: “The real test of the last seven years is whether it continues,” he said.
Taylor also commended Siddall’s dedication to the cause: “You are a true believer in the doctrines you espouse,” and that it takes great character for one who faces a lot of criticism “to stick to your guns.”
About CMHC’s now-infamous prediction of a “nine to 18 percent peak to trough drop” in housing prices,” Siddall said, “We don’t know yet.” He noted that the trough was to be in “the middle of 2022. We didn’t say the bottom would be now.”
On the mortgage deferral front, there is an understandable wait-and-see attitude, simply because wage supports by the government may be skewing data. Starting in November, arrears data will be collected from lenders by CMHC every 30 days, instead of every 90 days, and this data will be published.
In closing, Siddall said he wasn’t sure what he’d do next. He has promised his CMHC colleagues that he would remain in his post until the end of the year. He reiterated his gratitude for his team at CMHC “who care a lot about your clients, too,” and said to Taylor, “Your advocacy work has been crucial, even when we disagree” on policy.
At MPC, we are grateful for the relationship we have developed with CMHC, and with Siddall. We are all in agreement on the need for stable and sustained economic growth, in all provinces and territories.
We wish Siddall well in the next chapter of his professional career and thank him for his service to Canadians.