Published August 16, 2024

By Joel Goldenberg
The Suburban

Montreal more heavily regulates housing than 73 percent of Canadian cities and provinces surveyed by the Canada Mortgage and Housing Corporation, resulting in an eroding of affordability and increases in housing prices, says a new study released by the Montreal Economic institute.

“The more regulation there is, the longer it takes and the more it costs to build new units, thus making housing more expensive and harder to find,” stated Vincent Geloso, senior economist at the MEI and author of the study. “Contrary to what the Mayor (Valérie Plante) claims, the market is capable of responding to demand; the city just needs to allow it to play its role.”

Geloso adds that the study also shows that “the higher the index of regulation is, the higher the ratio between housing prices and income tends to be.

“For example, Greater Vancouver has the highest index of regulation in the country,” the study says. “A home there costs 14.18 times the income of the people who live in the area. In contrast, Greater Edmonton has the lowest index of regulation. The price of a home there is around 4.35 times the income of its residents. Montreal is in the middle of the pack in terms of regulation, and housing costs residents around 6.18 times their income. Between the 1970s and the mid-2000s, however, the price of a home was around three times the income of Montrealers.”

Geloso also stated that “the increase in the time required to obtain a building permit clearly shows the loss of flexibility resulting from regulation.

“When it takes an average of 540 days to obtain the authorization to build in the Mayor’s borough, obviously it’s the administration, not the market, that’s to blame.”

Other points in the report:

• “If prices are rising, as they currently are, it is because demand is growing faster than supply. However, this can be the result of ill- advised government policies that prevent supply from increasing. In such a case, the problem is not the market, but rather the obstacles put in place that are hindering its proper functioning.”

• Regulatory obstacles include: “density limits, parking-to-customer ratio rules for retail spaces, overly strict zoning regulations and restrictions on building characteristics (height, dimensions, materials), mandatory permits, property taxes, and rent control.”

• Such obstacles “increase housing construction costs, and maintenance costs once units are built. This reduces the incentive to build new units, thus lowering housing starts. Ultimately, this leads to a permanent increase in the cost of housing, all else being equal.” As well, “they make supply more rigid, meaning that it responds more slowly to increasing demand. Thus, when there is a demand shock, such as a rapid increase in the size of the population, normally temporary price increases last longer. Third, these regulations tend to affect certain kinds of housing more than others, such that the remaining market orients it-self to serve a different clientele. In general, what we see is a reorientation toward richer households.”

Scroll to Top