Regulatory uncertainty and bureaucratic requirements undermine housing affordability in Montreal

• The City of Montreal’s “20-20-20” regulation alone costs as much as $10,500 per unit.
• The seemingly arbitrary nature of the City’s approval decisions makes investment riskier.

Montreal, February 23, 2023 – The City of Montreal’s housing policies drive up construction and housing costs in the area, shows a Montreal Economic Institute publication released this morning.

“Regulatory uncertainty and the City of Montreal’s unreasonable demands play an important role in the rising cost of housing construction,” says Célia Pinto Moreira, public policy analyst at the MEI and author of the study. “There is a world of difference between what Mayor Valérie Plante says and what the City does when it comes to housing affordability.”

In particular, the study targets the City’s “20-20-20” regulation mandating the kinds of housing units to be built as well as certain financial contributions to the municipal government.

According to the author, the financial portion of the regulation imposes surcharges on construction ranging in one typical case from $6,900 to $10,500 per housing unit.

She also criticizes the inflexible nature of these mandates, which create situations in which the kinds of housing built does not respond to market demand, but rather to government demands.

“The City’s approach assumes that all neighbourhoods have the same needs, as if the McGill Ghetto and Anjou were identical,” says Ms. Pinto Moreira. “This creates situations in which developers wanting to build student housing are forced to include at least 20% family housing in downtown neighbourhoods.”

The study also criticizes the regulatory uncertainty created by the City’s seemingly arbitrary decisions regarding the approval or rejection of development projects.

The author cites the Proment construction project on Nuns’ Island, from which the City decided to lop off 11 floors following a zoning change, going against both the recommendation of the Office de consultation publique de Montréal and a citizen petition.

Another illustration of this regulatory uncertainty comes from the Square Children’s project, for which the City reduced the height limit to four floors, instead of the original 20, following a conflict with the developer—again going against the recommendation of the OCPM.

“Developers have to spend substantial amounts of money on fees for architects, engineers, lawyers, and others, with no guarantee that the City will approve their projects,” says Ms. Pinto Moreira. “As project approval seems to be subject to the government’s mood, the level of risk increases, as does the return necessary to make up for losses.”

The MEI study is available here.

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The MEI is an independent public policy think tank with offices in Montreal and Calgary. Through its publications, media appearances, and advisory services to policy-makers, the MEI stimulates public policy debate and reforms based on sound economics and entrepreneurship.

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