The High Cost Of Serving Developers

Doug Ford has a lot to be happy about these days. His debt to developers is being rapidly repaid via his Bill 23, which will not only remove key parts of the Greenbelt for development but also relieve many of his friends' financial burdens paying development charges. 

The only problem is the largesse bestowed on them by Premier Doug means high costs for the rest of us, as Kofi Hope writes:

Currently, municipalities put a charge on most new developments (with some exceptions) to help fund the cost of infrastructure needed to serve those developments, such as roads, sewers and transit. The charges apply to each new unit built, and in Toronto an increase passed in 2022 raises them up to $137,000 for a new detached home.

The development industry has argued that these charges are a barrier to building new homes and to making housing more affordable. And some advocates have called for reducing these charges on specific types of housing that help with affordability.

Professor Matti Semiatyki of the Infrastructure Institute says that reducing or eliminating the charges developers pay will have real consequences.

 “Cities are expensive,” Siematyiki says. “All the things the city is raising money for with development charges are things they have to pay for… if developers or new owners don’t pay, someone else will pay, whether through property taxes or other ways.”

And this is the part of Bill 23 that has Ontario municipalities up in arms. It’s estimated that our already cash-strapped cities will lose $5 billion in revenue, and Mayor John Tory says the city could lose $230 million annually. 

The ramifications of waived developments fees are extensive.

 If municipalities lose the revenue of development charges, they’ll raise property taxes or user fees for things like garbage collection. These carrying costs all make it less affordable to own a home, and it doesn’t just affect homeowners. If owners of rental properties find their monthly costs going up, they will raise the rent for tenants. So even if the cost to buy a property in a city is, say, 15 per cent less, if you are paying thousands more each year to keep that property, has housing really become more affordable?

As well,

If municipalities believe they can’t recover the costs that are required for new developments, that could push them to resist new development proposals, meaning Bill 23 may add more conflict and delays to a process everyone agrees needs to move quicker.

And we have to remember, as they say, there is ultimately only one taxpayer.

 Whether government is providing grants to developers to build the type of housing we need, or waiving fees to incentivize housing builds, it means new costs (and costs for the state not private developers).

So in the end, no matter how one parses this, serving the interests of developers is working against the interests of municipalities and ultimately, of course, the taxpayer. 

The last time I checked, developers hardly needed state welfare.