As the traditional construction holidays begin in Quebec, the relative calm on construction sites, abandoned by workers for a two-week break, seems to us to be a good time to take stock of the housing crisis. This issue should not be the business of a few days, before and after the 1er July, but rather every day of the year. Indeed, the scenario of 1er July 2024 and that of 2025, it is today that it is written.
And while we are collectively living through this housing crisis, the Central Bank is raising its key rate to 5%. This tenth increase since March 2022 puts additional pressure on the housing sector and can only worsen the situation. An additional burden for an industry already faced with major challenges, attributable on the one hand to structural causes and, on the other hand, to the combination of situational factors of exceptional magnitude and complexity. And in the end, both developers and future owners and tenants will pay the price. The cup was already full, it was thought.
However, what if what we are experiencing this year, described by many as a perfect storm, was only the prelude to a perpetual housing crisis? Optimistic or pessimistic scenario, one thing is certain, the recovery looks complex and difficult.
And the significant drop in housing starts in Quebec, by 48% in the first six months of 2023, according to the most recent data published by the Canada Mortgage and Housing Corporation, clearly announces that the difficulties are only beginning, if the trend is not reversed quickly.
To properly understand the problem of the housing crisis, it is first important to identify its structural causes. Stronger demand than supply, which translates into a housing shortage and, consequently, an increase in prices and a deterioration in households’ ability to pay. Demographic pressure, concentrated around major urban centres, accentuated by a rapid increase in immigration thresholds to reduce the labor shortage, without any real planning to accommodate newcomers.
An outdated and archaic regulation linked to the development of our cities and having demonstrated, over the years, that they were inadequate, inconsistent and costly. Taken together, it contributes to generating delays and costs that are largely unreasonable. To complete the picture, we must add the chronic underinvestment in affordable housing and municipal infrastructure.
The situation was already critical when cyclical factors entered the housing crisis, contributing to its rapid worsening and giving it the appearance of a perfect storm. Rising costs of construction, materials and land. Increase in interest rates and loan conditions. Historic labor shortage in construction. Global pandemic, whose longer-term consequences are still poorly assessed, all this against the background of the climate crisis which will impose major challenges on us.
Rethinking our living environments: a project for the future
Housing is a cross-cutting issue that encompasses infrastructure, transportation, the economy, health, immigration, seniors and homelessness. To act effectively on the housing crisis, it will be necessary to construct an equally cross-cutting response and stop working in a vacuum, each on his own.
We are of the opinion that it is high time to launch a vast project on the importance that should be given to urban development and the redevelopment of certain sections of our cities. We must collectively formulate a cohesive response not only to the housing and housing crisis, but also to the climate crisis and the energy needs needed to get there.
To curb urban sprawl and long solo car journeys that fuel CO2 the climate crisis, it will be necessary to rethink the occupation of the territory by promoting density and the development of local services.
At the very least, we should stop financially penalizing density through the imposition of royalties of all kinds. On the contrary, we should promote it by implementing incentive measures.
Currently, the cumulative effects of the imposition of various royalties and other tariffs are inflating the cost of each housing unit, in sectors intended for densification.
The diversification of city revenue sources, municipal regulations, permit delivery processes and consultation mechanisms seem to us to be levers that should be part of the discussions.
The energy issue will also have to be addressed. Indeed, the needs will be gigantic in green energy for the electrification of transport, to decarbonize existing buildings, for the development of our economy and the creation of wealth, and of course, for the development of our cities and our homes…
If nothing is done quickly, perhaps the worst is ahead of us and it will be difficult to reverse the trend. However, the time is no longer for dithering. There is an urgent need to act now, governments, financial institutions, players in the construction and real estate industry, citizens, all together, to develop innovative and sustainable solutions.