This article was written by Tim Hudak, CEO of the Ontario Real Estate Association (OREA).
On March 2, the Trudeau government announced that Romy Bowers will take over as CEO of Canada Mortgage & Housing Corporation (CMHC) in April, filling one of the most important appointed roles in the federal government. As CEO, one of her top priorities should be to make CMHC a champion of homeownership again, as it was through most of its history.
Ms. Bowers will replace Evan Siddall, who is best known for using his role at CMHC as a platform to indulge his strange fixation with making it harder for Canadians to buy homes. Siddall is a capable man, with a strong background as a public servant, and (like Bowers) in financial services. He should be thanked for his service at CMHC. Nevertheless, the end of his uniquely controversial tenure offers an opportunity – indeed, a desperate need – for renewal.
Although the cloud of controversy around Siddall has kept CMHC in the news in recent years, many Canadians still have little or no idea of what CMHC is, or of its proud history in enabling Canadian families to become homeowners. The agency was originally created in 1946 to administer the National Housing Act, and traces its beginnings to the Second World War, when it was established to house returning soldiers and assist with their re-integration into society by giving them access to affordable mortgages.
Tim Hudak, OREA CEO
In its early years, CMHC played an enormous role both in developing government-owned housing for low-income Canadians, and in expanding access to housing overall, including at one point being in charge of what is now the Town of Ajax. In the following decades, CMHC supported and delivered balanced, responsible, and sensible pro-housing policies, helping to build Canada’s middle class and to give people a hand up as they make the biggest financial decisions of their lives. CMHC promoted affordable homeownership through pro-growth policies, like the introduction of 5% down payments and the mortgage loan insurance program.
Mr. Siddall was hired as CEO in 2014, following a series of changes sponsored by then-Finance Minister Jim Flaherty, which also included bringing in the Office of the Superintendent of Financial Institutions (OSFI) for oversight, establishing an improved level of transparency and scrutiny, and overhauling the Board of Directors.
Evan Siddall, outgoing President & CEO of the CMHC
Support for homeownership is about as close to a unifying issue in Canadian politics as it’s possible to get. In Ontario, over 90% of voters believe housing is an important or somewhat important contributor to the province’s economy. Big majorities support policies like increasing first time home buyers’ rebates. Even in a pandemic, 6 in 10 say housing remains a good investment.
Not surprisingly, there’s also a lot of common ground among political parties on supporting homeownership. The 2019 federal Liberal platform said, “we will make it easier for more people to buy their first home”, and proposed an enhanced First-time Home Buyer Incentive. The Conservative platform said “a new Conservative government will remove barriers to homeownership. We will make more new homes available and make it easier for you to buy and pay for a home.” Support for homeownership has been a consistent theme of official policy and budgets under both Liberal and Conservative governments; indeed, the last federal budget made housing one of its four main themes, with the centrepiece being the First-time Home Buyer Incentive mentioned in the Liberal platform. This consistent aim, across parties and through the decades, helped to build Canada’s middle class and strong communities across the country.
None of this will come as a surprise to anyone who follows Canadian politics or who has any understanding of the priorities of middle-class families. The surprise is that within a federal government that has consistently prioritized homeownership, Mr. Siddall, as the unelected head of CMHC, embarked on a relentless policy and public communications campaign to make homeownership harder.
Much of this was rooted in dire warnings about risk – indeed, almost any economic news, good or bad, seemed an occasion for Mr. Siddall to promote or enact ever-stricter clamp-downs on home buyers. Last May, during the first wave of COVID-19 he famously told the House of Commons finance committee that he forecast “a decline in average house prices in Canada of 9% to 18% in the coming 12 months”, said “as many as one-fifth of all mortgages could be in arrears,” and raised the idea of doubling the minimum down payment as “a cushion against possible losses”. His forecast of crashing home prices was coupled with a prediction of huge increases in personal debt.
In fact, nothing remotely like this happened; rather, Canadian housing prices rose, and the savings rate went up. Of course, plenty of respectable people made bad forecasts in the uncertain early days of the pandemic, even if CMHC’s stood out as especially pessimistic. The remarkable and telling thing is that Siddall stuck to his guns, even as evidence mounted that reality was refusing to conform to his catastrophic prediction.
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In June, he clamped down on home buyers yet again, making it harder to qualify for mortgage insurance, reducing the amount many families can borrow, and more. In August, still foreseeing looming disaster, he sent a letter to lenders, asking them to turn down more loans in response to CMHC’s declining market share.
Indeed, it wasn’t until this March, the day before his successor’s appointment was announced, that Siddall finally offered a half-hearted acknowledgement via Twitter that his forecast had been wrong. Even this was disingenuous; for example, he said “our publication… described the -18% case as a highly unlikely worst case, which critics focused on”, but he did not mention that the best case in the agency’s range was -9%, which was worse than the major banks were predicting using the same evidence, and far worse than what actually happened.
The more important concern, though, is that this was only the latest of many episodes in which CMHC enacted or advocated real measures to make it harder to buy homes, almost always justified as responses to new or growing risk. Long before the pandemic, Mr. Siddall championed an overly-harsh mortgage “stress test”, which reduced buying power by 20 percent. Notably, if home buyers managed their risk by locking in a fixed-rate mortgage, his rule still gave them no relief. Even if buyers saved for a large down payment, and didn’t require mortgage insurance, he fought hard to have the harsh “stress test” apply anyway.
Siddall’s increasingly strident public statements over the course of his tenure at CMHC showed that his hostility to homeownership runs deep, and is rooted in a set of beliefs at odds with those of Canadian voters and the governments they elect. In a late-2019 speech, he said “[Canadians’] ‘dream of homeownership’ is static and regressive. …we need to call out the glorification of homeownership for the regressive canard that it is. Renting is a perfectly valid option, and may in fact be the best long-term option for many households.” In a section of the same speech listing what he views to be problematic policies, Siddall included “the personal exemption from capital gains tax on principal residences”.
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This is not a prudent viewpoint on risk; it’s an ideological position that disparages homeowners even while acknowledging “the dream of homeownership” as a core value of the very Canadians CMHC is supposed to serve. It is arrogant, government-knows-best scolding that is at odds with the position of not only the government of the day, but the major opposition parties as well. And it is deeply, fundamentally inconsistent with CMHC’s proud history in enabling millions of Canadian families to achieve their dream of homeownership.
With Mr. Siddall’s departure in April, Ms. Bowers has a much-needed opportunity as the new CEO to restore CMHC’s constructive role in helping families become home buyers, and to bring the agency back into alignment with mainstream views and government objectives. That opportunity comes not a moment too soon.
Romy Bowers, incoming CMHC CEO
There is much to be done to get CMHC back to basics, so it builds up housing choice and ownership opportunities instead of tearing them down.
Fixing housing supply should be a top objective, particularly selling and building more homes. Having a greater supply of homes in the market will not only help buyers, but also create spin-off jobs and increased consumer spending to strengthen economic recovery. Advocating to convert surplus government lands, and committing to transit-oriented communities, can certainly help to address housing supply shortages across the country.
Another priority Ms. Bowers should adopt in renewing CMHC should be to treat industry and stakeholders as partners and collaborators. Realtors, brokers, lenders, builders, and private insurers have no interest in setting up the housing market, or its participants, for a crash landing. By treating stakeholders with respect, by welcoming collaboration and honest and sincere dialogue, CMHC can rebuild trust from its stakeholders, and provide better advice to government. By understanding that others also have valid and helpful viewpoints on the housing market, the agency can avoid repeating its 2020 experience of setting policy based on outlier forecasts that prove to be just plain wrong.
Under its new leadership, CMHC should also promote and support pro-growth policies once again, especially as we transition from lockdowns to economic recovery. It should respect and support prospective first-time home buyers by loosening the stress test, bringing back the 30-year amortization option, and working with government to revamp the First-Time Home Buyers program. With historically low mortgage interest rates, first-time home buyers are uniquely positioned to enter the housing market.
Along with Realtors across Ontario, I welcome Ms. Bowers to her new role. I look forward to working together to restore and revitalize CMHC, and to ensure that dream of homeownership is a reality for future generations of Canadians.
