A KPMG survey reveals 96% of Québec business leaders see housing as the top economic risk
Québec's business leaders are united in their message that housing affordability and supply must be the top priority in the upcoming federal budget.
According to a survey conducted by KPMG in Canada, a striking 96 percent of 112 business leaders from small- and medium-sized enterprises in Québec identify high housing costs and a lack of supply as the most significant risks facing Canada's economy.
They assert that this issue should take precedence in the next federal budget. This widespread concern is linked to the increasing cost of living, primarily driven by housing expenses, compelling companies to elevate wages to attract and retain scarce talent.
Caroline Charest, an economist, and Montréal-based partner at KPMG in Canada, detailed the economic repercussions of the housing affordability crisis.
She explained, “The ripple effects from the high cost of housing and lack of supply are being felt throughout the economy. New and young Canadians are being shut out from purchasing and are finding rentals scarce and costly.”
“Those who were able to enter the market a few years back due to record low interest rates now face the risk of default when their rates reset at upwards of three times what they pay now.”
Charest highlighted the considerable challenge businesses face in attracting and keeping key personnel, especially in urban areas where housing costs have soared and in regions where housing is particularly scarce.
The survey also revealed a strong consensus among Québec's business leaders on the necessity for innovative public-private sector collaboration to tackle the housing crisis, with 88 percent emphasizing its importance.
Mathieu Bouchard, executive director and Lead for Impact Strategy for Industrial and Commercial Innovation at KPMG in Montréal, discussed the broader implications of the housing challenge.
Bouchard remarked, “The central questions are, who are we building housing for, how will it be serviced, and how do we create cities and communities that we all want to live in?”
He noted the difficulties municipalities face in keeping pace with the ambitions of federal and provincial governments to boost residential construction through additional funding and smarter regulations.
Key findings from the survey include:
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90 percent of respondents say the rising cost of living, largely due to housing costs, is forcing their organizations to pay more to attract and retain talent.
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86 percent are budgeting for higher labor costs due to competition for talent, inflation, and the high cost of affordable housing.
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88 percent believe solving the housing crisis requires public-private sector collaboration.
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86 percent say the high cost and lack of affordable housing has hindered their ability to attract and retain employees.
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88 percent expect inflationary pressures in Canada to continue until the housing shortage and high rents are addressed.
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81 percent view the high cost and lack of affordable housing as a greater threat to the economy than inflation.
Furthermore, the survey highlighted a significant endorsement for innovative tax relief measures aimed at making housing more affordable. About 82 percent of business leaders suggest using the income tax system to ease housing affordability, including proposals such as making mortgage interest tax-deductible.
Additionally, there is a strong call for maintaining current tax benefits like the capital gains inclusion rate and the Lifetime Capital Gains Exemption, as well as introducing innovative, repayable tax measures to support homeowners facing mortgage renewals.
Yara Bossé-Viola, a Montréal-based partner in KPMG's Tax Incentives Practice, commented, “Our survey revealed strong support from the business community for innovative tax measures to increase housing supply and construction and provide relief to homeowners dealing with higher interest rates and mortgage renewals.”
Bossé-Viola highlighted the necessity for fresh thinking and a critical role for government in addressing Canada's housing challenges through innovative tax and regulatory measures.
