December press review

This press review of the last month of the year focuses on three topics: the solutions put forward to counter the housing crisis, the impact of the increase in property taxes on owners and tenants, and the effects of inflation on the housing sector.

By Corinne Laberge

 

The housing crisis: players in solution mode

The Canada Mortgage and Housing Corporation (CMHC) estimates that 620,000 additional housing units must be built by 2030 in Quebec to restore affordability. However, inflation, rising interest rates, high material costs and labour shortages are not conducive to achieving this goal. "From January to September 2022, housing starts for conventional rental apartments in Quebec decreased by 5.3% compared to the same period last year," notes Jean Sasseville in this article published in Les Affaires. "Various government policies must be put in place and investments must be made from different sources, both private and public. The magnitude of the challenge is such that the private sector must participate: the governments cannot do it alone," emphasizes Aled ab lowerth, assistant chief economist at CMHC, quoted in an article in the Journal de Montréal.

This mobilization around the housing crisis is encouraging. Indeed, the Communauté métropolitaine de Montréal (CMM) has moved forward with its first housing policy. "Since 2011, the sale price of housing in Greater Montreal has increased by 90%, while household income has only increased by about 40%. As for rents, the rates of increase over the past three years are the largest observed in nearly 20 years," states the CMM document, as reported by La Presse. The housing policy aims, among other things, to "reduce by a quarter, by 2031, the number of households in core housing needs," to "increase the pace of housing starts to more than 35,000 units per year," and to "re-establish a 3% vacancy rate in the rental market," the article said. A step of the CMM greeted by the Association of the professionals of the construction and the housing of Quebec (APCHQ) in this release.

In the neighboring province, "The 2022 Act to Accelerate the Construction of More Housing has received Royal Assent. It supports the government's initiatives to alleviate the housing supply crisis and build 1.5 million homes over the next 10 years," announced this release from the Ontario newsroom.

Municipal budgets tabled: homeowners face big bill

The municipal tax increase will not be a small one. "At 4.1%, the increase in Montrealers' "tax bill" will be twice as high as last year," reads this Radio-Canada article. In Laval, the property tax bill will jump by 4.8% for owners of single-family homes next year and by 3.6% for owners of condominiums, reports La Presse. In Quebec City, the residential tax increase is set at 2.5%. "Single-family homeowners in Quebec City will face a tax increase of about $75 in 2023, the highest in 15 years," says Le Journal de Québec.

The situation is worrisome for owners, but also for tenants, who "will also pay for this measure to offset the increase in expenses related to inflation," recalls this article from Noovo info. The director of public affairs of CORPIQ, Marc-André Plante, intervenes in this text, affirming that it is terrible news for tenants, "particularly those most vulnerable who are the most fragile in the inflationary context which we are experiencing".

Inflation and its effects on the housing industry

The price of everything has gone up and inflation is not sparing housing. "Statistics Canada tracks the cost of a range of goods and services. Each month, the prices of what you buy or consume on a regular basis are compared to what they were a year earlier in the Consumer Price Index, an indicator of inflation," explains this CBC article. It details the percentage increase in the cost of a selection of products compared to the previous year. For the "Housing" component, the increase is 6.9%. "By beginning to gradually raise its policy rate in March 2022, the central bank slowed the market. Higher borrowing rates have discouraged some buyers, and prices have begun to fall as a result of pent-up demand. However, it will take 12 to 24 months for the Bank of Canada's intervention to have its full effect on housing prices," he says. However, according to economics professor Dalibor Stevanovic, who is quoted in the text, "this will not solve the problem of housing availability. It may even make it worse. Yes, there is a downward effect on prices. But if it causes the housing shortage to worsen or continue, it may also keep rent prices higher," he notes. In addition, building construction is being slowed by the rising policy rate and the supply of new housing to the market is being reduced.

In this other article published by Le Devoir, the journalist begins his lead with: “Highly indebted, Canadians are particularly vulnerable to the current rise in interest rates.” Adding further that Canada is one of the countries where households are most indebted. “This is due in part to the sharp rise in house prices, which are also among the highest in the world relative to families' disposable income. However, the accelerated rise in interest rates is not only putting a solid brake on economic strength, but also increasing the cost of this household debt and, in recent months, has caused the value of the homes on which their debts are based to plummet,” we summarize.

At the time of writing, the Bank of Canada was raising its key rate by 50 basis points. The rate is now at 4.25%, its highest level since 2008.