Quebec has the largest private rental apartment stock in Canada. It has nearly a million buildings, almost as many as Ontario, British Columbia and Alberta combined.

Like just about everywhere else in the country, we are experiencing an acute housing crisis, with a vacancy rate of 1.3%, practically an all-time low. This means that households sometimes end up on the street on July 1 because of significant rent increases and pressures. Rents went up quite a bit from 2013 to 2023, nearly 50%.

The crisis has many causes, but three factors stand out.

First, net migration has skyrocketed, particularly in relation to non-permanent residents, who overwhelmingly rent when they arrive here. Second, home ownership has become unaffordable. Third, an aging population is driving some older households back to renting.

Supply has simply not been able to keep up with demand for a number of years. There are a lot of barriers. Construction costs, of course, have increased by 40% since the pandemic. Between 2021 and 2023, the cost of financing a typical rental property went from 2.55% to 7.3%.

While the climate is now more structurally favourable, land scarcity, excessive regulatory requirements, lack of infrastructure and development charges are all factors that have been holding back new construction for decades.

We recently saw an acceleration in rental housing starts, but this was due to the exceptionally low rates in place during the pandemic, something that won't happen again any time soon.

Since then, residential construction has been declining. It is currently not profitable to build new unless the rents are very high, which many people cannot afford.

The existing stock of rental housing is more affordable, but profitability is steeply declining. Renovation, maintenance, repair and insurance costs have ballooned, as have mortgage interest costs. Defaults are mounting, all in an environment where rental increases are regulated.

It is very difficult for owners to renovate their buildings. However, Quebec's rental stock is old and poorly maintained.

In short, we're in a perfect storm. According to the Canada Mortgage and Housing Corporation, CMHC, 1.2 million homes across all housing categories would need to be built to bring affordability back into the housing market by 2030, which amounts to tripling housing starts. This is in Quebec alone.

What happens is that market rents, the ones that make new rental construction profitable, are very high, almost twice the cost of rents in existing housing. Unfortunately, the perfect storm has consequences. Sometimes the only way to make the purchase of an existing building profitable is to carry out renovictions.

On top of all these stumbling blocks, the federal government now wants to throw in another obstacle. It intends to increase the capital gains inclusion rate by more than $250,000. This measure will really hurt Quebec's middle class because of our unique model. Quebec has 82% of the country's rental buildings with three to five units, which makes it a particular problem in Quebec. This rental stock represents some 300 small buildings and more than 500,000 rental units, which is one third of the province's total supply.

We do not foresee the crisis resolving itself quickly. There is a critical need for public policies that stimulate construction and the renovation of existing rental stock. However, that is not enough. There also needs to be a much more attractive tax environment for owning a rental property and, to that end, the government should consider bringing back tax incentives, as there have been in the past.

In conclusion, while everyone agrees that more supply is needed to solve the crisis, opinions naturally differ on how. In recent years, public policy has tended to increase the tax and regulatory burden on property owners. The exact opposite should be done.

If you stifle owners, you stifle supply. If you over-regulate prices, you create a shortage. There is a pressing need to recreate an environment conducive to rental investment, and to do so, you have in your hands the powerful tool of taxation.

We urge you to use it.