Press review of late February

Our end-of-month press review compiles useful information for anyone involved in the residential rental real estate industry.

By Corinne Laberge

 

Stakeholders develop solutions to the rental housing challenges in Quebec

As part of its special report on rebalancing the residential real estate market, Les Affaires has published a three-part series on the big issues of the day. The first article in the series gets straight to the point.

It opens with: “Quebec’s rental market is really struggling. Vacancy rates have been dropping steadily across the province in recent years, as has the number of new units being built. The current pace of housing starts would have to double to give the market some breathing room, but several obstacles make that difficult.”

The article notes that “between 2017 and 2021, the vacancy rate simply crashed in the province’s 10 largest cities.” In 2017, six of these cities had a vacancy rate above 3%. By 2021, however, only Montreal had a rate above 3% (3.6%), followed by Quebec City (2.8%) and Laval (2.2%). The seven other cities saw their rates fall below 2%.

And the situation did not improve last year: “The 2022 figures released by Canada Mortgage and Housing Corporation (CMHC) at the end of January do not show any positive signs, with rates in Montreal, Quebec City, and Gatineau at 2.0%, 1.5%, and 0.8%, respectively.”

In an economic downturn, and with the Association des professionnels de la construction et de l’habitation du Québec (APCHQ) forecasting “a 32% decline in the number of rental housing starts in 2023,” there is cause for concern.

Marc-André Plante, Director of Public Affairs and Government Relations at CORPIQ, notes that it is very difficult for a contractor to build a dwelling for less than $350,000, and it is impossible to set the rent at $800 a month. Mr. Plante says, “Even setting it at $1,500 is a challenge. That’s too steep a rent for what people can pay. The investment risk is too high, so contractors stay away.”

In terms of solutions, “the way that rental real estate works in Quebec needs to be reformed,” he says, stressing that action is urgently needed: “The time is not one minute to midnight—it’s one minute after midnight. Everything we don’t do now will affect what we have to do in the years to come. [...] We are facing a number of red-flag issues right now, with supply chain disruptions, labour shortages, bureaucratic red tape, and municipal urban planning regulations. There are a lot of things that need to be done in Quebec right now, and a lot of work that needs to be done on the ground that isn’t being done.”

Solutions are also the focus of the second article, which looks at how to rebuild the real estate industry. With CMHC estimating that 620,000 additional housing units and properties will need to be built by 2030 to restore affordability, Maxime Rodrigue, President and CEO of the APCHQ, believes that “the industry needs to sit down quickly and implement an action plan.” Regulations need to be reviewed, in particular the Act respecting labour relations, vocational training and workforce management in the construction industry (Act r-20). “It needs to be adapted to the specific needs of today,” says Mr. Rodrigue. “More workers must be able to enter the industry.”

The APCHQ and CORPIQ suggest “creating programs that provide financial support to contractors so that they can maintain the pace of housing starts.” The article highlights several options, such as revising GST and QST refunds, as suggested by the APCHQ, offering financial incentives to municipalities to build a minimum number of rental units, as mentioned by Mr. Rodrigue, and harmonizing existing housing affordability programs.

The third and final article in the series looks at the obstacles to construction in the rental housing industry. It says, “The various stakeholders interviewed by Les Affaires noted that the problems are linked to both structural issues and the current economic climate.”

These problems include the increase in the key interest rate, which is pushing up the cost of financing projects, and the new tax imposed by some municipalities on multi-unit residential buildings. “We are being asked to increase density, but the taxation is unfavourable,” says Mr. Plante. “We are told that rents are expensive, but these taxes drive up costs. If densification is a priority, buildings with 20 units cannot be taxed more than those with four units.”

Delays that “have become the norm for contractors,” land scarcity, and construction industry regulations, as well as inflation-induced cost increases, supply problems, and an increasingly scarce and expensive labour force are all obstacles that do not encourage investors.

Housing scarcity will slow down move-outs, and some cities are charging fees for the construction of new housing

An article in Le Nouvelliste entitled “Renouvellement de bail : ce n’est pas le temps de déménager” (“Lease renewals and why it’s not time to move”) reports on the situation in the Mauricie region. The introduction states that “with a vacancy rate of around 0.9% in Trois-Rivières and 2.3% in Shawinigan, available housing is scarce.”

Mr. Plante of CORPIQ points out that barely 10% of tenants decided to move out last year. He told Le Nouvelliste that he “expects this figure to be in the same range again this year, if not even lower.”

According to Mr. Plante, rent increases are inevitable. Faced with these increases, Marie-Ève Croteau, Communications Advisor at the Office municipal d’habitation de Trois-Rivières, warns of the need for caution: “Before, when our rent went up, we thought that we could find something cheaper elsewhere. But now the market is getting tougher.”

Lastly, La Presse published an article by André Dubuc on the tax soon to be imposed by cities on new housing. “One investor found out the hard way: The fee to obtain a building permit will rise from $5,000 to $35,000 for a six-unit building in Vieux-Terrebonne,” the article states. “With some exceptions, Terrebonne will charge builders $5,000 per unit. In Brossard, the fee is $3,527 per unit. In both cities, the fee is due when the building permit is issued.”

Let’s end with this quote from Jean-Philippe Meloche, Professor and Director of the École d’urbanisme et d’architecture de paysage at Université de Montréal: “It’s easier to make citizens who don’t exist pay taxes than to make citizens who do exist pay taxes, because citizens who don’t exist don’t vote.”