All major political parties in Quebec acknowledge it: the rapid rise in housing costs has put homeownership within reach into question for an entire generation. Ahead of the October 5 election, parties are offering different ways to help buyers—from increasing tax credits to speeding up construction. However, experts warn that measures that look attractive to future owners are not always able to solve the market’s main problem: a lack of supply.
According to Antoine Genest-Grégoire, a professor at the Faculty of Taxation at the Université de Sherbrooke, for those planning to buy a home, in some cases it may make sense to wait for the election results. Simon Langellier, a representative of the Quebec Professional Association of Real Estate Brokers (APCIQ), on the contrary, warns: if a large number of buyers decide at the same time to postpone their purchase, pent-up demand could later create additional pressure on an already tight market.
In brief
- The current federal-provincial tax credit for first-time homebuyers in Quebec is $1,400.
- CAQ proposes increasing it to $7,000; PQ—to $3,000.
- PLQ wants to raise the price threshold for new homes eligible for a TVQ rebate from $300,000 to $500,000.
- PQ proposes refunding a first-time buyer up to $45,000 of TVQ paid when purchasing a new home.
- Most parties propose simplifying building regulations and speeding up permit issuance.
- Experts see increasing housing supply as a more fundamental solution, but differ on the effectiveness of specific tax measures.
What is happening in the housing market?
The main problem, according to experts, is an imbalance between supply and demand.
When there are more buyers than available properties, financial assistance to buyers can lead not only to easing their situation, but also to further price increases.
That is why Antoine Genest-Grégoire divides campaign proposals into two broad groups: measures that stimulate demand and measures that increase supply.
And the consequences of these two approaches can be completely different.
Will increasing the tax credit help?
Right now, a first-time homebuyer can receive a tax credit of $1,400.
CAQ proposes increasing it to $7,000, PQ—to $3,000.
At first glance, this is direct help for someone trying to put together a down payment or cover costs associated with buying.
However, Professor Genest-Grégoire warns: if housing supply does not increase at the same time as demand, the additional purchasing power may ultimately end up in sellers’ pockets.
François Des Rosiers, a professor of finance, insurance, and real estate at Université Laval, also considers such a situation possible. If buyers are given additional liquidity, sellers and developers may factor it into pricing.
At the same time, the expert makes an important caveat: if supply significantly exceeded demand, such assistance could work differently. That is why the tax credit becomes, in his words, a double-edged sword.
What do they propose regarding the tax on new housing?
Another option for assistance is to increase the rebate of the provincial sales tax (TVQ) when a first-time owner buys a new home.
Today, the rebate applies only to properties priced under $300,000.
The Quebec Liberal Party (PLQ) proposes raising this threshold to $500,000, while keeping the maximum rebate at $10,000.
The Parti Québécois (PQ) proposes a much larger rebate—up to $45,000 when purchasing a first home.
TVQ rebate proposals
| Party | Proposal |
|---|---|
| PLQ | Maximum $10,000; raise the home price threshold to $500,000 |
| PQ | Up to $45,000 when purchasing a first home |
Antoine Genest-Grégoire is more optimistic about such measures. In his view, they can make building relatively affordable housing more attractive to investors. Projects with more affordable apartments and houses are often less profitable, so an additional financial incentive could encourage new supply.
But Université de Montréal urban planning professor Jean-Philippe Meloche points to the other side of the issue: part of the tax break may simply be passed into the price of the property.
In other words, the buyer will get a discount from the government, but the developer can raise the price at the same time.
The Quebec Construction and Housing Association (APCHQ) proposes going even further and fully compensating taxes on new housing, as is done in Ontario.
Why do experts talk about construction?
Perhaps this is where the main difference lies between short-term help for the buyer and a long-term solution to the housing problem.
Most parties talk about the need to remove regulatory obstacles that slow construction.
What do the parties propose?
CAQ:
- modernize the building code;
- remove outdated and duplicative requirements;
- exempt light renovation work in small residential buildings from certain requirements of the R-20 law;
- shorten permit timelines;
- avoid duplication of procedures between municipal and provincial levels.
PLQ:
- provide additional funding to municipalities that issue building permits quickly;
- set a maximum timeframe for obtaining required provincial permits.
PQ:
- harmonize the building code;
- reduce the number of approval stages;
- reduce the amount of bureaucracy for construction companies;
- create a certification system for prefabricated and standardized buildings;
- aim to issue permits within 30 days.
PCQ:
- simplify the building code;
- simplify the conversion of agricultural land to other uses;
- reduce the number of regulated construction trades;
- exempt residential construction from the R-20 law.
Representatives of the construction industry support the idea of reducing bureaucracy.
APCHQ believes that the complexity of the current building code reduces productivity and increases costs.
APCIQ also points to the large number of requirements that developers must meet at the municipal level, including architectural restrictions in certain areas.
In Simon Langellier’s view, such changes are not as politically flashy as announcing tax holidays, but they may be crucial for increasing supply.
What if we just build more?
Representatives of the construction industry believe that supply can be increased not only through new construction.
Another reserve is the existing housing stock.
According to data previously published by Radio-Canada, Quebec has about 100,000 unoccupied housing units.
Another direction is prefabricated homes.
Most new housing in Quebec today is in the rental sector. Developing prefabricated home manufacturing, according to APCHQ, could make construction faster and cheaper thanks to standardization.
The CAQ government has already announced funding for a significant portion of infrastructure in areas where most housing will be sold for under $350,000. As part of this approach, the use of prefabricated structures was also discussed.
PLQ, for its part, promises the construction of 100,000 housing units per year, betting in part on prefabricated technologies.
What do they propose for investors?
PLQ proposes another measure: defer payment of capital gains tax for developers if the profit is reinvested in new housing projects.
Antoine Genest-Grégoire considers this idea potentially interesting. In his view, a property owner who is planning to wind down and sell an asset could instead be given an incentive to reinvest funds into construction again.
QS proposes the opposite approach—taxing 100% of capital gains from transactions involving residential real estate.
In Genest-Grégoire’s view, such a measure could reduce the attractiveness of residential real estate for investors.
At the same time, for owners selling property to non-profit organizations or housing institutions, QS proposes setting capital gains taxation at 25%.
What does Québec solidaire propose for first-time buyers?
QS also proposes direct financial assistance for those buying a home for the first time.
The party proposes providing a loan of up to:
- 15% of the price of a new home;
- 5% of the price of an existing home;
- $50,000.
In addition, QS proposes changing the rules for calculating real estate agents’ commissions by tying them to the listing price of the property, and also banning closed bidding, in which buyers do not know competitors’ offers.
Another idea from the party is to purchase 2,000 homes and then resell them at 25% below market value.
Why are some measures called flashy but ineffective?
Professor Jean-Philippe Meloche believes that some proposals look more attractive than they may turn out to be in practice.
As an example, he cites increasing the tax credit for first-time homebuyers.
The logic of the criticism is simple: if there is little real estate on the market and buyers are given more money, that does not necessarily create new homes. The additional funds may simply increase the amount buyers are willing to pay for existing properties.
Therefore, from the expert’s point of view, housing affordability policy should consider not only a person’s ability to buy a home, but also the number of homes that are actually available on the market.
Should you wait for the election results?
Here, experts disagree.
Antoine Genest-Grégoire believes that in the short term, waiting for the results of the October 5 election may be a reasonable strategy for someone who is planning to buy a home and hopes to take advantage of one of the promised measures.
Simon Langellier sees the situation differently.
If a large number of potential buyers decide to wait at the same time and then enter the market after the election, pent-up demand could increase pressure on prices.
Therefore, there is no universal answer for all buyers: the effect will depend on the specific property, neighborhood, market conditions, and which measures are ultimately adopted.
Frequently asked questions
Can increasing the tax credit make housing more affordable?
The buyer will directly receive additional financial assistance. However, when supply is scarce, part of this effect may translate into higher prices.
Which measure most directly increases supply?
Experts point first and foremost to speeding up construction: simplifying permitting procedures, reducing bureaucracy, standardizing projects, and developing prefabricated construction.
Why are prefabricated homes being discussed?
Standardization makes it possible to repeat the same solutions, which can potentially reduce construction time and cost.
Is there vacant housing in Quebec?
Yes. According to data cited by Radio-Canada, the province has about 100,000 unoccupied housing units.
Should you postpone buying until the October 5 election?
Experts give different assessments. Waiting may allow you to benefit from a new program if it is adopted, but a simultaneous return to the market by many people who postponed their purchase can also increase demand.
Unique commentary
Quebec is facing a fairly simple math problem: if more people want to buy housing, but the number of homes does not increase, financial assistance alone cannot solve the problem.
A tax credit, a TVQ rebate, or a preferential loan can help a specific family put together the required amount. But if at the same time a developer faces a long chain of permits, expensive land, rising construction costs, and numerous regulatory requirements, new homes will not automatically appear as a result.
That is why the current campaign debate about housing has effectively split into two questions.
How do we help a person buy a home?
And the second—much more difficult:
How do we make sure there are enough houses and apartments?
The first question is much easier to turn into an attractive campaign promise. The second requires long-term work with municipalities, the construction industry, infrastructure, land, and rules.
And for someone who is looking at real estate prices in Quebec today, both answers matter.
