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Rising development charges impact new home buyers

Michael Moldenhauer
Toronto Star
May 10, 2008

If you think about the cost to fill up your gas tank seven years ago versus today, you are probably painfully conscious of the difference. According to Statistics Canada, that tank of gas is costing you a whopping 57 per cent more today than it did back in 2001. Ouch!

There is, however, a product that has jumped even higher than gas. Average development charges (the fees builders pay to municipalities every time they take out a building permit for a new home or condo) have increased 75.1 per cent since 2001, and rocketed as high as 342 per cent in the City of Toronto.

Development charges have doubled, if not tripled, in several GTA municipalities over the last seven years. These charges now exceed $30,000 per single detached home in nine GTA municipalities, topping out at $35,398 in Brampton. You can get a very good car for that kind of money, never mind the gas.

Considering that the overall inflation rate for Ontario has risen just 11.7 per cent since 2001, average development charges are up 6.4 times the rate of inflation. Meanwhile, the new home price index has risen 26.6 per cent, so development charges are up three times the price of the product itself.

Since no one else seemed to be keeping track, our association started crunching the numbers. Earlier this week, we released the results in a report titled Over the Top: The Impact of Development Charges on New Homebuyers (see www.bildgta.ca/media_releases.asp).

The impact on new homebuyers is clear. The higher development charges rise, the less people can afford to buy new homes, and when the charges are rising three times faster than house prices and six times faster than inflation, housing affordability obviously suffers.

It’s no revelation that the dramatic increases in development charges coincided with the downloading of social service costs onto the municipalities. By the same token, development charges represent the further downloading of these costs onto new homebuyers, a situation that is unsustainable and counterproductive.

With so many municipalities contemplating further dramatic increases to their development charges, we felt it was time for a reality check on just have fast the charges have been rising and the levels they have reached.

The Over the Top report urges the provincial government to upload the cost of social services from the local level and calls on the federal and provincial governments to increase the level of infrastructure funding to cities for roads, transit, sewer and water services. BILD also supports Mayor Hazel McCall ion’s Cities Now initiative to make infrastructure a national priority.

We are eagerly awaiting the report of the Provincial-Municipal Fiscal and Service Delivery Review, which should pave the way for uploading of the previously downloaded social service costs. In fact, the provincial government has already taken the first step by uploading the Disability Support and Drug Benefits programs. As noted by Premier McGuinty at the time, “the downloading of these programs stands as one of the worst misjudgements of the previous government.”

Municipalities also need more infrastructure funding support from the senior levels of government and there needs to be far more co-operation and a lot less bickering between Ontario and the federal government.

At the end of the day, what’s good for homebuyers is good for government at all levels. The more people can afford new homes, the more jobs and tax revenue the development and homebuilding industry can generate.

Over-the-top development charges could ironically result in less revenue for all levels of government. Unfortunately the jobs would disappear too.

Michael Moldenhauer is president of the Building Industry and Land Development Association. The views expressed are those of the president.

Posted on Wednesday, July 9, 2008 at 01:25PM by Registered CommenterElaine in | Comments2 Comments

Reader Comments (2)

Rising developement charges, rising gas prices, rising inflation. It really seems like there is nothing decreasing. But you would be wrong assuming this. As a Vancouver realtor I would say that the number of listings increased considerably in the past few monthts. And this forces sellers to decrease the asking price in order to overtake the competition. The increase of 75,1% may seem horrible, but it may not be so bad after all.
July 12, 2008 | Unregistered CommenterVancouver realtor
I agree with your post. Last two paragraphs are absolutely true, unfortunately the government still didn't understand it. It's a simple rule - the freer the market, the healthier the economy. And of course as a result, the more satisfied people. I as a Toronto realtor also think that situation, where the fees grow more than six time the rate of inflation is not good for the buyers and thus not good for whole economy and society. Especially in these times. Cheers, Julie.
July 16, 2008 | Unregistered CommenterToronto realtor

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