For new condo apartments, the report found that government charges can add up to as much as C$124,582 per unit. That's about 50% higher than the average unit in the U.S. and about 30% higher than the average unit in Canada (see above chart for the list of cities). While all of us in the industry can appreciate this, I don't think most homeowners and tenants understand this. Hopefully they're reading this post.
Chart: Bloomberg
In Toronto we have something known as Development Charges. In the US, they are more commonly referred to as Development Impact Fees, which in my view, lends a certain precision to their intent.
The idea behind these fees is that they account for some or all of the off-site public costs required to serve a new development. Initially this meant utilities, but today these fees usually include everything from transit and parks to child care and pedestrian infrastructure.
According to Wikipedia, the first impact fees were implemented in Hinsdale, Illinois in 1947. By the 1980s, impact fees had become a universally accepted mechanism for funding the costs associated with growth.
Not surprisingly, there’s substantial case law around impact fees. One of the concepts that comes up a lot is this idea of essential or rational nexus. That is, can the fee(s) be rationally linked to the impacts of a particular development?
One well known example is Nollan v. California Coastal Commission (1987).
The Nollans proposed to build a 2-storey house within the exact same footprint of their current 1-storey house. As an approval condition, the Coastal Commission wanted a public easement across the beach in front of their house.
The U.S. Supreme Court sided with the Nollans and held that the development exaction (public easement) was not adequately related to their new development (additional storey). A “rational nexus” did not exist.
If you’re interested in this topic, the American Planning Association has a policy guide on impact fees available on their website.
For new condo apartments, the report found that government charges can add up to as much as C$124,582 per unit. That's about 50% higher than the average unit in the U.S. and about 30% higher than the average unit in Canada (see above chart for the list of cities). While all of us in the industry can appreciate this, I don't think most homeowners and tenants understand this. Hopefully they're reading this post.
Chart: Bloomberg
In Toronto we have something known as Development Charges. In the US, they are more commonly referred to as Development Impact Fees, which in my view, lends a certain precision to their intent.
The idea behind these fees is that they account for some or all of the off-site public costs required to serve a new development. Initially this meant utilities, but today these fees usually include everything from transit and parks to child care and pedestrian infrastructure.
According to Wikipedia, the first impact fees were implemented in Hinsdale, Illinois in 1947. By the 1980s, impact fees had become a universally accepted mechanism for funding the costs associated with growth.
Not surprisingly, there’s substantial case law around impact fees. One of the concepts that comes up a lot is this idea of essential or rational nexus. That is, can the fee(s) be rationally linked to the impacts of a particular development?
One well known example is Nollan v. California Coastal Commission (1987).
The Nollans proposed to build a 2-storey house within the exact same footprint of their current 1-storey house. As an approval condition, the Coastal Commission wanted a public easement across the beach in front of their house.
The U.S. Supreme Court sided with the Nollans and held that the development exaction (public easement) was not adequately related to their new development (additional storey). A “rational nexus” did not exist.
If you’re interested in this topic, the American Planning Association has a policy guide on impact fees available on their website.
Emily Badger's recent piece on "how 'developer' became such a dirty word" has been getting passed around within the industry over the last few days. I had a chuckle when I read this bit:
The notion that development is inherently bad, or that developers are inherently bad actors, seems to ignore that the communities residents want to protect from developers were once developed, too, and often by people who made money at it. (That is, unless you believe in “immaculate construction.”)
The article hits on a number of points that are absolutely true. There's generally a lack of understanding around the economics behind new housing. And the cost structures, today, are dramatically different compared to the suburban-industrial complex.
To provide one example, our cost consultant, Finnegan Marshall, recently shared with me a chart (dated April 2019) that broke down the various government fees that typically make up every new condo suite in Toronto.
What it showed is that between 20-24% of the price of a new condo is generally compromised of government fees and taxes that span all three levels of government. This includes everything from development charges (impact fees) to parkland dedication.
Similarly, the article quotes one developer from Montgomery County who estimates that the impact fees alone for his projects are usually upwards of $60,000 per housing unit. (This is pretty cheap compared to Toronto.)
I raise this as an example because development charges/impact fees have become an important source of revenue for cities across both Canada and the US. They often offset lower property taxes. (Whether this is appropriate is an entirely other debate.)
And so I find it paradoxical that many homeowners would like to simultaneously see lower property taxes, no new development, and more public services and infrastructure.
Emily Badger's recent piece on "how 'developer' became such a dirty word" has been getting passed around within the industry over the last few days. I had a chuckle when I read this bit:
The notion that development is inherently bad, or that developers are inherently bad actors, seems to ignore that the communities residents want to protect from developers were once developed, too, and often by people who made money at it. (That is, unless you believe in “immaculate construction.”)
The article hits on a number of points that are absolutely true. There's generally a lack of understanding around the economics behind new housing. And the cost structures, today, are dramatically different compared to the suburban-industrial complex.
To provide one example, our cost consultant, Finnegan Marshall, recently shared with me a chart (dated April 2019) that broke down the various government fees that typically make up every new condo suite in Toronto.
What it showed is that between 20-24% of the price of a new condo is generally compromised of government fees and taxes that span all three levels of government. This includes everything from development charges (impact fees) to parkland dedication.
Similarly, the article quotes one developer from Montgomery County who estimates that the impact fees alone for his projects are usually upwards of $60,000 per housing unit. (This is pretty cheap compared to Toronto.)
I raise this as an example because development charges/impact fees have become an important source of revenue for cities across both Canada and the US. They often offset lower property taxes. (Whether this is appropriate is an entirely other debate.)
And so I find it paradoxical that many homeowners would like to simultaneously see lower property taxes, no new development, and more public services and infrastructure.
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