Quebec’s housing industry heavyweights are demanding that François Legault’s government stop imposing the provincial sales tax on all new rental property construction as soon as possible, as is Ottawa.
“If we do not act quickly, there will be capital flight in Quebec, which is likely to worsen the housing situation,” warns the executive director of the Urban Development Institute (IDU), Isabelle Melançon. For a government that wants to be nationalistic and constantly tries to compare itself to Ontario, this is a risk that should worry them.”
The next economic update, announced by Finance Minister Éric Girard for November 7th, would, in his view, be the perfect opportunity to send a strong signal to the industry that the government really wants to tackle the housing crisis.
Quebec is lagging behind
In mid-September, Prime Minister Justin Trudeau announced his intention to exempt all new rental property construction in Canada from GST, while encouraging his provincial counterparts to do the same.
Several of them, including Ontario, British Columbia, Nova Scotia and Newfoundland, have now announced that they will follow in the federal government’s footsteps.
However, unlike them, the Quebec government remains cautious, preferring to claim that a QST holiday is a costly measure that would have a negligible impact on tenants.
Risk financing
“Be careful,” replies François Pelchat, vice-president of Immostar, a major real estate company in Quebec that operates in almost all regions of the province.
“The majority of my investors are mutual funds from the Maritimes, Ontario and Quebec. Everyone is looking for the best return on their investments, he says. If a project promises 13% cost savings at the start just because it’s in Toronto or Vancouver, where do you think the investment will be?
Mach Group CEO Vincent Chiara thinks no less. He warns the CAQ government of the real danger that real estate investment trusts will divert their attention from Quebec under these conditions.
“Without funding, how are you going to get Quebec to reverse the housing crisis?” he asks, adding that a QST exemption would represent only a small portion of what needs to be done to truly revitalize housing in the province.
To restore balance between supply and demand, the Canada Mortgage and Housing Corporation (CMHC) estimates that more than 860,000 units should be built in Quebec by 2030.
By the end of 2023, only 37,000 housing units will have been built in Quebec, according to the Association of Professionals in Housing Construction of Quebec (APCHQ). However, in order to achieve the goals set by the CMHC, this construction pace should be three times more important.