The solution to tackling the housing crisis does not lie in less regulation to stimulate residential construction, suggests a new study from the Institute for Socioeconomic Research and Information (IRIS). Despite numerous constraints, the real estate industry in Quebec has “been doing very well” for the last 20 years, maintains the organization.
In its report published Monday, IRIS questions the discourse according to which the current crisis is explained by excessive regulatory barriers at the municipal level slowing down construction starts and causing an underconstruction problem, or by demographic issues.
Rather, the organization paints a picture showing that residential development has had the wind in its sails in Quebec, but mainly in the condominium and single-family sectors.
“Far from having been marked by a deficit in private construction and investment, the last two decades during which the housing crisis has grown have been characterized by strong growth in the real estate industry and, according to sectors of activity, by historical or very appreciable income levels,” write the authors of the study, Louis Gaudreau and Catherine Héon Cliche.
The two researchers associated with IRIS rely on various available statistics. They mention, among other things, that private investments have experienced “almost uninterrupted growth” since 2003.
In 2022, the amount, which includes both new construction and renovation, stood at $29.4 billion, more than double the amounts recorded at the end of the 1990s, the study indicates.
“Starting in the early 2000s, there really was a takeoff in investment in residential construction,” says Mr. Gaudreau in an interview. A takeoff that also stands out compared to previous decades. »
He attributes this trend to “the explosion of the mortgage market”, with outstanding loans amounting to $2,000 billion in 2023, and to “new players who have arrived with a lot of money to invest”, i.e. funds investment.
No shortage of condos
IRIS also debunks the idea that residential construction has had difficulty keeping up with population growth. The organization argues that the number of new housing units completed in at least four large cities in Quebec (including Montreal and Quebec City) has either been greater than or roughly equivalent to the growth in the number of households between 2001 and 2021.
“That does not mean that because the population is expected to grow in the coming years and decades that we could not, if we maintain current rates, end up with a problem of lack of housing,” specifies Mr. Gaudreau .
Although investments have reached record highs and supply has kept pace with population, IRIS notes that residential affordability and access to rental housing, particularly for low- and moderate-income households, is increasing. have deteriorated over the years.
Vacancy rates have fallen to low levels in several of Quebec’s large cities. And average rents have undergone increases of between 61 and 112% in the last 20 years, according to data presented by IRIS.
“When we built in quantity, we did not build to meet the needs which were priorities. And we have especially underinvested in social housing, affordable housing,” maintains Mr. Gaudreau.
“There is no shortage on the condo market. There isn’t that much of a shortage in the single-family home market either. We are no longer in a context of a shortage of rental housing, and even more so, of affordable rental housing,” argues the UQAM professor.
The IRIS report mentions that the majority of investments were injected for the construction of condos or single-family houses (between 54 and 69% depending on the city). Rental received between 29 and 44% of the sums, while the share for social housing was between 2 and 5%.
“This industry has maintained its production model for 20 years by favoring certain residential products which have not managed to respond to the crisis,” underlines Mr. Gaudreau.
Public investments needed
These findings, which show “flourishing activity”, call into question the relevance of giving more room for maneuver to the industry as it demands, estimates IRIS.
And if construction is currently experiencing a slowdown, the organization associates this situation more with cyclical factors, such as rising interest rates and material supply problems, than with the regulatory framework.
IRIS invites us to “rethink the model on which residential development is based”. According to Mr. Gaudreau, public investment is necessary in order to protect housing from speculation and thus reduce rents.
“To ensure a large number of developments, then sufficient to meet the needs for affordable housing, it will be necessary to develop housing decommodification policies which are of greater scope, that is to say which aim either to move away from housing existing ones or build new ones outside the market,” he explains.