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If we do not use this platform to permanently rightsize and modernize DCs, it will be a lost opportunityLast updated 1 week ago You can save this article by registering for free here. Or sign-in if you have an account.New infrastructure benefits everyone, but it's important to make sure everyone pays their fair share. Photo by SuppliedWe independently select everything we recommend. Buying through us may earn us a commission, which supports our work.Over the last few months, we have seen the announcements and moves to begin implementations of reductions to municipal development charges (DCs) under the provincial and federal governments’ Canada-Ontario Partnership to Build. Enjoy the latest local, national and international news.Exclusive articles by Conrad Black, Barbara Kay and others. 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Plus, special edition NP Platformed and First Reading newsletters and virtual events.Unlimited online access to National Post.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles including the New York Times Crossword.Support local journalism.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountorOnce implemented, this program will reduce DCs in many municipalities in Ontario by 30 to 50 per cent for a period of three years. This program will have a very beneficial impact on housing project viability and supply, but it does beg the question – how do we use the leadership shown by this announcement to make reductions in DCs permanent? Development charges are a one-time fee developers pay to municipalities to fund housing-supportive infrastructure and services like parks, water and wastewater systems, and roads. Like all input costs, these costs are rolled into the home price and eventually paid for by the new home buyer. These charges have risen significantly in the last 15 to 20 years in some regions in the Greater Toronto Area (GTA) and can add up to $130,000 to the cost of a single-family home and up to $80,000 to a condo. It is important to note that many municipalities across the GTA have taken action in recent years, following the leadership of Vaughan and Mississauga, to try to address the impacts of DCs on the cost to build new homes. However, these programs like the federal-provincial one, are temporary changes. If we do not use this platform to permanently rightsize and modernize DCs, it will be a lost opportunity. It is for that reason that BILD has, and will continue to advocate, that we use the period of the next three years to address the challenge presented by these charges. Note that I say rightsize and modernize them, not eliminate them. DCs serve a vital purpose and provide a critical legal framework, and therefore the objective should be to ensure that the new home buyer pays their fair share, but not shoulder a disproportionate amount as is currently the case. As we look to do this, there are a number of principles that we should keep in mind. First, payment for infrastructure should match its life expectancy and not be upfronted on the homebuyer. Roads, water and wastewater infrastructure have lifespans that are measured in decades. Municipalities themselves amortize the cost of these pieces of infrastructure over decades, but expect the developer and thus the new home buyer to pay the cost in one chunk up front. This invariably gets rolled into a mortgage and thus the new home buyer is doubly aggrieved – they have to pay the whole cost upfront and they have to pay mortgage interest on it. For infrastructure where it makes sense, like water and wastewater, it would be appropriate to bill the new homebuyer on their utility bill or tax bill over a 20 to 25 year period. Second, new infrastructure benefits everyone, so let’s make sure that everyone pays their fair share. In principle, the current DCs regime includes a calculation for something called, “Benefit to Existing”, which is meant to capture the above, however in practice there are countless examples where this calculation is distorted or adjusted, resulting in the new home buyer paying a disproportionate share. The tried-and-true Ontario municipal maxim of “growth paying for growth” in this instance, has been tried and is not true; growth is paying for more than growth. To give you an example, in the city of Toronto roughly 42 per cent of DCs is composed of transit-related costs or roughly between $22,000 (bachelor apartment) and $55,000 (single-family home) in costs, while on the average annual property tax bill an existing resident pays less than $1,000. Lastly, Ontario and British Columbia are unique in North American provincial or state jurisdictions for enabling the province-wide use of municipal development charges. They also happen to be some of the most expensive jurisdictions for housing. These two facts are not unrelated. This means the vast majority of other jurisdictions have found other ways to fund the cost of housing-related infrastructure. Given that infrastructure in many North American jurisdictions is on par with our own, this means maybe there are lessons we can learn from others. Municipal Utility District (MUDs) in Texas, Community Development District (CDD) in Florida, and how Quebec funds water and wastewater infrastructure are all worthy of examination. The provincial and federal governments’ Canada-Ontario Partnership to Build has given us three years to figure out a long-term fix for where 40 years of development charges in Ontario have brought us. Let’s not miss the opportunity and let “tried and true” slogans get in the way of fixing our housing supply challenges for the next generation of residents. Dave Wilkes is President and CEO, Building Industry and Land Development Association. Join the Conversation This website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. Read more about cookies here. 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