Fiscal Gains from Real Estate Development: The Case of Québec Municipalities

This paper examines the relationship between real estate development and property taxation in Québec municipalities. Regression analysis shows a fiscal gain associated with municipal growth in Québec. For municipalities with a population of 1,000 or more that registered higher population growth or a higher increase in the number of real estate units from 2008 to 2018, property tax rates either increased by a smaller amount or declined by a larger amount compared with municipalities that had lower levels of growth or that experienced decline. Current spending per capita in these municipalities also increased by a smaller amount over this period. However, a larger share of their revenues came from fees, permits, and development charges, which may have covered part of their current spending. Ultimately, however, this growth-related fiscal gain was temporary. The analysis also shows that municipalities with larger populations had higher per-capita spending, financed by higher property values, which suggests that the property tax is well suited to pay for the costs associated with municipal growth.