‘bullet in the head’
Developers warn charge hike could devastate condo market.
A bid to jack up development charges in Toronto has builders painting real estate doomsday scenarios, with one developer suggesting the move could potentially “put a bullet in the head” of the condo market.
Brad J. Lamb goes on to say he is furious at a proposal to increase charges on residential construction projects by about 90%. If approved, the cost a builder pays to the city for a two-bedroom or larger unit would jump to $23,036, up from $12,412, by next July. A development charge on a townhouse would go to $30,648 from $15,695.
developers say that cost, in the end, will be borne by the homebuyer.
“I think it’s insane,” said Mr. Lamb. “I think that the city of Toronto has feasted on the backs of condo buyers for too long, and with Section 37 charges and parks levies and educational levies and development charges and art charges and ridiculous Toronto Hydro hook-up fees, it has just become … actually disgusting.”
development charges are one-time fees meant to help pay for infrastructure needed to accommodate a growing population. The city is aiming to collect $2.4-billion over the next 10 years, or about $240-million a year. About one-third of that money will go to transit projects such as the Spadina subway extension. Staff also suggest increasing development charges for street-level retail by 32%. Builders who erect office buildings, large-scale industrial and affordable rental housing do not pay development charges.
Various city councillors agree charges should go up, but how much and how quick- ly is up for debate. Councillor doug Ford, for example, said he supports “a little” increase. City council has the power to set a lower amount, but whatever isn’t raised through development charges will have to come through taxes, other fees, or result in shelving projects.
Toronto’s development charges are the lowest in the Greater Toronto Area, with most municipalities demanding rates twice as high. A report before the executive committee suggests that even when adding in the cost of the municipal land transfer tax and education development charges, Toronto would be well below most of its neighbours.
The last time city council set development charges was in 2009, amid economic uncertainty. It opted to freeze charges for two years and phase in a lower increase — a move staff say resulted in about $350-million in “theoretical” foregone development charge revenues.
Mr. Lamb, and others, point out the revenue only comes if developers build, and this proposal will slow the market down further. “It’s not like it’s booming out there,” he said.
Alan Vihant, senior vicepresident at Great Gulf Homes, and Steve upton, vicepresident of development at Tridel, agree the timing is bad.
“When you introduce charges that are too high, people simply don’t build,” said Mr. Vihant, who says he will put one downtown condo project on hold until the development charge proposal is resolved.
Mr. upton, who is also chairman of the Building Industry and Land development Association, maintains when all fees are calculated, it’s not cheaper to build in Toronto. He is hoping councillors at next week’s executive committee defer the matter to the fall to allow for further discussion and warned that the industry will fight the proposal at the Ontario Municipal Board if it has to.