To see the prices displayed for new condos or rents of new apartments, one may wonder who has the means to pay for this today. This is what leads some commentators to wonder if we really build the right types of housing to get out of the spiral of the price increase that affects our families.
However, from an economic point of view, each new built accommodation – whether it is a small apartment or a huge penthouse – directly helps bring prices back to more affordable levels.
Travel effect
It is notably thanks to what is called the movement effect.
Essentially, each time a family moves into a new accommodation slightly larger or better located, it releases by the very fact another apartment or condo often more affordable, but which met its needs less well.
In turn, another family moved in, leaving another slightly cheaper accommodation, which will thus be able to benefit from another family. And the cycle generally continues on six trips. Academics who looked into the phenomenon were able to quantify it by following a group of 52,000 households over time.
For each slice of 100 new dwellings built at market prices, the travel chain frees 45 affordable homes for families with median or less income. Among these dwellings, 17 become accessible to the 20 percent wealthy of the population.
If we take a single tower under construction in the city center at the moment, the Skyla project offering 662 apartments, we can estimate that, thanks to this travel chain, around 298 affordable dwellings will be released for the middle class, including 113 in the most modest quintile.
It’s still not bad when you consider that this is only a single tower, among all the projects under construction!
Affordability
It is also important to note that these new accommodation find takers. Among the 40,000 builts in Montreal in the past three years, around 95 percent are occupied.
The other way in which new homes contribute to affordability – rather in the long term – is by modifying the composition of the housing market. This is explained by the fact that the new offer generally includes developments and infrastructure up to date and which is not necessarily found in the accommodation built a few decades earlier.
For example, there are few buildings of the 1990s which have “urban chalets” or terraces on the roof.
As this new offer is built, the accommodation which, in the past, were perceived as luxury housing ended up gradually integrating the mid -range, while those which were mid -range become affordable.
It is observed in particular in the income of households that move into these units following a move. In general, each time an apartment is returned to the market, its subsequent tenant has an income approximately three percent lower than the previous one.
If this process takes time, it makes it possible to ensure that the Quebecers of tomorrow can have affordable housing.
Like what, each new built accommodation, regardless of its price level, helps bring prices back to more affordable levels both in the short term and long term.
Gabriel Giguère
Senior analyst in public policies at the IEDM
