Development Charges Continue to Spiral

The endless taxes being imposed by municipal, provincial and federal governments does not abate.  The most recent example of an outrageous tax hike is the 99% hike in development charges passed by the Region of Peel’s Council.  bit.ly/NLcDLw

The justification of the Region’s Councillors including Mississauga Mayor Hazel McCallion and others authorizing an increase of each single family residential unit’s development charges from $17,830.00 to $35,532.00 without any type of phasing, is that development pays for growth.  Existing homeowners should not pay for such growth.  But what is lost in the impact of these staggering increases, is that the cost of housing in the GTA is making it virtually unaffordable for the average homebuyer.  The average cost in the GAT now is over $600,000.00 for a single family home.  To date, it is only the exceptionally low interest rates that have made it somewhat affordable.  When interest rates return to normalize rates of 5-6%, only the rich will be able to afford housing in the GTA.

Development has virtually stopped in the Halton Region as a result of massive tax increases on housing in that region, making it virtually impossible for developers to develop land in Halton and build houses at prices which people can afford.  There is a reason that July and August 2012 new low-rise housing sales dropped by 58% from the 13 year average and it is not because people suddenly want to live in high-rise apartments.

Sadly, the healthy real estate market which has been fuelled by tremendous high-rise sales has masked the growing disparity between low-rise and high-rise affordability and the fact that investors have been significant players in the high-rise market.  The province’s growth plan to intensify built-up areas has resulted in limited land being available for low-rise development, thereby increasing dramatically the cost of land.  This, coupled with massive tax increases by way of development charges and excessive parkland dedication fees which are all passed through to the purchaser, are resulting in the GTA becoming unaffordable for the average homebuyer.

Until sales grind to a halt, municipalities will continue to blindly impose massive tax increases without regards to the marketplace under the guise of “making development pay for growth”.  Much of the growth-related services benefit all taxpayers, not only new home buyers.  Asking new home buyers to pay for expanded transit, ignores the fact new transit benefits all taxpayers, not only new home buyers.

This, coupled with the imposition of the HST several years ago, is leading the GTA to an affordability crisis which will impact on the whole economy of Ontario.  The residential housing construction industry is a massive contributor to jobs and as it slows down, so will Ontario’s economic engine.

Politicians take heed.  Roger Anderson, Chair of Region of Durham, at the BILD GTA Leaders Dinner on Thursday, October 4, 2012, admitted that the development industry and new home buyers cannot foot the bill for much of the needed new infrastructure.  Only the provincial and federal governments can and should start footing the bill.