Last week I submitted a Letter to the Editor of the Globe and Mail. While it was published in the electronic version of the paper on Nov 30th, it was severely edited removing the nuances that I had included. You can see the published version (page down through letters) here:

And below my longer version.

There is little evidence that the Canadian government pays heed to advice from international institutions like the OECD or IMF. But this week’s recommendation from the IMF to curtail the role of its mortgage insurance agency Canada Mortgage and Housing Corp is an ominous sign. Through the Harper years there has been some speculation from Min. Flaherty, and others, about selling off CMHC. The 2013 budget did identify the sale of government assets as part of its deficit reducing strategy. And CMHC with annual profits exceeding $1 billion, is certainly a large and valuable asset. Add to this the fact that the former President’s position, usually a 5-year appointment, was renewed in 20011 for only 2 years ending last March. With plenty of time to find a new chief, the government instead appointed an acting president, temporarily promoted from below. If the government wanted a dynamic organization to lead on critical challenges in the housing market it would have appointed an appropriate new leader. The fact that they instead stuck with a temporary caretaker is perhaps an indication of the government’s true intentions. Is CMHC on the auction block? I’m not sure this would be good public policy.

Expanding on the final comment in my letter (which the editors dropped) I don’t believe this would be good policy for a number of reasons.

  • First it’s a valuable asset that generates significant revenues to the government very year (e.g. in 2012 CMHC’s unallocated net income exceeded $1.7billion, and that’s after paying federal taxes of $534 million). You can only sell an asset once, so if its underpriced, in the interests of helping achieve deficit targets, it’s a large loss of revenues ongoing into the future.
  • CMHC is an important instrument for government to implement policy. Changes to their mortgage insurance products have historically been used both to help families buy homes and more significantly to ensure financing is available for rental housing loans – the two private mortgage insurance corporations do not insure rental loans.
  • Drawing on the federal government crown borrowing facility, CMHC also provides direct financing for renewals of social housing loans, at rates well below market. This is an activity that in the future could help expand the declining social and affordable housing stock and lever limited grant funds.
  • CMHC market analysis activity generates a large volume of data on the state of housing markets – an activity that could potentially be reassigned to Statistics Canada, but its raison etc. is closely linked to CMHC’s core insurance business so whether all data elements and surveys would be sustained in unknown. And while a shadow of its former self CMHC’s research division does support a small amount of research o housing issues – an area that should be reinvigorated with increased funding to help fund and build university based research capacity.