New report argues development charges unfair to new home buyers

New homes under construction (File)

If you’re buying a brand new home, you may be paying more than your share when it comes to development charges. That’s according to at least one expert in how municipalities operate.

“We say that growth should pay for growth, but I say everybody should pay for growth,” said Andrew Sancton. “We all benefit from it in some ways, and we all should share the cost of our infrastructure in our community.”

Development charges are the fees municipalities levy to cover the costs of infrastructure and other public amenities.

In his report, “Growing Pains: Rethinking Development Charges in Canadian Municipalities,” for the C.D. Howe Institute, Sancton, former Chair of the Political Science Department at Western University, argues municipalities should reduce their reliance on development charges and adopt models that spread infrastructure costs more broadly. This could include implementing user fees, or long-term financing by the municipality.

“If you look at the city of London website, it boasts about how their cost of borrowing per capita has been going down. London has huge reserves and is still charging big money,” said Sancton. “The other thing that could be done is, the cost of wastewater and water supply systems could be paid for through increased user charges.”

In London, the development charge on a new home is more than $50,000, which is paid up front by the developer when the building permit is issued. That cost is then tacked onto the price of a new home.

Mike Wallace, executive director of the London Development Institute, says the industry has long argued for a model that places less financial burden on developers, and in turn, new home buyers.

“The benefits for a new fire hall, a new recreation centre, a new park, these should be spread out to taxpayers across the city, the municipality, the city of London in this case, because we all benefit from new development,” Wallace said.

London Deputy Mayor Shawn Lewis says reducing development charges means raising everyone’s taxes.

“I don’t think homeowners are willing to start having a property tax increase to subsidize new growth build. If we’re going to look at changes we do, I think, have to look to the federal and provincial government to make that dedicated tax transfer,” Lewis said.

In an effort to spur new builds, this past spring the federal and provincial governments announced $8.8 billion in funding over the next decade to help municipalities substantially reduce development charges.

Sancton warns this could result in municipalities facing additional approval requirements, potentially delaying local decision making when it comes to development.

“We’ve had an affordability crisis that everybody’s noticed, and people don’t want houses so expensive. People look at development charges. I think that’s the main reason, and people said, ‘We’ve got to do something,’” said Sancton.