Fiscal Gains from Real Estate Development: The Case of Québec Municipalities
Property taxes are the main source of funding for municipalities in Canada. In Québec, several municipal representatives have argued that the dependency on property taxes forces municipalities to encourage real estate development to improve their financial situation without having to raise taxes.
In a new paper for the Institute on Municipal Finance and Governance (IMFG), Jean-Philippe Meloche examines the relationship between municipal growth and property taxation in Québec. Using Ministry of Municipal Affairs and Housing financial data, Meloche shows that faster-growing municipalities tend to experience smaller increases or even decreases in their property tax rates, indicating a fiscal gain from development. Meloche adds that growing municipalities also benefit significantly from one-time growth-related revenues such as building permits, land transfer taxes, and development charges. However, these growth-related gains are temporary because the rise in population ultimately puts a strain on services and leads to an increase in per capita spending.