Mayor Rob Ford’s executive committee has voted to defer a bylaw that would nearly double Toronto’s residential development charges. City staff now have until September to review the proposal and consider the building industry’s concerns.
During the July 3 meeting, developers repeatedly argued the proposed increase in development charges – a cost recovery tool employed by the City to pay for required infrastructure (roads, water, transit and other upgrades) for new residents – would threaten the health of the residential real estate industry.
City staff say that, over the next 10 years, new development will cost the city $3.4 billion. This is why staff, along with many councillors, are backing a significant hike to development charges. If passed, residential rates would increase by 90 per cent and non-residential by 30 per cent, by the time the City finishes phasing in the increases. This would generate between $220 and $260 million each year.
The last review in 2009 saw Toronto city council freeze the charges for two years to help developers that struggled during the 2008 economic collapse.
But while the recession may be over, developers are still warning the industry faces risks.
Patrick Berne of the Muzzo Group said there would be financial chaos if Toronto had adopted the proposed increases. However, many councillors did not buy the ‘doom and gloom’ prophecy.
“You and your colleagues in the business, you’re saying the taxpayers of the city should shoulder those costs,” said Coun. Denzil Minnan-Wong.
Even with the proposed increase, Toronto will still have the lowest development charges in the Greater Toronto Area (GTA) – even when factoring in other building-related costs such as the land transfer tax.
Coun. Shelley Carroll said developers would only shoulder about 70 per cent of the required new infrastructure costs if the proposed increase is passed; the remainder would be passed on to the existing tax base.
She added that while the proposed bylaw may require some fine-tuning, Torontonians will not accept the status quo.
“Residents are telling (us) they want growth to pay its own way,” she said.
Eileen Denny, vice-chair of the Confederation of Resident and Ratepayer Associations (CORRA) in Toronto, said taxpayers have consistently funded the unmet cost caused by growth during the recent highrise boom. She argued it is inappropriate for the development industry to keep asking taxpayers to cover the costs associated with new development when there are many essential infrastructure repair projects sitting on the waiting list.
“Narrow the gap and shift the burden of infrastructure growth where it belongs,” said Denny.
Steve Deveaux, first vice-chair of the Building Industry and Land Development Association (BILD), told the committee that infrastructure projects involve a significant amount of money and, therefore, “It’s really important that we fund them correctly.” He said the proposed changes put too much of a burden on developers.
Deveaux went on to explain the cranes that dot the city skyline do not speak to the health of the industry today but, rather, the industry three years ago.
“Today (for consumers) it’s more about affordability,” he stressed, adding the proposed increase could affect developers’ ability to sell units, which, in turn, would result in less revenue for the City.
Some councillors called for balance and smart planning rather than simply increasing charges across the board.
“Do fees need to go up? Absolutely, yes. Do they need to go up substantially? Yes, they do,” said Coun. Adam Vaughan, before adding that incentives for priority neighbourhoods is an important factor in spurring growth in target areas.
Moving forward, staff will consult with developers and review their concerns regarding issues like the classification of stacked and back-to-back townhouses and possible incentives for developers building general rental housing units. If the mayor’s executive committee approves the re-submitted bylaw, it will then head to city council on Oct. 8 to vote on the matter.
Before the vote to defer, Coun. Minnan-Wong cautioned councillors and City staff not to give in to all the development industry’s demands.
“The developers want a deferral. The community associations want action,” he said.
He added that earlier consultations with developers already resulted in City staff reducing their initial proposed increases. Diluting development charges even further, he said, will only shift the burden to another source.
Now that the bylaw has been deferred, Coun. Minnan-Wong offered a prediction for the weeks leading up to September’s committee meeting: “Let the summer of lobbying begin.”
Daniel Viola is the online editor for Canadian Property Management and Building Strategies & Sustainability magazines. He is also the editor of Property Management Report.
