Development charges are making it more difficult for young families to afford new homes.
So what are development charges? Ontario’s cities and towns pass bylaws to set development charges. They use these charges to collect money from new homes and businesses to pay for critical infrastructure: sewers and water pipes, roads, transit, parks and community centres. There is no doubting their importance.
The Development Charges Act is the over-arching provincial legislation that allows municipalities to collect them.
These bylaws are accompanied by a background study, which outlines the estimated amount and location of development within a municipality, and the related calculations of how the new services will accommodate the new population.
The topic of development charges (DCs) is part of the province’s 80-day public consultation on improving the land use planning and appeals system. I have been writing about the consultation in this space over the past few weeks and will continue to discuss it until the consultation ends on Jan. 10.
BILD and the Ontario Home Builders’ Association addressed DCs during a recent meeting held at our office that sought input from both associations’ members. The province is our partner in economic growth, and we have a lot to say about DCs’ effect on this growth.
In 2012 alone, the industry estimates that more than $1 billion was paid in DCs by new-home owners across the GTA.
But at the end of the day, DCs and other taxes represent one-fifth of the cost of a home in the GTA, according to a study of six GTA municipalities by Altus Group Economic Consulting. That is too much for a young family to take on.
The study involved Toronto, Markham, Oakville, Bradford West Gwillimbury, Ajax and Brampton.
Since 2004, those municipalities have increased DCs between 143 and 357 per cent.
Let’s look at the Town of Oakville, as one example: for a new single-detached home, Oakville charges $23,503 in DCs; Halton Region charges $36,778; Oakville’s school boards charge $4,175 in educational DCs to allow them to acquire land for schools. In total, that new-home owner is paying $64,456 in DCs.
Those DCs are added to new-home owners’ mortgages, and they must pay the interest on those charges for decades.
When DCs are the biggest charge on a home, they pose a threat to the affordability of homes and even the health of the home-building industry.
It’s important to note that our industry employs about 202,700 people and generates $10.8 billion in wages.
During the current 80-day provincial consultation, now is the time for citizens ton tell the province about what they think is fair and reasonable to be charged by the municipalities.
Municipalities do have other alternatives to raise revenue. And it’s time they looked at their other options.
This column has been updated from a previous version.