Thank you, Chair.

Thank you, committee, for allowing me to make this presentation.

I'm going to talk about what I think is a major distortion in the single-family housing market, particularly in the GTA. I'm referring to single-family housing, not multi-family dwellings. I'm going to start with an ask that may not be all that popular in light of some comments I've already heard with respect to capital gains taxes.

I'm here to ask you to consider a punitive capital gains tax on speculative investments in non-principal-residence single-family homes if not held for a minimum period of two years. I am the CEO of the Italian Canadian Savings & Credit Union. We are deeply rooted in the real estate development and construction sectors of the GTA. As mortgage lenders, we've seen increasing speculation in new high-rise condo builds, such that by 2019 speculators accounted for up to 80% of unit purchases and possibly more. In their recent economic report, the chief economist of CIBC reported this number to be north of 70%.

This trend, I maintain, had the result of shifting the demand curve upwards. Speculators have not historically dominated the market to this extent, and they have different interests. Families buy a home to hold and raise kids and are often financially stressed, while speculators look for short-term gains and often have more money than families do. This shift resulted in housing becoming unaffordable for families. Additionally, this buying frenzy spilled over to other types of homes, including detached suburban homes. Private equity funds have been building portfolios of detached single-family homes to hold for capital gains. Families can't compete with the purchasing power of private equity funds.

Speculators bet on short-term gain. The primary intent of these investors is to flip their purchase contracts. In normal markets there are also investors that buy to hold. These are not the investors being referred to in this discussion.

This hyperdemand increased developers' margins very substantially. This is important to take note of. By some accounts, margins increased to as much as $400,000 per unit. As the various sector partners took note of the developers' increased margins, contractors bid up their contracts, labour negotiated for more, prices of building materials increased and of course municipalities demanded more.

Rapid increases in interest rates in 2022 were very effective in taking the speculators out of the market. Urbanation, a real estate research and consulting firm specializing in condominiums, reports that there are currently 40,000 condo units for sale in the GTA, including unsold units in development, assignment listings and resale listings on MLS. They state that it will likely take up to 50 months for the market to absorb these units based on current sales rates.

A long-term strategy to return the single-family housing market to families is paramount for our social and economic well-being. If speculators or flippers return to dominate the market as interest rates moderate, families and first-time buyers will continue to be shut out of the market. Another significant effect will be a housing market that resembles a commodities market, whereby only people with money will invest and trade housing units as between themselves. There's already much evidence of that.

This commoditization or financialization of the single-family housing market may also impact mortgage financing in the long term. The security of having a fixed-rate mortgage together with a long amortization period are traditionally intended to make it easier for average income earners to buy a home.

Mortgage lenders have historically not questioned the risk associated with these features, as the value of real estate has traditionally been predictable. As the housing market becomes more like a commodities market, though, and therefore, more volatile, the question becomes whether mortgage lending should be more like commodities lending. Should mortgages look like margin loans, whereby, like with commodities loans, the lender can call a loan if the value of the house drops?

As I'm sure you're aware, the federal government holds substantially all of the risk for residential mortgages through CMHC's securitization plans.

In its economic and social report dated May 2024, Statistics Canada reported that “it is not yet clear” whether “inflation...in 2022 was driven by demand [or by supply] factors”, and that rent paid “for housing contributed significantly to the high inflation in all four quarters of 2022.”

There is no long-term upside in having speculators dominate the housing market, and left to interest rate policy alone, speculators will come back as rates stabilize. A fiscal policy that includes a very significant capital gains tax on flipping single-family homes may be more effective in correcting this anomaly. It will have the effect of stabilizing demand and reducing construction costs, and it will return the Canadian dream of home ownership back to families.

Thank you.