Accommodation in Montreal is becoming more and more expensive, so finding accommodation within your budget has become a daunting task. Although we are not at the same stage as Vancouver, the average rent for a 4 ½ has passed the $1000 per month mark in 2022.1 Compared to 2021, this represents an increase of 5.4%.
The Montreal municipal administration blames everyone. Mayor Valérie Plante has in turn blamed Airbnb, real estate speculators, entrepreneurs who do not offer the right products.
Mayor Plante forgets to point the finger at another culprit: the City of Montreal itself and its public policies, which play a direct role in the increase in housing prices.
Through taxes, development fees, dictates on the types of housing and various regulations, the municipal administrative apparatus considerably increases the risk and the prices to be paid when building for developers, which has a direct impact on the selling prices of the units and the rents charged.
And who says excessive regulation says disincentive to build more. The supply of housing is therefore directly limited, which prevents prices from falling.
Issues during construction
The logic is clear: if supply is not renewed and does not grow as quickly as demand, the market equilibrium price of housing – whether rental or purchased – increases. To restore affordability, developers must be allowed to build more.
An example of constraints contributing to the increase in costs is the famous “20-20-20” regulation put in place by the Plante administration.
In short, the “20-20-20” by-law requires developers to include certain types of housing preferred by the municipal administration in their projects, otherwise city officials will reject their permit applications. We are talking here about a minimum of 20% social housing, 20% affordable housing and 20% so-called “family” housing in any project with more than five housing units, or an equivalent financial contribution to the City’s coffers.
Whatever the nobility of the City’s intentions, this by-law is far from “ensuring a better supply of affordable housing”, the desired objective.
In effect, promoters have two options.
The first is to incorporate the dwellings in question into their projects, even if they do not at all meet the needs of potential tenants or owners. Take so-called “family” housing, for example, which must have a minimum of three bedrooms. This results in student housing projects which, in order to meet regulatory requirements, must include at least 20% large 5 ½, although the clientele is looking for small affordable single units instead.
The second option, which applies to the 40% social and affordable housing, is to pay a significant compensatory sum to the City. For example, for the Mansfield project of 225 housing units downtown, the share requested by the City is up to $2.3 million, or more than $10,000 in additional costs per unit. It will be understood that this invoice is reflected in the sale price.
And these are just the direct cost implications associated with a single Montreal housing policy. Added to this are the indirect costs related to the City’s seemingly arbitrary decisions in approving certain projects.
Another example
Let’s take the example of the Evolo Nex tower project, from Proment, to L’Île-des-Sœurs. Despite a citizen petition in support of the project, the favorable opinion of the Office de consultation publique de Montréal and the proximity of a REM station, the municipal administration chose to cut 11 floors from the project. We could also mention in passing the Square Children’s project where, following a dispute, the City chose to punish the developer by increasing the maximum height to four floors, against the 20 initially planned.
The direct effect of these policies is both to limit the supply of housing and to increase the cost of construction, two realities that are diametrically opposed to housing affordability.
If Mayor Plante really wants to help Montrealers find affordable housing, she and her administration will have to look in the mirror before blaming the first comer.