The cost of building homes in Toronto will soon rise by tens of thousands of dollars per unit as the city raises development costs by nearly 50 percent.
The fees, which are charged to developers and help pay for the associated capital investments required to support new development, are assessed every five years using a long-standing formula.
City officials maintain that even with the increases, Toronto will still have cheaper development fees than several neighboring municipalities, including Markham, Mississauga and Vaughan.
But at least one residential construction industry representative says costs have now risen too high in Toronto and surrounding communities and risk “killing future projects” at a time when the region is in the midst of a crisis. of housing.
“You are completely wrong. It’s almost like there’s some group that doesn’t want housing supply, it’s almost like they want to stop growth in Toronto,” Ontario Residential Construction Council President Richard Lyall told CP24 this week. “It will affect builders and developers in terms of their ability to bring projects to market. But the people who will be hit hardest by this are the ones who just barely made it onto the market and can now only afford a home. It’s totally irresponsible and amazing.”
The new development fee framework, which still needs to be approved by the city council at the end of this month, would see the increases gradually over the next two years.
However, by 2024 developers would pay an additional $18,000 for each one-bedroom unit and an additional $35,000 for each unit with two or more bedrooms. The increase for single-family and attached homes, meanwhile, would be approximately $43,000.
City Controller Andrew Flynn tells CP24.com the charges are based on the “growth pays for growth” principle, but said in reality “legislative constraints” around development charges mean that “growth will only pay for 55 percent of growth.” in Toronto for the next two decades.
“Toronto is a large and populous city, and it is projected to experience substantial growth over the next 30 years. The development charge study used to inform these rates forecasts an increase of more than 430,000 people and 185,000 employees in Toronto by 2041. This level of growth requires investments in necessary growth-related services and infrastructure to create entire communities. ”, he said in a written statement.
Flynn said investments in “transit, highways and affordable housing” are the “key drivers” of the fare increases, accounting for about 80 percent of the additional costs. This includes the city council’s goal of creating 40,000 new affordable housing units over the next decade.
Flynn said other major infrastructure projects related to growth, such as “the Waterfront Transit Network, the Eglinton East LRT, and the Line 1 and Line 2 capacity improvement projects” are also combining to drive up costs. higher development.
But Lyall said the whole “growth pays for growth” approach is “nonsense” when so many people struggle to access housing in Toronto.
He wants Queen’s Park to step in and set some “meaningful standards” for things like development charges, as well as the approval process that can result in delays for developers eager to put shovels in the ground.
“I know they have a formula and I’m not saying the city doesn’t need money. But this is not the way to do it. This is hammering our future. It is falling on the backs of new owners and new tenants when in reality it should be spreading among society because when cities grow they create additional wealth and so on for the entire population,” he said. “The entire population benefits from growth and we need growth. (The cost) shouldn’t be regressive, right? It should not be leveled solely on the backs of new buyers and renters.”
Development charges will range from $52,000 to $137,000
City staff had initially proposed development fee increases that would have amounted to an average increase of 49 percent for residential projects, but reduced the increase to an average of 46 percent after consultation with stakeholders.
The new structure will see developers charging between $52,000 for a one-bedroom apartment unit and $137,000 for a single-family home, at the time they apply for permits.
The staff says the fees are “rooted” in $67 billion in planned capital work over the next two decades, $14.9 billion of which is eligible for potential recovery through development charges.
But the increases will further inflate construction costs in a city where developers were already paying Canada’s highest development costs.
In fact, a CMHC report released this week revealed that developers in Toronto pay $86 per square foot in government fees, compared to $70 in Vancouver and $24 in Montreal.
The report says fees in Toronto represent between 10 and 23.5 percent of construction costs, depending on the type of housing.
“There is no question that these (fees) increase the cost of a new home. But I think, you know, there’s an immediate story but there’s also a bigger story and I think the really important thing to look at here is how do we finance growth? How do we make sure that financing growth is an equitable approach?” David Wilkes, president and CEO of the Construction Land and Industry Development Association, told CP24 this week. “We cannot use the funding approaches and tools and approval systems of the 1960s and 1970s for today’s challenges. What was Einstein’s phrase? That insanity is defined as doing the same thing over and over again and expecting different results. We have to stop doing the same thing.”
MAYOR TO MAKE AMENDMENTS
Development charges have risen rapidly in Toronto in recent years, rising by 80 percent when last reviewed in 2018.
That has prompted some industry stakeholders like Lyall to call for changes to the system.
He told CP24.com that the level of increases developers are now being forced to pass on to buyers “completely undermines any goal to hit any kind of meaningful affordable housing goals or just housing goals.”
“It’s delusional,” he said.
However, city officials maintain that the charges are simply a “function of growth-related expenses, which have increased in Toronto along with the level of growth the city is experiencing.”
They say that “development has continued and has been strong for the past few years,” despite increases in development charges.
Mayor John Tory is also believed to support the new framework.
His spokesman, Don Peat, told CP24 that Tory believes the proposed increases ultimately “balance the need for growth to pay for growth with the need to ensure we continue to build more housing.”
Peat said that while Tory will present some amendments at next week’s executive committee meeting aimed at addressing “concerns about the impact of development charges on small developments, rental housing construction and housing efforts affordable,” will support the broader recommendations made by staff,
“We want to make sure that growth continues to pay for growth and that the infrastructure needed to house more homes and more people is properly upgraded to accommodate new developments,” he said.
If approved by the city council, half of the proposed increases would take effect beginning in May 2023 and the other half would be phased in the following year.