Excessive regulation has eroded housing affordability in Montreal, shows a new MEI study

• Housing in Montreal is more heavily regulated than in 73 per cent of Canadian cities and provinces

Montreal, July 11, 2024 – The regulatory burden is preventing the housing supply from adjusting itself, contributing to the rapid increase in housing prices seen in Montreal, points out a study published this morning 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,” says Vincent Geloso, senior economist at the MEI and author of the study. “Contrary to what the mayor claims, the market is capable of responding to demand; the City just needs to allow it to play its role.”

The study 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. 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.

Housing in Montreal is more regulated than in 73 per cent of Canadian cities and provinces surveyed by the Canada Mortgage and Housing Corporation.

The author explains that the addition of new regulations over the years has made the market more rigid, preventing it from adapting to demographic changes.

“The increase in the time required to obtain a building permit clearly shows the loss of flexibility resulting from regulation,” explains Mr. Geloso. “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.”

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 policymakers, the MEI stimulates public policy debate and reforms based on sound economics and entrepreneurship.

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