CMHC Report: Despite a difficult market, rent increases remain moderate

Montreal, January 31, 2024 - Rent increases are still relatively moderate, given the sharp rise in costs for landlords, squeezed by high interest rates and high inflation regarding taxes, maintenance and renovation expenses. CORPIQ notes that vacancy rates are low throughout Quebec, a situation that calls for a government response in terms of housing construction and legislative flexibility.

Landlords absorb a large portion of the cost increases

Property owners have been forced to absorb cost increases that come from everywhere and are beyond the control of Quebec landlords. Over the past few years, municipalities have raised taxes sharply, insurance premiums have soared, and the cost of materials and labor for maintenance and renovation has continued to rise. All these factors are driving the rental sector into a downward spiral that, despite rent increases, leaves no room for profitability. In addition to all of this, in 2023, a sudden rise in interest rates had a direct effect on monthly mortgage payments, leaving many landlords in turmoil, short of cash. Pressure on rental prices is therefore significant, but generally speaking, a majority of owners have absorbed a good part of the rise in costs. 

 

5.6% increase on the island of Montreal

The latest CMHC report reveals rent increases of 5.6% on the island of Montreal, while in the metropolitan ring, increases were higher. In Quebec City, increases remain at 4.8%, slightly higher in comparison to the previous year.

Rents are therefore fairly well aligned with the 6.5% growth in the incomes of social assistance, alimony and pension recipients, who were therefore sheltered from inflation in the rental sector.

With the majority of units rented at less than $1,000 a month, Quebec's housing stock remains very affordable, with rents well below those observed in the rest of Canada. The proportion of renters paying less than $1,000 per month is 60% in Montreal, 64% in Quebec City and 79% in the rest of Quebec.

 

The impact of municipal taxes on rent increases

There are no miracles: at the current rate of tax and insurance increases, rent hikes are inevitable. "Landlords simply act as intermediaries between municipalities and tenants by including taxes in the rent. Tenants do not receive a tax bill, but are directly affected by the tax increases that are beginning to weigh more and more heavily on rents. Landlords often find themselves having to absorb part of the tax increases themselves, which makes it really difficult for everyone," explains Benoit Ste-Marie, General Manager of CORPIQ. 

 

The urgent need to build and encourage long-term ownership of rental properties

The housing shortage throughout Quebec is a real problem. More than 100,000 housing units are needed in the Quebec market right now, and 600,000 more than regular construction would have generated by 2030.

The solution is to set up a regulatory and fiscal framework that encourages the renovation of existing housing stock and the massive addition of new units. For the second year running, housing starts are particularly weak. Governments will have to support an accelerated revival of housing construction throughout Quebec.

As for the regulatory framework, the Quebec government will have to do more to restore balance and confidence. In addition to the measures announced, we are in favor of relaxing the provisions around Section G of the lease and improving investment conditions for the maintenance and renovation of the rental stock. Benoit Ste-Marie points out that "as long as the rental sector remains unprofitable, thousands of units will leave the market every year, whereas on the contrary, more should be added. The example of the rental condo sector is conclusive, with thousands of rental condos being put up for sale and leaving the rental market for lack of profitability. A similar phenomenon is also occurring in the plex sector: in the current climate, there is less and less interest in renting, and many owners are losing money month after month.   

 

About CORPIQ

A non-profit organization bringing together 30,000 owners and managers who own nearly 500,000 rental units and condos, CORPIQ has been the largest association offering services to landlords for over 40 years. Quebec landlords provide housing for 1.3 million tenant households, and seven out of ten of them own a duplex or triplex. 

 

Information and interview requests :

Benoit Ste-Marie
CEO - Corporation des propriétaires immobiliers du Québec

514-249-1691

E-mail: olbell@corpiq.com