Municipalities in Ontario had until June 19 to apply to the provincial and federal governments’ Development Charges Reduction Program (DCRP) under the Canada-Ontario Partnership to Build.
The majority of municipalities across the Greater Toronto Area (GTA) have stepped forward to take advantage of this historic opportunity to provide new homes and jobs.
The municipalities who did not apply to the DCRP did not leverage the chance to support vital new housing in their own cities.
Development charges (DCs) are an upfront fee developers pay to municipalities to help fund housing-supportive infrastructure and services like roads, ambulances, parks, and water and wastewater systems. As with all government costs across our economy, these charges are included in the home price and eventually paid for by the new homebuyer.
In the last 15 to 20 years, DCs have risen to such an extent in the GTA that up to $130,000 can be added to the cost of a single-family home and up to $80,000 to a condo in DC fees.
For the past few years, housing projects across the GTA have been struggling under a cost-to-build challenge where elevated costs, including government fees, have dramatically reduced their economic viability. This in turn has slowed housing starts and is undermining future housing supply and economic activity in the region.
Reducing development charges is one lever that governments have in this area and can improve project viability and housing affordability, as assessed by lenders and capital providers, which can in turn support increased housing starts, jobs and overall supply.
Following numerous studies outlining the relationship between the size of these charges, economic viability and housing supply, both the provincial and federal governments have taken concrete steps over the last few months to begin implementing the reduction of development charges (DCs) across Ontario.
Interestingly, a similar program was announced for British Columbia on June 18, which is the only other province in Canada to use a DC system.
After the announcement of the Canada-Ontario Partnership to Build in March, the DCRP was launched to allow government funds to flow to municipalities to support infrastructure projects. This would enable municipalities to simultaneously continue their planned infrastructure projects while also making cuts to their DCs to support the construction of new homes for a time-bound period.
The program is a three-year initiative targeted to reduce DCs by up to 30 to 50 per cent in some regions, restore confidence in the housing sector, and mitigate financial risk for participating municipalities. The first funding announcement under the DCRP was made on June 23, where the City of Toronto received $1.5 billion in return for lowering DCs by up to 60 per cent.
The DCRP is a win-win.
It allows municipalities to keep added costs on new homes low, improving viability and increasing supply, while at the same time still receiving the funding necessary to support growth and enhancing infrastructure within their regions.
Despite the clear potential benefits, Halton Region, Oakville, Milton, Halton Hills, Caledon, Newmarket, Aurora, King, East Gwillimbury, New Tecumseth and Collingwood have decided that they did not want to participate — which is squandering a historic opportunity to help address the housing challenges that have long plagued this region.
These municipalities will come to realize the opportunity they’ve missed
Each municipality had a variety of reasons for not applying to the DCRP, and ultimately chose not to move forward with the program as they did not see the benefit. The reasons for not applying ranged from perceived risk, to too short of an application window, eligibility concerns and long-term financial uncertainty. However, hindsight is always 20/20 and I believe these municipalities and their decision-makers will come to realize the opportunity they have missed.
In Ontario, and the GTA specifically, housing and housing-related issues have consistently polled as one of the top issues the public is concerned about. It is therefore very surprising that in a municipal election year these municipalities and region have opted out of a program designed to help address these concerns.
For any parent concerned about their child being able to afford a home, or for any young family or new Canadian looking to buy a new home, or for any senior homeowner looking to downsize but cannot because of a lack of viable options, and those working in the sector, I encourage you — especially in upcoming municipal elections — to ask politicians what decisions they have made to place you closer to realizing your housing goals.
