Much has been made of the recent amendment proposed to Bill 31 in Québec’s real estate legislature. Recent developments were greatly highlighted by industry expert Anthony Arquin. His insights shed light on a potential “superpower” to be granted to Québec municipalities that could profoundly influence housing development projects. As a real estate professional, we are asking if it goes far enough?
This emergent amendment, currently under parliamentary review, could empower municipalities for a five-year period to approve housing projects that would otherwise contravene existing urban planning bylaws.
The criteria for such authorization are specific: the construction must involve at least three units, and either the project is predominantly composed of social, affordable, or student housing, or it is situated in a municipality with a population exceeding 10,000 and a rental vacancy rate below 3%.
This latter condition speaks volumes, as it encapsulates most major cities within the province, thereby potentially expediting the development of a significant number of housing units.
Crucially, this legislative shift aims to bypass the traditionally onerous referendum approval procedure, notorious for its length and cost, which has stymied numerous developments in the past. While a public consultation meeting would still be mandatory, the removal of the referendum barrier could dramatically accelerate project timelines.
The implications for commercial real estate investors are manifold. This “superpower” could unlock opportunities for rapid development and investment in residential projects, particularly in high-demand urban centers and spur much needed supply on the market.
For investors, this could mean a faster turn-around on investments and an influx of available housing stock to meet growing demand and reverberate across rental and property prices.
However, municipalities would retain the authority to impose additional conditions. This caveat introduces an element of uncertainty; the ease of the development process depending on these stipulations and the efficiency of municipal administrations which could vary greatly across the province. This same level of uncertainty would also create market divergence and opportunity across regions for investors.
The prospect of municipalities wielding this new power presents a dual-edged opportunity: the potential for swift project approval and the challenge of navigating new municipal requirements.
Incorporating Arquin’s perspective with what we already know of the legislative details of Bill 31, the landscape for commercial real estate investment in Québec is poised for change.
Let’s dive deeper into some of the details announced so far:
The $1.6 billion pledge for 8,000 social and affordable housing units over five years, as outlined by Finance Minister Éric Girard, is deemed insufficient by industry experts like Isabelle Melançon of the IDU and Paul Cardinal of the APCHQ. They argue that these measures scarcely scratch the surface of the estimated 860,000 additional units needed to restore affordability by 2030, as projected by CMHC.
The response also highlights the omission of any regulatory progress or direct action to tackle the soaring construction costs, which have escalated by 40% since the pandemic onset.
Moreover, the decision not to abolish the Québec Sales Tax (TVQ) on new constructions, contrary to federal or Ontario practices, as highlighted last week, has been met with disappointment from major associations such as the IDU, APCHQ, and ACQ.
Property owners being liable for higher indemnities for evictions, proportional to the lease duration may ensure fair compensation for displaced tenants, but also imposes additional financial burdens on property owners. It is essential for investors to consider these potential costs in their operational budgets and to approach tenant relations and lease enforcement with increased diligence.
On the surface, other amendments could also present a double-edged sword. The right to terminate a lease following a notice of lease assignment offers landlords more control over their property, but it also necessitates a delicate balance in managing tenant relations to prevent vacancies which can erode income stability.
The obligation to disclose the maximum rent for a five-year period on newly constructed or repurposed properties. This transparency is a boon for tenant planning and budgeting. However, it constrains investors from adjusting rents in response to rapid market changes.
This fixed horizon could impact return on investment calculations and long-term financial planning for new developments and hinder the precise goal of supply creation the government is aiming to achieve.
The cumulative impact of these legislative changes signals a transformative period for the Québec real estate market. For investors, it’s a call to adapt to a more regulated environment that values social considerations alongside economic gains.
As a broker at Votre Equipe Immobilier, this development prompts us to consider the strategic positioning of our clients’ portfolios. Will this amendment, if passed, alter your investment plans?
We remain vigilant and optimistic and invite you to discuss these developments with us at Votre Equipe Immobilier. Let’s strategize on how to best harness these potential new powers for your investment growth and success.