Ottawa city council approves development charge increases amid federal pressure to freeze rates

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Ottawa city council has approved an increase in development charges despite a warning from the federal housing minister that it could mean Ottawa will lose a shot at its share of a $6-billion infrastructure fund.

Development charges pay for infrastructure, facilities and services such as roads, sewers, water, stormwater management and drainage, police, public transit, parks and recreation facilities, libraries and ambulance services.

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The changes approved Wednesday represented an increase between 11 and 12 per cent. Inside the Greenbelt, single and semi-detached houses face development charges of $55,678 per unit, for example, while multiple, row and mobile dwellings will be charged $44,337. Outside the Greenbelt, charges will be $63,337 for single and semi-detached dwellings, and $49,738 for multiple, row and mobile dwellings.

THERE WAS DEADLINE PRESSURE

Last week, Housing, Infrastructure and Communities Minister Sean Fraser told the House of Commons human resources committee that Ottawa may not qualify for a share of the $6-billion fund, which requires cities to freeze development charges where they were at on April 2.

In approving the increases, Ottawa city council was up against a deadline. Under the 2019 version of Ontario’s Development Charges Act, municipalities must update their development charges bylaw at least every five years. Ottawa’s current interim bylaw was set to expire next week.

The city also faced losing money if it didn’t update the charges. Freezing development charges would have put a pause on $130 million in revenue, said Vivi Chi, the interim general manager of planning, development and building services. 

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After Wednesday’s council meeting, Mayor Mark Sutcliffe said the city is working closely with the federal government and shared the same goals of building more homes and more affordable homes, and of doing so as quickly as possible.

“I think the idea of freezing development charges at this time is very challenging for us,” Sutcliffe said, pointing out that the April 2 cutoff date was arbitrary.

Other municipalities have recently updated their development charges, so it doesn’t make sense to institute a freeze on a particular day and not take into account those that had recently updated, he said.

Development charges in Ottawa are a small component of the cost of a house and are lower than those in many other municipalities, Sutcliffe said. For example, in Vaughan, north of Toronto, development fees are about triple what they are in Ottawa, he added.

THE RISING COST OF EVERYTHING, INCLUDING URBAN SPRAWL

Meanwhile, the city’s costs have continued rising.

“We want to make sure that we keep homes as affordable as possible, whether they’re for rental or purchase, but we also want people to live in vibrant communities, and we can’t build neighbourhoods and have the infrastructure in place without development charges,” Sutcliffe said.

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The average price of a new home was slightly more than $500,000 in 2013. A decade later, it was slightly more than $1 million. But consistently development charges have made up five to six per cent of the cost, Stittsville ward Coun. Glen Gower said. Across Ontario, the range is usually between five and seven per cent of the cost of a new home.

“I think that’s a good benchmark that we can look at to determine if our development charges are still in a reasonable range,” said Gower, who supported the increases.

Sprawl has been expensive, Capital ward Coun. Shawn Menard said. If the city is serious about a reduction in development charges that doesn’t come at the expense of taxpayers, the best way to do that is to stop expansion of the urban boundary, he added.

Rideau-Jock ward Coun. David Brown said the city was between a rock and a hard place. However, because it is so expensive to build a home inside city limits, that has driven homebuyers to towns beyond the capital’s borders, he said.

“Take a quick drive over the western border of the City of Ottawa,” Brown said. “You can build a home for approximately $35,000 to $40,000 less than it would cost you to build it in Ottawa. You can get it done in half the time. So, although I’m going to reluctantly support the motion on the table today and pass this bylaw, I think we need to look at how we’re driving growth in the rural part of the City of Ottawa and how we’re contributing to enlarging the tax base of the municipalities around us.”

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HOME BUILDERS HAVE CONCERNS, TOO

Jason Burggraaf, the executive director of the Ottawa Home Builders’ Association said too much of a burden is being placed on new housing.

Before Bill 185, Ontario’s Cutting Red Tape to Build More Homes Act, the city was looking to extend the current bylaw because it had not yet completed significant background study work, including updates to the Transportation Master Plan and the Infrastructure Master Plan, said Burggraaf.

“However, once the prospect of being able to push through a significant development charges increase became available without the mandatory phase-in, it seems the city rushed its work in order to do so.”

The original proposal was to increase development charges rates by 28 per cent inside the core, 24 per cent in the suburbs and 40 per cent in the rural areas, he said. Those proposed rates were cut in half after an “error” was found through the home builders’ technical questions, said Burggraaf. The home builders have yet to see a revised background study that supports its figures.

There are “questionable” projects and cost allocations in the background study that are not related to growth, Burggraaf argues. One example in the development charges bylaw is a new Olympic-level swimming pool that’s intended to draw meets and new tourists to Ottawa, he said.

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“New home buyers are paying for the majority of that project. How is that related to growth?”

New home buyers are also paying for all of the interest on the construction cost of phase 1 of the LRT, even though it’s been open for five years and serves existing communities, said Burggraaf. “New home buyers, starting next week and conceivably for the next 10 years or more, are paying for that cost.”

Cities are restricted in their revenue sources and how they spend money, Sutcliffe said. Ottawa’s costs are increasing rapidly, but the only way the city can resolve the crunch is by raising taxes or by going to other levels of government.

“A better structure is needed where we have other sources of revenue or more sustainable commitments form other levels of government so we know that we can tackle these challenges,” he said.

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