House prices: beyond the big picture

Just like every lease renewal period, the rise in housing prices is front and center. Mindful to analyze the issue from all angles, we've taken a look at articles that shed different light on the subject.

Published in the Journal de Montréal, this opinion piece entitled "Comment l'administration Plante contribue à la hausse des prix du logement" (How the Plante administration is contributing to the rise in housing prices) is signed by Daniel Dufort, President and CEO of the Montreal Economic Institute. Right from the introduction, he gets to the heart of the matter: "Conservative leader Pierre Poilievre's harsh words about Montreal mayor Valérie Plante, whom he described as incompetent, have caused a lot of ink to flow". He continues, "In the most direct way possible, the City of Montreal has contributed to restricting the supply of housing by hindering the development of thousands of units throughout its territory". 

He points out that from the time the Plante administration took office in 2017 until today, "we have counted 23,760 housing units whose development has been hindered by decisions made at City Hall. And these are just the files that made the headlines". The case of the Proment à L'Île-des-Sœurs project, which "was initially slated to include a total of 37 floors of condos and was located just a stone's throw away from an REM station", is cited. Despite citizen support - evidenced by a 700-name petition - and the favorable opinion of the Office de consultation publique de Montréal, eleven floors were cut from the project by the Plante administration, which also delayed its development for more than two years.

Among the obstacles to construction, the author points to bureaucracy. "If we want to curb price rises, the obvious solution is to build more. But City Hall prefers bureaucratic tricks instead. The result? Even the Plante administration's bylaw that was supposed to promote affordability, the famous 20-20-20, has instead become a tax on the development of new housing representing up to $10,535 per door," he writes. "Given this choice, you'll understand that almost all developers choose to pay the tax and pass it on to potential buyers or tenants."

This other text, published on the 98.5 website, revisits the new report from the Canada Mortgage and Housing Corporation (CMHC), confirming that "the housing crisis is not only affecting Montreal, but the entire province". Francis Cortellino, the economist responsible for market analysis in the Montreal region at CMHC, told Paul Arcand. "The vacancy rate has bottomed out for Canada at 1.5% in 2023," he points out. 

In Quebec, with a vacancy rate of 1.3%, you'd have to go back two decades to find such a low percentage. "As a result, we're also seeing record rent increases. For example, for a four-and-a-half-bedroom apartment in the province, we're talking about an 8% increase, which is once again an unprecedented level since at least the 1990s," observes Mr. Cortellino. He adds that young people are staying renters longer. "Supply is increasing, but demand is too strong. It's very difficult for young households to buy that first house or condo," notes the economist.

Finally, Le Devoir's article "Hausses de loyer à géométrie variable d'un océan à l'autre" (Rent increases variable from coast to coast) takes a look at the situation across the country. "(...) many Quebec tenants are surprised these days at the increases their landlords are demanding: 63% here, $200 there... If landlords in Quebec have the right to demand such amounts, tenants also have the right to refuse them - unlike the norm in half of Canada, where landlords can demand any increase they like, without tenants having the opportunity to contest it," it states.

In Alberta, Saskatchewan, Newfoundland and Labrador, Nunavut and the Northwest Territories, there are no rules limiting rent increases. Tenants can either accept the increase at renewal or refuse it and move out. "According to CMHC, rents for 4 ½-unit apartments in Calgary rose by an average of 14.3% in 2023. This was the highest increase among Canadian cities in 2023," mentions the text.

It goes on to point out that in New Brunswick, the rent increase limit is determined by the market price, and that Newfoundland and Labrador is "the only place in Canada that allows a landlord to evict a tenant without having to provide a reason".

Others opt for capped increases. "In Manitoba, allowable increases fluctuate largely with inflation, at 3% this year. However, as soon as the cost of a dwelling exceeds $1,615 per month, it escapes the rule and its landlord can increase the rent at will," we read. While Ontario has had a 2.5% cap for the past two years, in British Columbia it was 2% in 2022 and will be 3.5% in 2024. In these provinces, landlords who have invested significant sums in the maintenance or renovation of their buildings can demand increases above the limit if they request authorization from the authorities before giving the notice of increase to the tenant.   

The article notes that in Quebec "the process works in the opposite way: the landlord can submit the increase of his choice without the approval of the Tribunal administratif du logement (TAL). If the tenant feels wronged and the two parties fail to reach a compromise, the landlord must nevertheless refer the matter to the TAL to justify the increase, which settles disputes on the basis of a calculation grid updated at the start of each year". However, dwellings built 5 or less years ago are not subject to rent control, so the tenant cannot contest the requested increase.

In conclusion, "In Quebec, we have a system that has a certain balance between housing demand and supply," says François Des Rosiers, full professor at Université Laval's Faculty of Business Administration. "(...) the system is designed to encourage negotiation between the two parties. The landlord has the responsibility of having to defend his case at the TAL to show that the rent he is asking for is reasonable. This provides an incentive to keep rents relatively low, but what we've also observed is that it accelerates the deterioration of the housing stock. Currently, the conditions required of landlords to set rents discourage investment, since the return is low. It takes about 40 years for a landlord to recoup the capital invested."