London might slash development charges by 50%, but application to $8.8B program still vague

New home construction in London, Ont. (File)

On Wednesday, Mayor Josh Morgan summoned council for a special meeting to make a last-minute decision about participating in a federal-provincial program that aims to spur new home construction by slashing development charges (DCs).

“They are moving very, very quickly with this program,” explained Anna Lisa Barbon, deputy city manager finance supports about the short notice.

Last Saturday, city staff received critical details from the provincial government about applying to the Development Charge Reduction Program (DCRP) through the Canada-Ontario Partnership to Build.

Municipalities only have until this Friday at 10 a.m. to submit their applications.

The joint initiative by the senior levels of government makes a share of $8.8 billion available to municipalities that agree to reduce their development charges on new home construction by at least 30 to 50 per cent for a period no less than three years.

The funding must contribute to the cost of infrastructure projects that support residential development, like expanding roads and sewers.

However, Coun. Susan Stevenson was frustrated that a list of infrastructure projects to be included in the application on Friday, wasn’t yet available Wednesday morning.

“You have to have been working on this for the last couple of weeks. All that work is not visible to the public. It’s not accountable. It’s not transparent. And we are being asked to vote today blindly,” she argued.

Stevenson wanted to know more about the projects and their financials, rather than leave the choice of projects entirely to senior city staff.

Barbon explained, “We have estimates, many, many estimates that we are trying to refine. I did not feel it was prudent to put forward estimates that are going to change, possibly before we submit. But I am happy to provide that information [in a memo to council] as soon as we’re able to finalize it and submit an application.”

Municipal applications to the program will compete for a share of the senior government based on three criteria:

DC rate reduction – the depth of the local DC rate reductions, with reductions beyond the minimum 30 per cent being eligible for higher program funding.

Housing impact – the number of housing units enabled by the DC relief and on the number of housing units enabled by the project.

Municipal contribution – municipal contribution for each eligible project. While the minimum required municipal contribution is 10 per cent, applications that provide for more.

“There is a potential revenue gap that could occur in the event that the DC relief ends up being significantly higher than the lost funding,” Barbon acknowledged.

Among the risks to the city, similar to previous joint-funding agreements with the senior levels of government, the municipality is on the hook if the infrastructure project goes over budget.

Stevenson referred to the bus rapid transit (BRT) project’s cost overrun.

“We were fortunate enough to get financing for the BRT, and it has cost taxpayers hundreds of millions of dollars. We understand the risks. Hopefully, that council back then was more informed than we are right now,” she said.

Morgan said if London is approved for funding, a subsequent report will be brought forward in August to assess the terms and conditions set out by the province.

At that time council can choose to proceed or not.

“Just to be clear, we will still have another vote to decide whether or not to participate with all of the full details of what it actually looks like for the City of London,” Morgan explained.

However, Coun. Sam Trosow expressed concern that the decision might not be that simple.

“I really worry that we’re going to come back in August and it’s going to be sort of like trying to push a big boulder up a hill that has already started rolling down the hill,” Trosow warned colleagues.

Stevenson added, “I have an obligation on behalf of taxpayers to ask for more information. It is here. Somebody has it. Somebody is guiding this ship, and I thought it was going to be council.”

After an hour-and-a-half debate, council directed staff to submit an application.

“This is a program where council will make the final decision when we know all of the parameters and all the risks of the program, at the Transfer Payment Agreement stage later this year,” Morgan emphasized after the meeting. “So, there has been no final decision made except to apply.”

Based on a philosophy that growth should pay for growth, development charges are fees paid to the municipality on new construction intended to cover the cost of growth-related infrastructure.

Within London’s Urban Growth Boundary, DCs range from $22,364 on a small apartment up to $50,564 on a single-detached home.

There is no clarity on how the province will ensure that the 50 per cent reduction being proposed by city hall would be fully passed onto new homebuyers.

“That’s a great question for the province about how they are going to try to ensure that,” Morgan told CTV News. “I can tell you I’ve had conversations with our local development industry [and] they’re looking to lower the price of homes.”

Jared Zaifman, CEO of the London Home Builders’ Association wrote in a letter to council, “This is a rare, low-risk opportunity to dramatically improve housing affordability without shifting the infrastructure burden onto existing local taxpayers.”

A letter written by Mike Wallace, executive director of the London Development Institute reads, “The financial support this program provides, from the two higher levels of government, will have a direct and positive impact on housing affordability.”