Brandon Donnelly

Daily insights for city builders, delivered every morning at 6 AM ET. I’m Brandon Donnelly — a Toronto-based real estate developer and founder of Globizen. I’ve been writing here since 2013.

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Canadian cities will need to freeze their development charges if they want infrastructure fund money

Here’s some positive news. This past week, the Government of Canada announced additional details around its $6 billion Canada Housing Infrastructure Fund (CHIF). The goal of the fund is to accelerate the construction of housing-supportive infrastructure (water, wastewater, stormwater, and solid waste), and the plan is to deliver it through two distinct funding streams.

The first is what they are calling a “direct delivery stream”, and this is how the first $1 billion is going to be allocated. Municipalities and Indigenous communities will need to apply, and the funds are expected to be distributed over the next 8 years. But to be eligible — and this is the positive news — municipalities will need to have done the following:

  • Adopt zoning permitting “four units as-of-right” per lot in all low-density residential areas that have municipal servicing
  • Implement a three-year freeze on development charge increases beyond whatever rates were in place on April 2, 2024 (which is when the initial CHIF announcement was made)

Toronto has already done number one. But many/most other municipalities have not, so this should provide a further incentive. As for requirement number two, my understanding is that this is not (yet) in place pretty much anywhere. I haven’t heard of any municipalities committing to this. So I’m taking this as incremental good news. (Please correct me if I’m wrong.)

There are, however, important caveats: item number two only applies to municipalities with populations greater than 300,000 people. This seems unnecessarily high. And I can speak from firsthand experience working in communities below this threshold.

Three-years also isn’t very long when it comes to development timelines, especially in this market. A complicated rezoning process might take 3 years, or even 10 years. So this is very much for small-scale projects, which may be impactful or it may not be, depending on quickly the market responds to policy changes like requirement number one.

The last thing I will say, and this relates to yesterday’s post, is that freezing is good, but lowering is obviously better.

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4 responses to “Canadian cities will need to freeze their development charges if they want infrastructure fund money”

  1. johnbarnott Avatar
    johnbarnott


    We have a housing shortage that is inconsistent with our immigration numbers. China has millions of unoccupied apartments and/or houses in various cities. Should we not be looking to the Chinese? Notwithstanding authoritarian attitudes towards land ownership and other issues, they have built an extraordinary number of dwellings in a fairly short period of time.

    Reply
  2. AM Avatar
    AM

    Every neutered regulation counts, but this still feels like too little too late.

    Plus it’s interesting to see the government steal ideas from the conservative platform in their panicked frenzy of the waning days of a hated administration.

    Reply
    1. Brandon Graham Donnelly Avatar
      Brandon Graham Donnelly

      Yup

      Reply
  3. scottonthespot Avatar
    scottonthespot

    I wrote the following to the Taxopoly Media Relations email:

    Media relations –

    Your site is amusing, interesting and alarming…but it gets a key premise wrong.  More on that in a moment.

    Did you know that Monopoly, upon which your Taxopoly is obviously based, was itself a variant of The Landlord’s Game, invented by Georgist activist Lizzie Magie in 1903?

    The original variant was a way to teach players about Land Value Taxes, as explained by journalist and political economist Henry George (1839-1897), who wrote one of the world’s best-selling books ever, Progress and Poverty (1879) and several other books.

    According to Wikipedia: https://en.wikipedia.org/wiki/Lizzie_Magie

    Magie was an outspoken activist for the feminist movement, and Georgism, which reflected her father’s political beliefs when she was young.[2] Georgism refers to the economic perspective that instead of taxing income or other sources, the government should create a universal land tax based on the usefulness, size, and location of the land (Single tax). Then, after funding the government, the left over money would be distributed to the people. Many progressive political leaders at the time supported this economic perspective as it motivated people to cultivate land, redistributed wealth to people of low socioeconomic standing, eradicated the idea that landowners or landlords held the power and monetary value of the land that citizens used, and let people own all of the value and benefits of their creations.[4] This belief became the basis for her game known as The Landlord’s Game.[2]

    The variant that came to eventually be known as Monopoly was stolen by several parties, reworked, and eventually licensed by Parker Brothers from Lizzie Magie, as well as the original Landlord’s Game.  Unfortunately for society, the more ruthless, winner-take-all version, Monopoly, came to be the popular version, not the home-promoting version that Magie was trying to teach people to embrace.

    Your site and Taxopoly game, such as it is, does not make the distinction between taxing land and taxing buildings.

    But the fact is, a tax on land alone, while untaxing buildings would encourage building to highest and best use (zoning permitting), ending speculation and hoarding of idle land, and production of housing at all levels of income.  As it stands now, building is actually discouraged by increases in property assessments – and therefore, taxes – when a building is built, while vacant or barely occupied land may be barely taxed at all, even just next door.  The incentives of the Land Value Tax have been tried and proven hundreds of times.  See the attached summaries of case studies by Common Ground USA found, Steve Cord, or the Common Ground USA website here: https://commonground-usa.net/ or the website of the local New York City chapter here: https://commongroundnyc.org/.

    I hope that in the future, your site: https://www.cantwin.ca/ and the board game it promotes, can be updated to reflect the advantages of the Land Value Tax vs. the current two-tier property tax which includes taxes on both land and buildings – typically half for each in dense urban areas, where land is the most valuable.  This would be a triple win, for developers, home buyers, and municipalities.  As it stands now, because house prices (read: land prices) are inelastic, any reduction in property taxes alone in the most desirable areas will just result in raises to the cost of housing overall, since developers will just raise prices to incorporate the revenue lost in tax collections.  These costs typically get included in mortgages, which just means more unearned income for banks.  The Land Value Tax solves this.

    Sincerely,

    Scott Baker, WEDG, CEO/Founder RiverArch Ventures LLC

    Reply

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