In a letter of opinion published on June 28, 14 mayors called on the Government of Quebec to establish a rent registry as a solution to ensure the affordability of rents. Obviously, their claim follows a political rather than an economic logic.
Currently, the demand for housing is greater than the supply. This creates a scarcity that helps push rents up. Inflation in construction costs and the rise in mortgage rates are the main obstacles to increasing supply to rebalance the market.
These mayors said: “We need solutions to stop inflation”. Good idea. Have they thought of relaxing their myriad regulatory requirements to build, which accentuate the deterioration of affordability? If housing is their real priority, why don’t they make better budgetary choices in order to slow down the inflation of their municipal taxes, which are rising faster than general inflation?
Over the past 20 years, the rate of increase in municipal taxes has almost always been higher than that of inflation (except in 2021, an election year and during which the Government of Quebec transferred 800 million to them for the impacts of the pandemic, as well as in 2022-2023, when the inflation rate jumped).
It is convenient to use real estate owners as a cover to pass on these taxes to the rents, then to denounce that these same rents are too expensive. The seniors in our residences do not have incomes that increase at the rate of taxes and the costs inherent in maintaining an RPA in operation.
In economics, everyone knows that the more constraints you impose, the more supply you scare away, the more scarcity you accentuate, the more prices rise… Behind their speeches, the mayors know it too. A rent register to counter excessive rent increases? Proponents of this option do not know what an abusive rent increase is; they look at the change in the rent only during the move rather than over the long period during which it rose less quickly than inflation.
More than 500 residences for seniors (RPA) have closed in Quebec for five years. For the majority, the income/expense business model was simply no longer viable. Seniors in some regions are now less well served. However, Quebec has a population of seniors which is increasing sharply and which requires more of these precious services offered by these RPAs.
Very many seniors pay rents that are significantly below the value of the unit they live in and the services they receive. This can be explained by the fact that they have lived there for several years, because the managers of residences are aware and resigned to their inability to pay more, also because close human relations develop in RPA, which implies put the calculator aside. It’s admirable, but these RPAs end up being loss-making.
Establishing a rent register to allow new residents to benefit from the old rent, which had not kept up with inflation, is to want to control a price without being the least interested in the evolution of costs. This would certainly have the effect of accelerating the closures among the 1,467 RPAs that remain in Quebec and scaring away anyone who was still thinking of opening one. Unless families keep their elders with them, the lack of residential units will cost much, much more to governments, at all levels, and therefore to taxpayers.
The solution is obvious: supply and demand must be rebalanced by stimulating the development of new real estate projects, RPAs and apartment buildings, using economic tools and administrative simplification available to the Government of Quebec and municipalities. One should not opt for defensive measures causing the opposite effect.