Wednesday, May 29, 2024

Building a home in Ottawa could soon cost developers, or you, an extra $12K | CBC News

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Ottawa’s development industry is feeling sticker shock from a proposed hike for the charges that pay for new roads, water pipes, libraries and parks, with experts warning the extra $12,000 could stop homes from being built. 

Members of the city’s planning and housing committee will debate a new development charge bylaw on Wednesday, and they’re prepared for pushback.

“Certainly a development charge does add to the cost of a new home,” said Stittsville Coun. Glen Gower. “It gets passed on to a homebuyer, so there’s definitely a link to affordability.”

But he warned that charging too little could make the city unable to pay for expanded public transit or a new fire station. 

If approved, the fees on a new single or semi-detached home within the Greenbelt will increase about $12,000 from the current $43,000 fee to $55,000 — a roughly 28 per cent hike. 

Building a similar home outside the Greenbelt would cost even more: about $63,000. 

Kitchissippi Coun. Jeff Leiper, who chairs the committee, said this process is “always contentious.” 

But industry stakeholders found this year’s process particularly chaotic, as staff rushed to ensure the bylaw can be approved days before it expires.

Can growth pay for growth?

Development charges are designed under the planning mantra that “growth pays for growth” — a principle that’s become far less certain as other levels of government tinker with rules in efforts to boost dwindling housing stocks.

Two overarching planning documents guide the process: the infrastructure and transportation master plans. 

Neither have been updated in a decade, though work on both is nearing completion. 

It only forecasts about 82,500 new housing units over the next decade, far from the 151,000 pledged by the city (but deemed “aspirational” by staff). 

Ideally, city staff would be waiting to update the development charges bylaw with the new versions of those master plans, but the province set a deadline that can’t be changed. 

“We don’t have a choice,” said Leiper, who called the situation “less than optimal.”

Buyers want more warning

The federal government also recently announced a new $5- to $6-billion infrastructure fund that cities can only access if they agree to freeze their development charges for three years. 

Gower suspects the city hopes to get fees up fast, so they don’t lose out. 

That would provide an explanation for another change that’s rankled industry insiders — the removal of a six-month transition period that allows developers to plan for hikes before they’re enforced. 

It ensures home buyers aren’t slapped with a bill higher than they’ve budgeted for, and protects planners from drowning in the tsunami of building permits filed by builders who want to get in on the lower rate. 

Jason Burggraaf, the executive director of the Greater Ottawa Home Builders’ Association, said if that’s not changed, people who’ve already signed contracts with a builder and negotiated financing for their new home could be in for a nasty surprise. 

“You could turn around and be on the hook for another five, to ten, to $14,000 depending on where you are in the city,” he said. “There could be a lot of families on the hook.” 

Jason Burggraaf, the executive director of the Greater Ottawa Home Builders’ Association, is worried that the lack of a transition period will catch many families off-guard. (Jean Delisle/CBC)

Fees ‘choking off’ development, expert argues

As governments come up with competing plans to tackle the housing crisis, development charges have become the subject of much criticism.

Originating in the 60s and 70s as a way to keep property taxes low, University of Ottawa housing researcher Carolyn Whitzman said they are now “choking off a lot of development.” 

While far from the only thing stalling building projects, Whitzman argues the development charges are regressive.

“They greatly increase the unaffordability of new buildings for renters and owners,” she said. “They’ve gotten completely out of control.” 

A woman in a red blazer stands in front of some seats and smiles.
Housing policy researcher Carolyn Whitzman says development charges are ‘choking’ the industry and she believes they need to be lowered or eliminated. (Kate Porter/CBC)

But cities have few other options.

They can lobby for increased federal or provincial funding or raise property taxes, which can be difficult to manage politically.

“Development charges are predictable, they’re certain, and they’re relatively cast in stone compared to putting the costs of that infrastructure on the tax bill,” Leiper said.

What’s in the fine print?

Another thing that’s changed since these fees were first imagined is where developments happen. 

It’s easy to argue why developers should pay for massive infrastructure projects in newly created suburbs, but harder to explain why most of the cost for downtown parks and transit stations should be borne by newcomers to the area. 

In order to justify the bottom line charges, staff must explain exactly where every dollar taken from developers will go.

Some projects are entirely paid for through new development. 

Burggraaf went through every line item in  the city’s 358-page background study, and argued that developers are shouldering too much of the burden for projects like debt servicing costs for light-rail transit projects, a new aquatic sports centre, and urban recreation centres. 

A blue and white for sale sign in front of a red brick house
Councillors say growth must pay for growth, if the city is going to keep up the maintenance of critical infrastructure. (Sean Kilpatrick/The Canadian Press)

Last minute changes irk industry

Burggraaf noted one other frustration with the city’s development charge plan. 

After months of work, he said staff have given him just a few days’ notice that a drastic change in the fee structure is in the works. 

When it’s tabled on Wednesday, Burggraaf expects the $12,000 fee-hike will be slashed to something closer to $6,000. 

It should be a victory, but he’s left wondering what has been cut, and why staff took so long to share the news. 

“I’ve got examples of projects we’re concerned about,” he said. “But what if it’s a legitimate project, right? A new road and more water infrastructure that was needed that got the axe in order to reduce the rates.”

The city would not comment on the meeting or what was discussed, but councillors expect at least some changes will be unveiled at Wednesday’s meeting. 

No matter what concerns are raised, it’s unlikely councillors will vote against the bylaw since that would put the important revenue stream at risk. But if the industry isn’t happy with the outcome, it’ll have the option to launch an appeal. 

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