Canada’s housing minister has a warning for Ottawa city council: increase the development fees charged on new homes and say goodbye to federal infrastructure money.
Councillors will decide next week on a plan to hike rates on a single or semi-detached home in the Greenbelt by 11 per cent to $48,000, a much more modest increase than was originally pitched to the industry.
The fees have become a hot-button political issue in recent months.
Cities argue that they’re the best way to pay for the infrastructure — anything from roads and water pipes to parks and recreation centres — that supports new growth, while housing experts and federal politicians say they delay building and raise the cost of homes for buyers.
Housing Minister Sean Fraser told the House of Commons human resources committee on Thursday that by raising fees, the city may be about to put itself out of the running for money from a new $6-billion fund.
That fund requires cities to freeze development charges at the rate they were at on April 2.
“If they don’t abide by a freeze as of that date, they’re going to jeopardize their eligibility to tap into those funds going forward,” Fraser said.
The funding provides $1 billion directly to municipalities. But if no agreement can be reached with provinces, the rest of the $5 billion will also go straight to local governments.
Increase heads to council next week
Members of the city’s planning and housing committee brought up the fund before unanimously approving the hike at their Wednesday meeting.
Vivi Chi, the interim general manager of the newly reorganized planning, development and building services department, said staff crunched the numbers and found that freezing the fees would cost the city $130 million.
“Mind you, it’s not a number cast in stone,” Chi told CBC after the meeting. “It really, really depends on the context of what the agreement will be.”
The city is scaling back its transition period — a warning window for developers to adjust projects to the new rates — from six to three months. When asked why, she emphasized the importance of getting that additional funding as fast as possible.
“You’ve heard some of the councillors say that residents, when they move in, they want to have their libraries, their parks and so on,” Chi said.
“So, this is what the money’s being used for. It’ll just slow things down if we don’t collect.”
Coun. Jeff Leiper, who chairs the planning committee, likewise told CBC that waiting for federal money that might never materialize isn’t in Ottawa’s best interest.
“I don’t think it behooves us to knee-jerk to political initiatives that may or may not come to fruition,” he said.
Fraser ‘monitoring developments’ in Ottawa
But Fraser hinted Thursday that it may not be only infrastructure funds that are in jeopardy.
The city spent months last year negotiating a $176-million deal through the housing accelerator fund (HAF), which will be paid out in $44-million instalments.
Those are contingent on meeting an agreed-upon goal of issuing 4,400 building permits over three years.
Development charges appear nowhere in the HAF agreement signed by Mayor Mark Sutcliffe last December, but Fraser said that doesn’t mean the money is safe.
“It’s an outcomes-based program,” he said, noting that if the fee hikes slow down development as experts believe, it could affect Ottawa’s ability to hold up its end of the bargain.
“Then, certainly, we would withhold funds. No permits, no money. That’s my approach.”
Another key promise in HAF agreement was to allow four units to be built on any residential lot in Ottawa, something that’s included in the new comprehensive zoning bylaw that’s about to undergo 18 months of public consultation.
Conservative housing critic Scott Aitchison prodded Fraser on the issue at committee, asking why his office is supporting a city that’s raising the cost of building homes during an affordability crisis.
Fraser’s office later confirmed to CBC it is keeping track of Ottawa’s recent policy moves.
“We are monitoring developments in Ottawa and the impact that they might have on our existing agreements with the city, along with their eligibility for federal infrastructure or transit programs,” wrote communications manager Micaal Ahmed.
One such program, the future permanent public transit fund, has been on Ottawa’s budget wishlist for years now as it would provide much-needed operational funding to the perennially struggling OC Transpo.
New requirements added this year would require Ottawa to eliminate minimum parking requirements and allow high-density near transit lines, and ease zoning requirements around post-secondary institutions.