Relief for Real Estate Developers: The City of Montreal Modifies its 20-20-20 By-law
On March 19th, the City of Montreal (the “City“) officially announced a modification to its By-law for a Diverse Metropolis, commonly referred to as By-law “20-20-20” (the “By-law“), for the purpose of easing some of the constraints imposed on real estate developers. This decision follows criticisms voiced by the official opposition and the Chamber of Commerce of Metropolitan Montréal, which maintain that the By-law has not achieved its objective of stimulating the construction of social and affordable housing in the city, and that it could even promote the development of projects outside the metropolis. In response to these concerns, the City was compelled to make adjustments to the By-law.
A Commendable Goal: Taking Measures to Ensure Access to Affordable Housing
Due to the significant challenges surrounding the accessibility to affordable housing over the years, the City wished to introduce stricter legislation to regulate the supply of affordable housing. In doing so, it aimed to preserve the diversity of its neighborhoods and ensure access to decent housing for all.
As such, the By-law stipulated that anyone undertaking a project involving the addition of at least one housing unit and exceeding a specified residential area was required to enter into an agreement with the City to contribute to the supply of social, affordable, and family-oriented housing. These projects could involve the construction of a new building, or the expansion or conversion of an existing building.
The funds raised by the City were to be used for the construction of social and affordable housing. According to recent available information, the total contribution raised by the City as of December 31, 2023, was 38.7 million.
We refer you to our blog article on this matter, which was drafted in 2020 and can be found here.
A Somewhat Different Reality: Temporary Adjustments by the City to Address the Issues
The City has seen little success in reaching agreements with developers for the integration of social housing into their projects. Most have opted to provide financial compensation, in the form of a penalty, rather than include these types of housing. Furthermore, only one social project was built using the funds collected.
Therefore, temporary adjustments were deemed necessary by the City. Effective until the end of 2026, these include reductions in financial contributions from developers and exemptions for small projects, such as:
- Increase in the residential area threshold: The By-law sets a threshold of 450 m² of added residential area, equivalent to approximately 5 housing units. However, until December 31, 2026, this threshold is temporarily increased to 1800 m², or approximately 20 housing units, to account for the economic context. After this period, the threshold for compliance will be once more reduced to 450 m².
- Inclusion of conversions to residential: The By-law provides for certain exemptions, namely for social or affordable housing projects. Additionally, until December 31, 2026, any conversion of office space into housing units in Sector 1 of the By-law, which roughly corresponds to the downtown area, will also be exempted.
Conclusion
This recent announcement by the City highlights the complex challenges facing housing policy, including the need to align the social diversity and affordable housing construction objectives with the economic realities and concerns of real estate developers.
The financial burden on developers is an important current market reality; Development has stagnated in recent years in an inflationary context and as a result of labor shortages, supply challenges, restrictions on available municipal infrastructure, and substantial delays in permit issuance.
Given that real estate law has been in constant flux in recent years, we, at Gascon and associates, will be pleased to inform you of any subsequent developments and remain available to assist you.
By Selma Adam