LS-334E

TABLE OF CONTENTS

BACKGROUND

DESCRIPTION AND ANALYSIS

   A. Housing Finance

   B. Export Promotion

   C. Other Areas

BILL C-66: AN ACT TO AMEND THE NATIONAL HOUSING ACT
AND THE CANADA MORTGAGE AND HOUSING CORPORATION ACT

BACKGROUND

Canada Mortgage and Housing Corporation’s general authorities are derived from the Canada Mortgage and Housing Corporation (CMHC) Act. CMHC is a Crown corporation within the meaning of Part I of Schedule 3 of the Financial Administration Act (FAA) and is subject to the various conditions and requirements set out in this legislation. CMHC’s specific authorities in housing are embodied in the National Housing Act (NHA). The NHA provides CMHC with a range of authorities and tools to address the housing and related needs of Canadians. These tools can be grouped under four main headings: housing financing, assisted housing, research and information transfer, and international activity.(1)

In the 1993 Budget,(2) the federal government announced that it would no longer be increasing its support for social housing through the Canada Mortgage and Housing Corporation (CMHC) beyond the current funding level of about $2 billion a year.

In 1995, CMHC’s mandate in research and information transfer was reaffirmed by the Treasury Board and a Cabinet decision determined that CMHC should be given the authority to sell products and services in support of housing exports. The 1996 federal Budget announced the government’s intention to operate CMHC’s mortgage loan insurance and mortgage loan guaranty activities on a more commercial basis. At the same time, the federal government announced that it would be phasing out its remaining role in social housing except for housing on Indian reserves and the funding of other specific initiatives for targeted client groups (battered women, the disabled elderly, the homeless). To further clarify the jurisdiction in the housing field, the federal government offered provincial and territorial governments the opportunity to take over the management of existing social housing resources, provided that the federal subsidies continue to be used for housing assistance for low-income households.(3)

To implement CMHC’s new mandate requires changes to the National Housing Act (NHA) and the Canada Mortgage and Housing Corporation Act (CMHC). Bill C-66 would provide the necessary amendments.

The bill also proposes substantive and technical amendments, particularly in the areas of housing finance, and export promotion, in order to improve government management and delivery of housing services. Many administrative and technical amendments have been pending since the last amendments were made to the NHA and CMHC Act.

The modifications to the NHA follow three basic themes:

1. Expansion of the commercialisation of the mortgage loan insurance and mortgage loan guaranty activities of CMHC;

2. Confirmation and expansion of CMHC’s mandate regarding the promotion of housing-related exports; and

3. Simplification of the legislative framework governing the delivery of social housing.

The proposed amendments to the Canada Mortgage and Housing Corporation (CMHC) Act are administrative and technical in nature and consist of improvements to the wording of the Act in order to:

• align CMHC’s own administrative legislation with other current legislation governing federal Crown corporations; and

• confer on CMHC the right to enter public and private partnerships of a commercial nature.

DESCRIPTION AND ANALYSIS

   A. Housing Finance

These amendments aim at enabling CMHC to adjust its insurance and guarantee operations under the NHA to help ensure the continuing availability of low-cost financing to home buyers in all regions of Canada, promote market competitiveness and efficiency and contribute to the well-being of the housing sector.

These amendments are expected to give CMHC the necessary tools to compete effectively and fairly in the loan insurance marketplace. It is hoped that they will simplify the NHA by removing unnecessary restrictions and permit CMHC to respond quickly to shifts in consumer demand and market conditions.

• Clause 2 would introduce a new section of the National Housing Act, redefining its purpose with respect to housing finance:  to promote housing affordability and choice, to facilitate access to finance sources and to encourage competition and efficiency.

• Clause 3 would enact a new Part I combining or consolidating the parts dealing with housing loan insurance (Part I), housing for rental purposes and financial provisions (Part II) and interest rate protection (Part VIII). Sections 7 and 8 of the Act in the new Part I would enable CMHC to insure any kind of housing loan. Section 14 in the new Part I would provide CMHC with additional tools to guarantee the timely payment of securities issued on the basis of housing loans (NHA MBS). Section 16 would authorize CMHC to offer a more effective interest-rate protection product. In other words, the detailed terms and conditions in the NHA governing the provision of housing loan insurance, guarantees and interest rate protection would be replaced by a general power enabling the Corporation to set terms and conditions.

• Through section 18 CMHC would be able to obtain reinsurance with respect to the risk covered by its insurance and guarantee operations as well as to pay compensation to the federal treasury in recognition of the Crown status of these operations (clause 3).

• New section 19 would enable CMHC to set terms and conditions relative to the payment of claims in respect of any insurance, guarantee or other protection by CMHC and enable it to establish schedules of premiums, fees for housing loan insurance, guarantees and interest-rate protection (clause 3).

• New section 21 would require CMHC’s annual corporate plans to include a proposal for the use of net profits from the insurance and guarantee business (clause 3).

   B. Export Promotion

The aim of these proposed legislative changes is to expand export opportunities for Canada’s housing industry by granting CMHC broad authority to assist Canadians to sell their housing expertise to foreign countries, participate in housing development and financial infrastructure projects, and better promote Canadian housing products and services abroad. The ultimate aim of these proposals is to improve domestic job opportunities for Canadians.

• New section 75 would enable CMHC to undertake research and planning activities and information relating to the financing of housing, housing affordability and choice, living environments or community planning (clause 11).

• New section 77 would authorize CMHC to promote and develop the export of Canadian expertise, research, services and products related to housing, living environments and community planning. It would also enable CMHC to carry out development and research activities outside Canada in housing finance, living environments and community planning (clause 12).

   C. Other Areas

• Clauses 7, 8, 9, 13 and 20 of Bill C-66 would authorize CMHC to establish eligibility criteria and other terms and conditions to promote harmonisation, rationalisation and efficiency of housing assistance programs.

• New section 99.2 would introduce an amendment defining CMHC’s authority to charge fees for its services, products and activities (clause 23).

• Clauses 25 to 28 would provide administrative amendments to the CMHC Act in order to simplify the composition of the CMHC Board of Directors by removing the statutory split between "public service" (4) and private sector (6) members, making CMHC’s senior executive structure more similar to that of other Crown corporations.

• Section 28.1 would add to the CMHC Act to give CMHC the ability to carry out its authorities in co-operation with and through other public and private parties (clause 34).