CMHC guarantee on mortgage insurance putting taxpayers at risk, says OECD

OTTAWA – The Organization for Economic Co-operation and Development is warning that Canadian taxpayers are vulnerable to a serious correction in the country’s overheated housing market.

In its first major review of the Canadian economy in two years, the international economic body says Ottawa should rethink the way it insures borrowing in the real estate market through Canada Mortgage and Housing Corp., saying it exposes taxpayers to more risk than necessary.

It says the federal government should limit the percentage of a mortgage CMHC can insure, rather than guaranteeing 100 per cent of the loan.

Among other recommendations, the OECD says Canada should improve its skills training because shortages in some sectors in resource-rich Alberta and Saskatchewan could limit economic growth.

The report is also critical of Canada’s environmental record, calling the expansion of the oilsands in Alberta the principal reason the country won’t be able to meet its 2020 target on reduction of greenhouse gas emissions. It recommends that Canada increase the pricing on carbon emissions, noting that currently it has one of the lowest effective tax rates on carbon among industrialized countries.

Generally, the OECD says Canada’s economy is doing relatively well with expected growth rates of 2.5 per cent this year and 2.7 per cent in 2015. But it warns that inequality is rising and that housing in some large cities, such as Vancouver, has become too expensive for many.