Ottawa’s city council is considering a proposal to increase property development charges, despite the federal government’s warnings that municipalities that hike costs that are passed on to developers could jeopardize federal housing funding.
Council is set to vote Wednesday on a new bylaw that would increase development charges by between 11 and 12 per cent, which would add up to $6,200 to the cost of a single-family home after a three-month transition period, during which the new development charges wouldn’t apply to homes.
The proposal would put the city at odds with the federal government’s $6-billion Canada Housing Infrastructure Fund announced in April as part of the federal budget, which requires municipalities to freeze development charges to qualify. The fund is designed to pay for infrastructure such as pipes and sewers needed when building new homes.
The infrastructure fund is among a pair of housing programs launched by the federal government that requires cities and provinces to make changes to density, development charges and other policies in order to qualify for billions of dollars for new housing construction. The other is the Housing Accelerator Fund, which requires cities to end zoning for single-family homes and allow fourplexes everywhere.
Under the proposal up for debate on Wednesday, development charges for single and semi-detached homes within the city’s Greenbelt would increase to $48,265 from $43,494. In areas outside the Greenbelt, the charges would increase to $57,596 from $51,376. Ottawa’s Greenbelt is an area of about 20,000 hectares of green space on the southern edge of the city.
Federal Housing Minister Sean Fraser told a parliamentary committee last week that cities that increase development charges would put funding under the infrastructure program at risk.
“If cities have made these increases, we’ve put the date of April 2,” Mr. Fraser said in response to questions from a Conservative MP. “If they don’t abide by a freeze as of that date, they’re going to jeopardize their eligibility to tap into those funds going forward.”
Mr. Fraser also said that while the Housing Accelerator Fund does not contain any language about development charges, if those increased charges make it more difficult for a city to meet its housing targets, then that money would also be in question.
Micaal Ahmed, communications manager in Mr. Fraser’s office, said the government is monitoring developments in Ottawa and the impact they might have on existing agreements with the city, along with its eligibility for federal infrastructure or transit programs.
Ottawa Councillor Jeff Leiper, who also chairs the city’s planning and housing committee, said the city stood to lose more money if it keeps development charges flat.
“The amount of forgone revenue from the infrastructure fund is significantly less than we would bring in by raising our development charges.”
“I think the minister’s comments were just intended to convey caution to council. And, you know, my message would be that council is very cognizant of the need to ensure that lots of housing is built to address demand,” Mr. Leiper said in an interview.
The city was initially considering increasing development charges by 28 per cent, or about $12,000, but that was later reduced after new calculations from staff.
Mr. Leiper also said council is “very open” to measures such as rezoning to allow increased density and heights, but he said the degree to which the city meets its housing targets depends in large part on factors that are out of its control.
“We can approve new density. We can approve new heights. We can give generous new permissions for building housing,” he said. “But if the underlying economic considerations don’t work out, then builders aren’t going to build and I think that the federal government understands that.”
In a statement, Association of Municipalities of Ontario president Colin Best agreed that a freeze in development charges could negatively affect municipalities.
“Development charges have been part of Ontario’s municipal fiscal framework for decades and are a critical way that municipalities recover the incremental costs of infrastructure investment to support new housing and growth.”
Jason Burggraaf of the Greater Ottawa Home Builders’ Association, which represents more than 400 companies working in residential construction and professional renovation, said the increases will be an obstacle for new homebuyers. That increased cost would then push people into surrounding communities such as Rockland, Kemptville or Carleton Place.
“Every increase in the sticker price of a house cuts out the number of people who could have afforded it before,” he said. “Any increase in prices is really quite concerning.”