Development fees on some new houses could rise by more than $5,000 under a proposal approved by the city’s planning committee on Tuesday night.
By Jacob Serebrin.
But even if council gives the OK to the increases, homebuilders say they’re prepared to fight them.
The fees are intended to help pay for services and infrastructure such as roads at new developments. Local developers say they’ll appeal the increases – which amount to more than 30 per cent for some homes – to the Ontario Municipal Board.
Builders generally pass on fee hikes to homebuyers, meaning house prices will go likely go up if the changes are approved.
“We are deeply concerned about the impact of a 31 per cent increase on young families and first-time homebuyers,” Pierre Dufresne, president of the Greater Ottawa Home Builders’ Association, told the planning committee on Tuesday evening.
After an all-day meeting, the committee approved the plan with a few technical amendments.
Several other issues, including whether residential developments near proposed Confederation Line LRT stations and office buildings should be charged at lower rates, were referred to council for debate.
The city said it expects to bring in $2.4 billion from the charges over the next 10 years.
Under the plan, development charges on detached houses inside the greenbelt would rise from $16,891 to $21,959 on every new detached or semi-detached home, an increase of about 30 per cent. Outside the greenbelt, the charge will increase 22 per cent from $25,315 to $30,832.
Mr. Dufresne said higher home prices in Ottawa will drive some new homebuyers to suburbs outside of the city or across the river to Quebec if the plan is approved.
“While home prices have increased significantly, we all know that salaries have not increased that much,” he told the committee.
His group is also taking issue with the city’s math. Development charges are calculated using a formula set out by the province and are supposed to reflect actual costs.
Rob Howe, a lawyer for the homebuilders’ association, told the committee the city’s methodology “substantially inflated” the cost of road construction, which accounts for about 30 per cent of the overall charges.
According to Mr. Howe, who specializes in municipal and development issues at the Toronto law firm Goodmans, the city also failed to properly account for contributions from other levels of government to the east-west light-rail project, forcing developers to overpay.
Kanata South Coun. Allan Hubley, a member of the planning committee, told his colleagues that since the rates were likely to be appealed anyway, there was little reason to change them.
“This DC bylaw will be appealed,” Mr. Hubley said. “The OMB can only reduce the charge – they can’t increase it.”
Residential developments aren’t the only ones likely to see higher fees. Charges for commercial developments would rise by 10 per cent from $17.88 to $19.64 per square foot, while industrial developments will see a three-per-cent increase, from $8.22 to $8.47.
Bob Perkins, the past-president of the Ottawa Building Owners and Managers Association, told the committee that while his group has several issues with the proposed changes, its biggest concern is that the proposed bylaw would treat office buildings the same way as retail.
Under the existing bylaw, the development charge on office buildings is 19 per cent less than the standard commercial rate.
According to Mr. Perkins, with the removal of this incentive, office building developers will actually see an increase of more than 30 per cent.
“It has a direct impact on the local economy,” he said. “That’s enough to kill projects.”
Most municipalities in the province offer a similar break to office building projects, he said.
“Office space drives employment, and if we’re not competitive we’ll lose to other jurisdictions,” Mr. Perkins said. Unlike retailers, who set up shop where customers congregate, office tenants can locate almost anywhere and are particularly sensitive to cost increases, he said.
College Ward Coun. Rick Chiarelli criticized a plan to reduce the portion of the development charge earmarked for roads by 50 per cent on residential developments built within 600 metres of proposed O-Train stations.
Owners will see an increase in property values once the LRT project is completed, he said, and that “significant windfall” should be enough to encourage development. That incentive was referred to council for further debate at its June 11 meeting.
Meanwhile, there could be more fee increases on the way for developers.
The fees proposed by city staff don’t factor in the cost of additional social housing and subsidized childcare. The committee instructed staff to start crunching those numbers and report back to them when they’re ready.
Proposed increases in development charges
Detached and semi-detached houses (per unit):
Inside the greenbelt: $5,068 increase, from $16,891 to $21,959
Outside the greenbelt: $5,517 increase, from $25,315 to $30,832
Rural (serviced): $3,603 increase, from $16,082 to $19,685
Non-residential (per square foot):
Commercial: increase of $1.76, from $17.88 to $19.64.
Limited industrial: increase of $0.25, from $8.22 to $8.47