Adam: Housing minister shouldn’t fight with cities over charges

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The federal government and the city of Ottawa, perhaps cities across the country, are on a collision course over development charges, but it is a pointless clash that must be avoided.

At the heart of the disagreement is whether cities need to hike development charges that help pay for the infrastructure that new housing communities need to make them livable. New developments can’t do without roads, water and sewer lines, transit, parks, libraries or police and fire services, but these cost millions of dollars and someone has to pay for them. So, cities such as Ottawa levy development charges on homebuilders to help defray the costs.

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Ottawa recently hiked the charges by 11 per cent for homes built inside the greenbelt, and 12 per cent outside. Last year, Toronto increased development charges by 20 per cent. The idea is to make growth pay for growth, and it is reasonable to ask developers to pay their fair share.

However, the federal government, which is now spearheading housing construction, believes that the charges hinder the ongoing effort to build new homes faster, and it wants the fees frozen. Housing Minister Sean Fraser recently warned that Ottawa could be cut off from the federal government’s $6-billion infrastructure fund if it increased development charges. The city did anyway because it needs the money.

Needless to say, threatening cities that are the foot soldiers in housing construction would be counterproductive and undermine what the federal government is trying to achieve.

Do development charges add to the cost of new homes? Yes. Inside the greenbelt in Ottawa for example, single and semi-detached houses face charges of $55,678 per unit. For multiple and row housing, the charge is $44,337. Outside the greenbelt, the charges are $63,337 for single and semi-detached homes, while multiple and row housing will be charged $49,738. Some of these charges, if not all, are passed on to the homebuyer. It’s not ideal, but remember for instance that a grocer whose costs rise doesn’t absorb them all; some of the increase is passed on to the consumer. And all we do is gripe about it.

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Those who argue for freezing development charges haven’t explained where the money for new housing infrastructure will come from.

Another question: Are development charges the main reason developers are not building new homes as fast as the feds want? Not really. There are bigger factors such as inflation, which affects borrowing costs for developers, and the shortage of skilled construction workers. Development charges are not the villain here.

The city says freezing development charges would cost the city $130 million, money it doesn’t have lying around, but which is needed to help pay services for new homes. Which leads to the question: If the city can’t raise money through development charges, how is it going to pay for the services? All of it can’t be put on property taxes because existing homeowners are also stretched and can’t keep paying more taxes.

The answer lies with the federal government and it won’t come from threats. The feds have said the new infrastructure fund will cover the hole left by development charges, so the first question to ask is whether the $6 billion set aside for the task is enough. If the fund is enough, then there should be no bickering. What needs to start immediately is dialogue with cities either through the Big City Mayors’ group, the federation of municipalities, or individual cities, to ascertain their needs and how to meet them. The City of Ottawa says it is open to revisiting development charges when there is more certainty about how the infrastructure fund would work. Which suggests things can change if federal money is truly available to pick up the slack.

The federal government wants more housing built, and has done a good job at it so far. Municipalities are willing partners in this endeavour, and there is no need for confrontation. Fraser must understand the plight of the cities and work with them to achieve a reasonable solution.

Mohammed Adam is an Ottawa journalist and commentator. Reach him at nylamiles48@gmail.com

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