Hiking development charges will only make homes more unaffordable

Builders and developers must overcome myriad planning, zoning, and logistical hurdles as well as rustle through a lot of red tape, rules, and regulations to get residential projects built in Toronto.

It all comes with a hefty price, of course. The more time and money a developer spends navigating the extensive labyrinth of procedural processes, the costlier it becomes to build a new home.

But it could soon get even pricier. Development charges (DCs) account for a good chunk of the fees builders must pay to get a project off the ground and a new study is suggesting some hefty rate hikes.

The study, by consulting firm Hemson, is proposing that the rates be increased by 49 percent across the board for residential developments to prepare for population growth and help pay for capital projects.

The idea is ludicrous and will deter development at a time when we are in such dire need of housing. Developers already pay substantial fees to build residential developments in Toronto. Such drastic rate hikes will ultimately end up being passed on to buyers of new homes. As a result, the people who will suffer the most will be the ones who can least afford it.

It very much seems like the right foot doesn’t know what the left is doing. We’re in a housing crisis and the City of Toronto’s response to address housing affordability is to make it more expensive to build.

Individuals and young families already have enough trouble finding a down payment to buy in Toronto. The average price of a home in the city is now $1.3 million, beyond the reach of most working people. And don’t get me started on skyrocketing rents.

DCs are one of three financial tools used by the city to collect funds to support growth and pay for capital costs such as roads, transit, water and sewer infrastructure, and fire and police facilities. The city also receives funds through Community Benefits Charges and The Alternative Parkland Dedication Rate. Collectively, the three generate about $750 million in annual revenue for the city.

It is patently unfair, however, to saddle developers with the full burden of paying for infrastructure to support our future growth. Developers don’t mind paying their fair share, but there must be a proper balance. The proposed fee increases are illogical and defy rational behavior.

The new study proposes that the DCs on single and semi-detached homes rise to $139,830 from $93,978. The proposed charge for multiples with two bedrooms or more would rise to $115,579 from $77,679, and for multiples with less than two bedrooms, the fee would rise to $57,976 from $38,968. The charge for an apartment with two bedrooms or more would rise to $81,852 from $55,012, and for an apartment with fewer than two bedrooms it would rise to $53,432 from $35,910.

The study suggests the hikes would give the city funds to build up infrastructure to accommodate the 3.65 million people who are projected to immigrate to the Toronto area over the next three decades.

Recently, the provincial Housing Affordability Task came up with sweeping recommendations to get 1.5 million homes built over the next 10 years. Increasing development charges and imposing more exorbitant fees would fly in the face of the proposals, as they’d only make homes more unaffordable.

Particularly hard hit would be smaller builders who want to build “missing middle” or infill housing – an important piece of the housing supply mix – as higher DCs would make the projects unviable.

Roughly 80 percent of the high-rise developments built by RESCON members are in the Toronto area. They will likely look to build elsewhere if the DCs are too high. Young families are already leaving. Plus, there is a burgeoning brain drain of talent who, even though they have succeeded career-wise, don’t have the scratch to live here. It’s crazy.

Imposing these additional costs on new buyers and renters, absent any impact analysis, and at a time when housing is so badly needed, will undermine what the provincial and federal governments and our industry are trying to do – and that is built more homes. This is not the time to put more obstacles in the way of homes getting built. The proposal to hike DCs should be stopped in its tracks.

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