This City Made Developers Build Affordable Housing or Pay Up. They All Paid.

A law designed to build affordable housing in Montreal—and which an elected official predicted would lead to 600 new units a year—has led to zero units of affordable housing, according to the city’s data. The law required developers to either build housing or pay into a fund. Every developer chose the second option. 

In April 2021, Montreal adopted the Bylaw for a Diverse Metropolis. According to the law, developers who build five dwelling units (or the equivalent in terms of space) must sign an agreement with Montreal to either construct new city-subsidized housing or new affordable housing subsidized by the developer, along with other subsidies. If developers don’t build this housing, they can either donate land or pay directly into a fund that the city will use to build affordable housing units. 

According to data on the city’s website, and first reported by CBC, 150 agreements have been signed under the bylaw as of May 2023, resulting in 7100 units of housing, all of which are market rate. Every single developer opted to pay a penalty and five donated property rather than build affordable housing, resulting in $16.5 million for city-subsidized housing operated by co-ops or nonprofits—what the city classifies as “social housing”—and $8 million for affordable housing with other subsidies. 

Guillaume Pelletier, press officer for Ensemble Montreal, the official opposition at City Hall, told Motherboard the city was supposed to release another report on the bylaw this year but has failed to do so.

According to Véronique Laflamme, spokesperson for FRAPRU, an umbrella organization of housing associations and tenant groups, the problem is not just the lenient design of the 2021 bylaw but the lack of funding for social housing from the Quebec and federal government. 

Laflamme told Motherboard that FRAPRU advocates for more social housing and supported the bylaw in 2021, despite believing at the time it was not strict enough. The group does not believe developers should have had an option to pay a fee instead of producing affordable housing. But the city also set its fee far too low, and developers found it made more sense economically to pay a fee instead of ceding land or adding affordable housing. 

“It's cheaper to opt out than to build social housing or to transfer land,” Laflamme said. “We think we should not give the choice to opt out. Ultimately if we give this choice, the compensation should be higher.”

There is evidence from the U.S. that offering an optional development fee instead of mandating affordable housing leads to very little housing being built. In New Jersey, towns are required to build their fair share of affordable housing based on job growth and population growth in local counties. Towns were permitted to pay a fee instead of building housing from 1985 to 2008 and during this time many chose this path, leading to entrenched residential segregation. The practice was banned through legislation in 2008.

Quebec’s population has grown dramatically in the past few years but housing production has not kept up. The province’s population grew by 149,000 people in 2022—a fifty-year high largely driven by international migration. According to a report released by Montreal’s Chamber of Commerce, the city would have to build 23,000 units of housing every year until 2041 for the housing market to level out.

Laflamme said that the city should more aggressively acquire land to develop social housing rather than relying on the bylaw, which she said leans too heavily on market rate development that is too costly for many people. 

“We have never said that [the bylaw] was the only way to make sure that we have social housing,” Laflamme said. She said that developers have been building out neighborhoods with new condos and expensive rental units but no affordable units. Adding a small percentage of affordable units, as the bylaw requires, would still create mostly exclusionary neighborhoods, she believes. 

Even if developers opted to build social housing under the bylaw, Laflamme said that the province has failed to appropriately fund social housing, which means the projects still might not have been completed. “If you don't have a program dedicated to social housing and if there is not a funding plan for social housing, we have to wait,” Laflamme said. “It's ridiculous to be in this situation budget after budget.”