Toronto Has $ 2.6 Billion In Development Fees And Fees In Reserve, Says BILD Report

More than $ 5 billion in development fees and charges are deposited in Ontario’s municipal reserve funds, adding to the high cost of housing and creating a “lost opportunity” to immediately improve the lives of residents and newcomers from the region, says the Toronto-area home builder. association.

The Building Industry and Land Development Association (BILD) released a study Wednesday of 16 municipalities showing that more money is being raised than is being spent through development charges. , park fees and density bonuses.

The city of Toronto accounts for more than half of that with $ 2.6 billion in reserves, according to the report prepared for BILD.

Toronto runs the risk of deterring housing and other projects if development costs continue to rise, said BILD CEO Dave Wilkes. He mentioned inclusive zoning provisions passed by the city council last month that will require developers to pay for affordable housing units in some areas.

Wilkes said he fears that “capital may flee to other areas of the region, but more importantly, capital will flee to other areas of North America where it is not that expensive to undertake development.

“City fees and charges are by far the largest component of government-imposed taxes and fees that account for 22 to 24 percent of the cost of a new home,” he said.

In Toronto, that increases to nearly 27 percent once inclusive zoning begins.

Where development fees and charges have increased by as much as 606 percent in the GTA since 2009, property taxes have increased by only 22 percent, BILD said.

“For me, the fundamental finding of the report is that the funds that are there to support growth are not being spent,” Wilkes said.

He said that BILD is not advocating for higher property taxes. But, “I think it is easier to raise taxes on new owners than it is to raise property taxes,” he said.

Single-family home development fees in the GTA increased from $ 31,500 in 2009 to $ 80,600 in 2021, according to the report. Vaughan had the highest rate at $ 118,400 for a single-family home.

Between 2013 and 2019, the combined development charge reserves of 16 area municipalities grew to $ 3.25 billion, an increase of $ 1.3 billion, of which the city of Toronto accounted for the majority. Its reserve balance increased by $ 839 million in that period, totaling $ 1.2 billion.

The study found that development charge reserves across the GTA increased 70 percent between 2013 and 2019 to $ 3.25 billion, an increase of $ 1.3 billion between them. The City of Toronto represented the biggest boost in bookings, increasing $ 839 million for a total of $ 1.2 billion.

Cash reserves earmarked for green space increased nearly 300 percent in the same period to $ 1.48 billion.

Meanwhile, Section 37 reserves – money raised primarily in the city of Toronto when it allows developers to exceed a location’s height or density rules – amounted to $ 311 million at the end of 2019. Toronto’s share of that was $ 303 million.

Keeping money in reserve means residents get less for their dollar, Wilkes said.

Development fees and charges are generally collected when building permits are issued or, in some cases, when a subdivision plan is approved. But often the infrastructure is not built until later.

“What will happen is that the cost of those projects will increase over time. Construction costs always increase and if it is green areas, the cost of land also increases, ”he said.

Most reserve funds are held in relatively conservative investments that would not see the same growth, according to Altus Group, which wrote the report, “New Money for Homeowners at the Government Bank: How Undone Municipal Reserves Are Affecting building livable and affordable communities in the GTA. “

There is no limit on reserve fund balances, according to the city of Toronto, which identifies projects eligible for development charges over a 10-year horizon. Rates are set based on those projects.

The city says its current plan calls for $ 3.3 billion in development charges.

Once among the lowest development rates in the region, Toronto has been trying to catch up to pay for an expanding capital plan that includes investments in affordable housing, public transportation and water. Raised an average of $ 632.6 million in development fees for each of the last three years. The city’s reserves grew to $ 1.68 billion in 2020 from $ 1.15 billion in 2018.

That was the same year developers scrambled to pay fees and charges before higher fees were applied in 2019.

However, not all municipalities raised more than they spent.

“In many of these cases (Peel region, Barrie region, York region, Halton region), it is the municipalities that are responsible for the water supply and wastewater treatment infrastructure, which often have large upfront costs that require financing. of debt to finance, with future DC revenue paying off annual debt charges, ”the report says.

But others spent less than half of their projected development expenses. They were Oshawa, who spent 43 percent; Toronto that spent 41 percent; Vaughan, 29%; Durham region, 26 percent and Whitby, 14 percent.

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