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Bridge Beat

Dec 24, 2019

Development charges to be determined at time of first application: Bill 108 moves ahead in Ontario

Toronto has been seeking to delay the implementation of a number of changes affecting the calculation and payment of development charges that is coming into effect January 1, 2020, under Bill 108. 

Last Wednesday, December 18, 2019, City Council passed a resolution specifically requesting the Province to defer the changes relating to development charge rules to January 2021, to allow the City of Toronto to work out many issues with the Province.  

Municipal Affairs and Housing Minister Steve Clark, in a letter to Council on December 21, 2019, confirmed the changes will not be deferred.

Affordable housing advocate Councillor Ana Bailão had announced concerns over "further provisions of Bill 108 dealing with development charges that could potentially create loopholes costing City taxpayers millions of dollars."

The City characterizes these changes as loopholes, whereas in fact, the changes are a result of the Province's desire to speed up affordable housing construction, and as well, to create certainty and predictability for consumers. 

Currently, the rate of development charges is determined at the time of payment, which cannot be before a full superstructure building permit is issued by the City. Ultimately, the City controls the issuance of this permit and as a result, the timing of the issuance can be manipulated, deliberately or otherwise, and impact on the calculation of the actual development charges payable. 

For instance, most recently on November 1, 2019, a substantial increase in the Toronto Development Charges came into effect. Those developers that had their superstructure permits issued before that date were charged the pre-November 1, 2019, rates and correspondingly, consumers who were purchasing new homes or condominium units in these projects benefitted from the lower rates. However, many other developers who had completed their building applications were forced to pay the higher amounts because the City either failed to expedite or process their permit applications by November 1, 2019. 

Normally, in all purchase and sale agreements for new homes, there are clauses that allow the vendor to pass through any increases in the development charges that occur after a specified date. At the end of the day, increases in development charges directly impact on the ultimate purchase price and the cost of housing to consumers.

Under Bill 108 effective January 1, 2020, the amount of development charges will be determined when zoning is in place and when the first development application is made. That is an objective point in time which cannot be manipulated. Also, development charges would be paid at a much earlier date, giving the City of Toronto revenue earlier in the process.

As David Wilkes, President and CEO of BILD recently said: "Freezing development charges at the time of the planning application allows for cost certainty and predictability for the end consumer when purchasing a new home or condo. This is entirely positive."

In addition, certain projects such as rental housing, will see a deferral of the payment of development charges over several years, to encourage construction of affordable rental housing. The City again took issue with this change, notwithstanding the desire of the Province to encourage and speed up construction of rental housing.

As a result, the City of Toronto has imposed a penalty of 1.5% per month interest to cover the lost use of money during the time that development charges are deferred. This will in large part eliminate the incentive that the Province intended for spurring on rental housing construction. The City is clearly more concerned about maximizing revenues than encouraging creation of affordable housing.

It is time for municipalities to stop viewing new homes as the Golden Goose for infrastructure expenses. We understand that growth must pay for growth. However, it has to be done on a fair and equitable basis, and be tempered with the impact on housing costs.

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