LILLEY: Development, other municipal charges drive up the cost of housing

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The fight between the Ford government and Ontario municipalities over development charges is really a fight for the golden goose.

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Municipalities fear the Ford government will take away an easy source of revenue in an effort to make housing more affordable.

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According to the Association of Municipalities of Ontario, the changes made by the Ford government could take up to $1 billion out of municipal coffers annually over the next eight years. In other words, municipalities will not increase the cost of affordable or accessible housing with high development charges.

It’s really all in how you look at the situation.

Development costs in Ontario, particularly in our major cities around the GTA and in Ottawa, are not only among the highest in Canada, but also among the highest in North America. A study by Altus Group, an international real estate consulting firm commissioned by the Building Industry and Land Development Association (BILD), shows just how bad things are in Ontario.

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Municipal charges for low-rise housing, whether a single-family home or a house in a smaller apartment or condo, average $116,900 per unit. This ranges from $189,325 in Toronto to $113,635 in Oakville and $84,966 in Oshawa.

In Ottawa, the total municipal fee for an apartment or condominium unit in a high-rise building of 20 stories or more is $85,745 per unit. That’s a 202% increase over the same cost in 2020.

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While advocates at the municipal level tell developers to build, not collapse, municipal charges actually make this option less affordable. While the overall cost of a low-rise home is lower in most municipalities, the price per square foot is much higher for high-rise units, meaning the price incentive makes building homes low height more attractive.

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In Toronto, the cost per square foot for low-rise construction is $85, but rises to $125 in a high-rise. In Vaughan, the lowrise price is $76 but jumps to $152 for a highrise. In Ottawa, which recently significantly increased its development fees and other municipal charges, the cost per square foot for low-rise buildings is $18, but jumps to $116 per square foot for a high-rise.

It’s more than development fees, which the Ford government’s Bill 23 deals with when it comes to affordable and accessible homes, it’s also money in lieu of park, it’s fees community benefits, GO Transit fees for developers in the GTA, school development fees .

A study by Altus Group in September 2019 estimated the total cost of fit-up fees in the GTA at between 9-12% of the total cost of a home. The total cost of all government fees for a new home, including HST, land transfer tax and more, was over 20% of the total price.

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Since that study, large municipalities like Toronto, Ottawa, Mississauga and others have increased their fees dramatically. These municipalities have treated development fees, which are only passed on to new buyers, as a cash cow. It allowed municipalities to increase revenue by forcing new buyers to pay a disproportionate share of infrastructure costs while keeping taxes lower than they would otherwise be set.

A BILD study, again conducted by Altus Group, suggests that changes to what municipalities can charge for affordable or accessible housing will amount to less than 1% of their annual revenue. As anyone who has run a large organization can tell you, finding a 1% savings is the easy part.

Municipalities have become overly dependent on development charges and the like, charges that only increase the cost of housing for those who can least afford it. Bill 23 is an attempt to remedy this.

City leaders would be wise to embrace it, not fight it.

blilley@postmedia.com