The Appraisal Institute of Canada (AIC) is Canada’s leading real property valuation association with over 5,400 Members across the country and around the world. AIC’s Advocacy Committee works to support and promote our Members on a national and provincial level, and advocates for them on issues that impact the valuation profession and the real estate industry.
To learn more about our advocacy efforts, please contact André Hannoush, Associate Director, Public Affairs at AndreH@aicanada.ca or 613.234.6533 x236.
Over the past year, the AIC Advocacy team has been collaborating with the Ontario Ministry of Finance and the Financial Services Commission of Ontario regarding regulations that govern syndicated mortgages investments. In early March 2018, the Government of Ontario published new regulations that govern syndicated mortgages investments within its jurisdiction. Under Ontario Regulation 188/08 Mortgage Brokerages Standards of Practice of the Mortgage Brokerages, Lenders and Administrators Act, 2006 (MBLAA), mortgage brokers will have to comply with new and expanded rules as of July 1, 2018.
The AIC’s message of our Designated Members being unbiased, trained and qualified professional appraisers resulted in the new regulations stipulating that an appraisal for a syndicated mortgage other than a qualified syndicated mortgage must be prepared by a member of the Appraisal Institute of Canada who is independent and who holds the designation of Accredited Appraiser Canadian Institute. It must also be prepared in accordance with the Canadian Uniform Standards of Professional Appraisal Practice.
The regulation makes a distinction between two types of syndicated mortgages:
1) “qualified syndicated mortgage” which includes property that is used primarily for residential purposes, includes no more than a total of four units, and if used for both commercial and residential purposes, includes no more than one unit that is used for commercial purposes, and not for incurring debt on construction or development of property.
2) “syndicated mortgage” which is essentially a “non-qualified” syndicated mortgage and is everything other than what is defined under a “qualified syndicated mortgage”. These are specifically for non-residential properties – often larger, mix used types of properties and generally are used in the “pre-construction” phase.
For qualified syndicated mortgages (i.e. those for residential properties), the regulation does not specify any particular appraisal designation.
For syndicated mortgages other than qualified syndicated mortgages (i.e. those for non-residential or development properties), as mentioned above, the regulation states that an AACI must do these assignments.
We believe this is a step in the right direction to ensure consumers obtain sufficient information when making investment decisions.
More information here.
On March 8, 2018, the Canadian Securities Administrators (umbrella organization of the country’s provincial securities regulators) published for comment proposed changes to harmonize the regulatory framework for syndicated mortgages in Canada. This is separate and in addition to the recent steps taken by the Ontario Ministry of Finance and the Financial Services Commission of Ontario. A copy of the release can be found here. Under this proposal, issuers of syndicated mortgages would be required to deliver property appraisals prepared by an independent, qualified appraiser.
While the Canadian Securities Administrators would appreciate comments on the entire proposal (found here), they have specific questions including some related to appraisals and they are:
As proposed, an appraisal would be required in all cases where a syndicated mortgage is distributed under the OM Exemption. Should there be exceptions to this requirement? For example, should an appraisal be required if the property was acquired recently in an open market transaction with all parties acting at arm’s length? Public comments are due by June 6, 2018.
As AIC prepares to make a submission, we would like to hear feedback and suggestions from Members. They can be sent to firstname.lastname@example.org
Over the past few years, the AIC Advocacy team has been calling on the federal government to encourage its provincial counterparts to apply the Office of the Superintendent of Financial Institutions Residential Mortgage Underwriting Practices and Procedures (B-20 Guidelines) and Residential Mortgage Insurance Underwriting Practices and Procedures (B-21 Guidelines) to non-federally regulated financial institutions to ensure consistent lending practices across the country and a more stable marketplace. This includes established appraisal requirements.
During the last year, AIC Provincial Association Advocacy teams have also been encouraging their respective provincial governments to do so. In early February 2018, AIC-Quebec sent a pre-budget submission to the Quebec Finance Minister which included the recommendation to apply the above mentioned guidelines to all provincially regulated financial institutions. On March 15, 2018, the Quebec Financial Institutions Regulator, the Autorité des Marchés Financiers, updated its mortgage lending guideline to reflect the OSFI B-20 guidelines.
AIC Advocacy efforts have contributed to governments applying these guidelines or at the very least giving consideration to applying these guidelines. We will continue to advocate to the federal and provincial governments. For any feedback or questions on this, please don’t hesitate to contact us at email@example.com
The Office of the Superintendent of Financial Institutions (OSFI) released draft B-20 Guidelines (Residential Mortgage Underwriting Practices and Procedures) over the summer and sought feedback from individuals and organizations where we took the opportunity to make a submission. On October 17, 2017, OSFI released the final guidelines which amongst other things, does the following:
- In the draft guidelines, OSFI proposed a stress test for uninsured mortgages (down payment of more than 20%) where consumers would need to qualify based on the rate on their contract plus two percentage points. The final guidelines now require the minimum qualifying rate for uninsured mortgages to be the greater of the five-year benchmark rate published by the Bank of Canada or the contractual mortgage rate plus two percentage points.
- The draft guideline proposing that LTV ratio limits are reflective of risk and are updated as housing markets and the economic environment evolve remained intact.
- The draft guideline proposing placing restrictions on certain lending arrangements that are designed, or appear designed to circumvent LTV limits also remained intact.
The final guidelines also included a new process where they encourage Federally Regulated Financial Institutions to maintain and implement a framework for reviewing and challenging assumptions and methodologies underlying valuations and appraisals. We will continue to advocate with OSFI that appraisers need to be included in this process. For more information on the new guidelines, please click here.
AIC President-Elect Peter McLean attended CMHC’s Housing Finance Symposium to hear from government departments and agencies such as Statistics Canada and the CMHC as well as lenders, academia, brokers, municipalities on various housing related issues (data access, mortgage funding, affordable housing, etc).
The Office of the Superintendent of Financial Institutions released draft changes to Guideline B-20 (Residential Mortgage Underwriting Practices and Procedures) for public consultation. Interested stakeholders and the wider public were asked to submit comments. AIC submitted its paper on August 17, 2017 and a copy can be found HERE.
In March 2018, most provinces tabled their 2018-2019 budget commitments. On the invitation of their respective provincial governments, AIC representatives were invited to attend a session reviewing the budget before it was made public in Alberta, Saskatchewan and Ontario.
This was an opportunity for Provincial Associations to know what aspects of the budget could affect its Members before it was made public. It also provided some networking opportunities and visibility.
On February 27, 2018, the Government of Canada released its 2018 Budget and the Appraisal Institute of Canada attended its second straight federal government budget lock up on the invitation of Finance Canada.
This allowed the AIC to review the budget documents before it was tabled and made public by the Federal Finance Minister in the House of Commons. The following commitments and statements relating to our industry were made:
- Investment in Affordable Housing: To encourage a stable supply of affordable rental housing across the country, the Government proposes to increase the amount of loans provided by the Rental Construction Financing Initiative from $2.5 billion to $3.75 billion over the next three years. In total, this measure alone is expected to spur the construction of more than 14,000 new rental units across Canada.
- Holding the Course on Mortgage Regulations: Housing market pressures are easing following the rapid growth in prices and sales in recent years; housing market conditions have become more balanced in Toronto and Vancouver, and their surrounding regions. Going forward, housing demand across the country should continue to be supported by solid job and income gains, but tempered by rising interest rates and recent changes to mortgage underwriting Guideline B-20 for federally regulated lenders (including a mortgage rate stress test for uninsured mortgages)
- Economic Outlook 2018 Indicates that Household Debt is a Vulnerability: High household debt remains a key domestic vulnerability for Canadian consumption and housing activity in the case of a large shock to income, house prices or interest rates.
- Changes to Passive Income Rules for Small Business Owners: If a corporation earns more than $50,000 of passive investment income in a given year, the amount of income eligible for the small business tax rate would be gradually reduced (from 10.5% to 9%). It is proposed that the small business deduction limit be reduced by $5 for every $1 of investment income above the $50,000 threshold (equivalent to $1 million in passive investment assets at a 5-per-cent return), such that the business limit would be reduced to zero at $150,000 of investment income (equivalent to $3 million in passive investment assets at a 5-per-cent return).
- Better Access to Government Procurement: The Government will establish a new electronic procurement platform. This will help Canadian small and medium-sized businesses better access opportunities to work with the Government. Budget 2018 proposes to provide $196.8 million over five years, beginning in 2018–19, to Public Services and Procurement Canada to establish this platform.
Additional details on each of these measures can be found in the 2018 Federal Budget by clicking here. As always, please don’t hesitate to contact us if you have any questions or comments at firstname.lastname@example.org.
Federal Finance Minister Morneau launched Pre-Budget Consultations in November 2017. We asked Members to provide their comments to us via the December 1 communique as we prepared our submission. On January 26, 2018, we sent in our submission that addressed OSFI B-20, B-21 Guidelines, Affordable Housing, Financial Literacy, Mandating Valuation Fundamentals for Investment Portfolios that Include Real Estate and Data Access.
In August 2017, the AIC made a submission to the House of Commons Finance Committee in the context of their 2018 Pre-Budget Consultation. In September 2017, AIC’s President-Elect and Chief Executive Officer appeared before the Committee to present the submission and answer questions. In early December 2017, the Committee tabled its report in Parliament and follows over 400 written briefs being submitted. The AIC’s recommendations were reiterated in the report as part of what measures would help Canadians be more productive and can be read here. These steps ensure federal regulators are aware of our position on certain public policy matters, ensures we are on the radar in terms of real estate issues and continues to build relationships with federal officials.
On August 4, 2017, the AIC made a submission to the House of Commons Finance Committee in the context of the 2018 pre-budget consultation process. We are pleased to announce that the AIC was invited to appear before the Committee to present and discuss our recommendations. Peter McLean, AIC president-elect, and Keith Lancastle, AIC CEO, appeared before the committee on September 20, 2017. Click here to watch the video.
The House of Commons Standing Committee on Finance invited individuals and organizations to submit their comments for the 2018 Pre-Budget consultation process. AIC submitted its paper on August 4, 2017, and a copy can be found HERE.
We are proud to announce that the Appraisal Institute of Canada (AIC) played a role in the development of public policy through the House of Commons Standing Committee on Finance’s (FINA) study on the Canadian residential real estate market.
As previously mentioned, FINA adopted a motion to undertake a comprehensive study of issues surrounding the Canadian residential real estate market with a focus on the impact of the housing market on the Canadian Financial System and challenges surrounding access to residential home ownership. April 13, 2017, the Committee tabled their report in the House of Commons, making it available to the public.
We’re pleased to let you know that the AIC is quoted multiple times in the report. One statement is as follows:
“In order to ensure that no mortgage lender poses undue risk to Canada’s financial system, the Appraisal Institute of Canada advocated the application of Guidelines B-20 and B-21 regarding mortgage and mortgage insurance underwriting practices to all institutions that provide mortgage financing. Furthermore, regarding mortgage fraud, it proposed both that all organizations involved in lending should work together to detect potential fraud, and that on-site appraisals by qualified professionals should occur more often.”
AIC will leverage this position and continue to advocate for our members and help shape public policy in the housing market.
The House of Commons Finance Committee adopted a motion to undertake a comprehensive study of issues surrounding the Canadian residential real estate market with a focus on the impact of the housing market on the Canadian Financial System and challenges surrounding access to residential home ownership.
On February 8, 2017, AIC testified before this committee. To watch it, please click here.
On 14 June 2016, the House of Commons Finance Committee adopted a motion to undertake a comprehensive study of issues surrounding the Canadian residential real estate market with a focus on the impact of the housing market on the Canadian Financial System and challenges surrounding access to residential home ownership.
AIC submitted a brief and can be read here.
The AIC Advocacy team has attended several events from January 2018 – April 2018 as they continue to promote AICs Members.
Over the last few weeks, AIC representatives have been attending symposiums being held by Mortgage Professionals Canada in Toronto, ON (Brampton), Saskatoon, SK, Winnipeg, MB and Ottawa, ON. The month of May will see events in Burnaby, BC, Montreal, QC and Halifax, NS in June. These are great opportunities to hear from brokers and give some visibility/presence for appraisers.
AIC representatives attended the following CD Howe Institute events:
- January 20th, regarding the Office of Superintendent of Financial Institutions Stress Test featuring the Canadian Real Estate Association and the Ontario Real Estate Association.
- April 5th, regarding The State of Canada’s Housing Market One Year Later, featuring speakers from National Bank, the Bank of Canada and the Canadian Mortgage and Housing Corporation.
- April 17th, regarding Big Data, Bigger Problems: Who Owns Your Data?, featuring speakers from three different firms specializing in data management, cybersecurity, privacy and law.
From April 24 to 26th, the Canadian Housing and Renewal Association will hold their congress on housing and homelessness in Ottawa which AIC will attend.
As we informed Members in last month’s communique, the Department of Finance Canada is undertaking a review of the money laundering and terrorist financing legislation and regulations that currently exist. They sought input from organizations in response to a discussion paper they issued that could lead to legislative changes. The paper, which can be accessed here, included sections on “Leveraging Information in the Real Estate Sector” and on “Non-Federally Regulated Mortgage Lenders”.
As appraisers play a key role in the real estate industry, the AIC, with the feedback received by its Members, made a submission and it can be viewed here.
In this calendar year of 2018, several meetings have occurred at the federal level on various issues such as data access, financial literary, OSFI guidelines, syndicated mortgage regulations and more! Here is a glimpse of some of those meetings:
Prime Minister’s Office – AIC representatives met with the Prime Minister’s new economic and housing policy advisor to introduce the AIC and discuss top of mind issues.
House of Commons Finance Committee Member of Parliament Tom Kmiec – MP Kmiec tabled a motion at committee requesting a study on recent changes made by the Office of Superintendent of Financial Institutions. AIC met with MP Kmiec to state our position on the guidelines.
Additional meetings were held with Members of Parliament in February. Please refer to February 2018 activities
On February 5, 2018, the Advocacy Subcommittee had its first ever “Day on the Hill” event where members of the subcommittee met with several Members of Parliament in Ottawa from both the governing party and the opposition to introduce AIC, deliver its position on certain matters and discuss issues. Members met MPs Dan Albas (British Columbia), Francesco Sorbara (Ontario), Majid Jowhari (Ontario), Raj Grewal (Ontario), Sean Casey (PEI), Alaina Lockhart (New Brunswick).
Over the course of 2017, various meetings have occurred at the federal level on various issues such as data access, financial literary, OSFI guidelines and more! Here is a glimpse of some of those meetings:
Prime Minister’s Office, Parliamentary Secretary to the Finance Minister, Finance Minister’s Office, Industry Canada, Finance Canada, Canadian Mortgage and Housing Corporation, House of Commons Finance Committee Members including the Chair, Opposition Members, and more!
The AIC Board of Directors Executive participated in the Canadian Real Estate Associations’ Annual Political Action Committee Days. The three-day event included presentations from federal elected officials such Federal Minister for Families, Children and Social Development Jen-Yves Duclos and the leader of the official opposition Andrew Scheer. There were also panels that included members of the parliamentary press gallery and top political pundits. It was a great opportunity to get an overview of the political landscape in Ottawa and advice on how to approach the current environment to the benefit of our Members.
On December 13, 2017, the Federal Finance Minister announced the details around income sprinkling for the 2018 tax year and beyond. The Federal Government says the revised measures include clear, “bright-line” tests to automatically exclude individual members of a business owner’s family who fall into any of the following categories:
- The business owner’s spouse, provided that the owner meaningfully contributed to the business and is aged 65 or over. In recognition of the special challenges associated with planning for retirement and managing retirement income, the new approach to income sprinkling will be better aligned with the existing pension income splitting rules. This also reflects the fact that a business can play an important part in supporting its owner in retirement.
- Adults aged 18 or over who have made a substantial labour contribution (generally an average of at least 20 hours per week) to the business during the year, or during any five previous years. For businesses with seasonal operations, such as may be the case with farms and fisheries, the labour contribution requirement will be applied for the part of the year in which the business operates.
- Adults aged 25 or over who own 10 per cent or more of a corporation that earns less than 90 per cent of its income from the provision of services and is not a professional corporation.
- Individuals who receive capital gains from qualified small business corporation shares and qualified farm or fishing property, if they would not be subject to the highest marginal tax rate on the gains under existing rules.
For more information on Finance Canada’s release, please click here.
To learn more about the revised tax on split income proposals and how they might impact Members, please visit BDO Canada’s website here to get an overview from their perspective. Members can also watch a webinar that took place on December 15, 2017 here.
Following the comments received from Canadians, including our Members, the federal government made a series of announcements relating to the small business tax proposal they made in July. Among the most significant modifications, the federal government stated it will not be moving forward with the proposed measures to limit access to the Lifetime Capital Gains Exemption and made changes to passive investment limitations. Additionally, they announced their intention to lower the small business tax rate to 10 per cent, effective January 1, 2018, and to 9 per cent, effective January 1, 2019. Our strategic approach to this issue has served us well as the federal government has significantly modified their original proposal and we have maintained our positive relationship to the benefit of Members. For more information on the announcements, please click here
On July 18, 2017, the Federal Government announced proposed changes to three areas of tax considerations for private corporations. These changes include provisions dealing with employment of family members, holding passive investments in a private corporation and converting income into capital gains. To learn more about the Government of Canada’s consultation, please click here.
We understand that several professional organizations are in the process of creating a common front to lobby the federal government on these proposed changes. As the Appraisal Institute of Canada prepares its approach, we sent a survey to our members about whether or not this will affect them.
We continue to monitor this file and finalize our plan of action.
On December 1, 2017, the Federal Court of Appeal upheld an April 2016 decision by Canada’s Competition Tribunal that ordered the Toronto Real Estate Board (TREB) to allow its members to share the sales histories of listed properties online. The AIC believes this is a step in the right direction in terms of data access and paving the way for more open, transparent and reliable databases. For more information on this please click here. However, on December 21, 2017, the Federal Court of Appeal issued an Order directing a stay of the Competition Tribunal’s Order pending the determination of TREB’s application for leave to appeal that order to the Supreme Court of Canada. AIC will continue to monitor this.
In Budget 2017, the Government of Canada provided funding to Statistics Canada to improve housing data through the Canadian Housing Statistics Program (CHSP). On December 19, 2017, Statistics Canada published its first estimates from the CHSP focusing on non-resident ownership for Vancouver and Toronto. It revealed that non-residents owned 3.4% of all residential properties in the Toronto census metropolitan area (CMA), while the value of these properties accounted for 3.0% of the total residential property value in that metropolitan area. In the Vancouver CMA, non-residents owned 4.8% of residential properties, accounting for 5.1% of total residential property value.
Statistics Canada is now working to expand its reach to all census metropolitan areas for Ontario and British Columbia by the Spring of 2018 as well as adding other key variables such as characteristics of owners. They anticipate having data on 5000 subdivisions and aggregates by March 2022.
In late November, AIC participated in a cross-country roundtable with Statistics Canada as they obtained feedback on the CHSP.
In April many members received notice advising that RBC had entered into an additional arrangement with Nationwide Appraisal Services (NAS); under the new arrangement, some RBC commercial appraisal assignments would be moving to a NAS platform. Members were asked to register with NAS in order to continue to complete these assignments for RBC.
In response to a number of member enquiries, AIC quickly reached out to RBC to address a number of areas of potential concern to AIC and our members. RBC has now provided a written response speaking to some of these issues. The response can be found at this link.
AIC will continue to monitor this and will engage in further communications with RBC and/or NAS as the arrangement evolves.
As we head into the summer and continue to advocate on behalf of the Membership, we want to hear from you if you have a particular initiative in mind that you would like AIC to consider. To do so, please send us a message by clicking on the link below.
Additionally, with the launch of the new AIC website, we have revamped the Advocacy in Action webpage and it will be linked to directly from the monthly Communiqué. Advocacy initiatives are grouped by subject and provide a user-friendly method of obtaining an update on any given issue.
-AIC Advocacy Team