I am of the strong opinion that, as a general rule, development charges should aim to capture the costs and impacts directly attributable to new development. This is why I prefer the term "impact fee" as opposed to "development charge." The latter makes it seem like a generic catch-all tax. But that's not the intent. The intent is that "growth pays for growth." At the highest level, this makes sense and sounds good. So with all the talk of lowering/eliminating DCs to help with housing affordability, I think a lot of people are rightly wondering: Is this actually feasible? What fees are actually needed to fund growth-related infrastructure? Let's talk about this today.
I am of the strong opinion that, as a general rule, development charges should aim to capture the costs and impacts directly attributable to new development. This is why I prefer the term "impact fee" as opposed to "development charge." The latter makes it seem like a generic catch-all tax. But that's not the intent. The intent is that "growth pays for growth." At the highest level, this makes sense and sounds good. So with all the talk of lowering/eliminating DCs to help with housing affordability, I think a lot of people are rightly wondering: Is this actually feasible? What fees are actually needed to fund growth-related infrastructure? Let's talk about this today.
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Dundas Square - Brandon Donnelly
Rental housing:
In other words, if you were building 3-bedroom family-sized condominiums, the development charge would be $80,690 per home. And if you were building 3-bedroom family-sized rentals, the development charge would be $45,280 per home. But keep in mind that in addition to the above development charges, there are also other charges like the Community Benefit Contribution (Section 37), Parkland Dedication, Education Charges, Development Application Fees, HST, and so on.
Growing development charge reserve funds
Looking at just DCs, Ontario municipalities collected about $17.5 billion in development charge revenue over the last five years (according to the Missing Middle Initiative). But importantly, these same municipalities only spent $11.8 billion. The rest is sitting in DC reserve funds. Why is that? Well, part of this could be explained by timing. DCs are typically collected when a developer is issued their first building permit. But the costs associated with growth-related infrastructure may not happen at exactly the same time.
Except that these reserves have been growing. From 2010 to 2022, DC reserve funds across Ontario have increased from $2.6 billion to $10.7 billion (again, according to the Missing Middle Initiative). This is a 316% increase over 13 years. And in the case of Toronto — Ontario's largest city — reserves have grown 891% over the same period. This suggests that these charges aren't accurately tuned to actual impacts, because, in theory, these reserves should trend toward zero over long periods of time, as growth-related infrastructure costs are incurred.
Nexus between development charges and the impacts of new development
Let's get a little more specific. Over the last five years, DCs generated about $450 million for social services across Ontario. This includes things like long-term care, affordable housing, day cares, and public health; all of which are important and good things. But can all of these things be considered growth-related impacts? In other words, is it fair to say that because new housing got built, we now need more long-term care homes? I don't think so. Long-term care homes are certainly needed, but I don't think it's fair for new home buyers and renters to shoulder this cost.
Who is paying for the renaming of Dundas Square?
Let's consider another example. Back in 2014, Toronto City Council decided that Dundas Square should be renamed. I personally don't think this was at all necessary, but it got approved and the cost to do so was estimated at $335,000. At the time, it was also decided that this would be paid for through Section 37 funds as opposed to "taxpayer money." Section 37 of the Planning Act used to function in practice as "let's make a deal." It was a way for cities to extract money from developers in exchange for allowing more density. This has since been replaced by the Community Benefits Charge framework, but the intent is the same:
Section 37 of the Planning Act authorizes the City to adopt a community benefits charge (CBC) by-law and collect CBCs to pay for the capital costs of facilities, services and matters that are required to serve development and redevelopment. CBC funding will help support complete communities across Toronto.
In funding it in this way, the City of Toronto took a position. It basically said, "renaming Dundas Square is important to the city. We must do it. But we don't want all Torontonians to pay for it. We only want new home buyers and renters to pay for it." Because that's the effective outcome of using funds charged only to new developments. Is that fair? Once again, I don't think so. Because it's not reasonable to say that because new housing got built, it's now imperative that we rename Dundas Square. The two are unrelated matters.
By and large, this is the issue that many take with development charges. It doesn't appear to be "growth just paying for growth." It's growth paying for a lot of stuff. And it has a direct impact on housing affordability. In tomorrow's post, we'll expand on this last point and talk about what lowering/eliminating DCs could mean for apartment rents.
Yonge Street divides Toronto between east and west. It's an iconic street (though it has its ups and downs). Since 2018, the City has been studying ways to redesign and improve the stretch that cuts through the middle of downtown.
It is a story that we have seen in many other cities around the world, perhaps most famously in NYC. Here is a street where pedestrians outnumber vehicles and yet we allocate more space to the latter (within a fixed ROW). This study hopes to fix that.
They've narrowed things down to four Alternative Designs (downloadable, here). All of them prioritize pedestrians, but in different ways. As of right now the preferred option is Alternative #4. It looks like this:
The section around Dundas Square (from Dundas Sq up to Edward Street) is fully pedestrianized with only emergency vehicles having access during the day. This segment has the highest pedestrian volumes. The other blocks allow for a combination of one-way and two-way vehicular traffic.
Vehicular access is obviously still important for things like loading, but it's pretty clear that the future of Yonge Street is pedestrian priority. We should probably be doing this right now. If you'd like to voice your own opinion, you can do that here until Friday, December 6, 2019.
Here are a couple of cut-up snippets from a recent post by Seth Godin titled: “Waste and the new luxury.”
Luxury goods are built on a foundation of waste.
The front lawn is a luxury good, a sign that you don’t need to graze your cows on every square inch, and that you’re willing to waste the lawn.
There’s a new luxury that’s occurring, though, one that’s based on efficiency.
A luxury that’s based on investing in renewables, in resources that might be seen as endless, in smart design, in the satisfaction of knowing that others are benefitting, not paying, for the experience or the object you’re buying.
In other words, if you were building 3-bedroom family-sized condominiums, the development charge would be $80,690 per home. And if you were building 3-bedroom family-sized rentals, the development charge would be $45,280 per home. But keep in mind that in addition to the above development charges, there are also other charges like the Community Benefit Contribution (Section 37), Parkland Dedication, Education Charges, Development Application Fees, HST, and so on.
Growing development charge reserve funds
Looking at just DCs, Ontario municipalities collected about $17.5 billion in development charge revenue over the last five years (according to the Missing Middle Initiative). But importantly, these same municipalities only spent $11.8 billion. The rest is sitting in DC reserve funds. Why is that? Well, part of this could be explained by timing. DCs are typically collected when a developer is issued their first building permit. But the costs associated with growth-related infrastructure may not happen at exactly the same time.
Except that these reserves have been growing. From 2010 to 2022, DC reserve funds across Ontario have increased from $2.6 billion to $10.7 billion (again, according to the Missing Middle Initiative). This is a 316% increase over 13 years. And in the case of Toronto — Ontario's largest city — reserves have grown 891% over the same period. This suggests that these charges aren't accurately tuned to actual impacts, because, in theory, these reserves should trend toward zero over long periods of time, as growth-related infrastructure costs are incurred.
Nexus between development charges and the impacts of new development
Let's get a little more specific. Over the last five years, DCs generated about $450 million for social services across Ontario. This includes things like long-term care, affordable housing, day cares, and public health; all of which are important and good things. But can all of these things be considered growth-related impacts? In other words, is it fair to say that because new housing got built, we now need more long-term care homes? I don't think so. Long-term care homes are certainly needed, but I don't think it's fair for new home buyers and renters to shoulder this cost.
Who is paying for the renaming of Dundas Square?
Let's consider another example. Back in 2014, Toronto City Council decided that Dundas Square should be renamed. I personally don't think this was at all necessary, but it got approved and the cost to do so was estimated at $335,000. At the time, it was also decided that this would be paid for through Section 37 funds as opposed to "taxpayer money." Section 37 of the Planning Act used to function in practice as "let's make a deal." It was a way for cities to extract money from developers in exchange for allowing more density. This has since been replaced by the Community Benefits Charge framework, but the intent is the same:
Section 37 of the Planning Act authorizes the City to adopt a community benefits charge (CBC) by-law and collect CBCs to pay for the capital costs of facilities, services and matters that are required to serve development and redevelopment. CBC funding will help support complete communities across Toronto.
In funding it in this way, the City of Toronto took a position. It basically said, "renaming Dundas Square is important to the city. We must do it. But we don't want all Torontonians to pay for it. We only want new home buyers and renters to pay for it." Because that's the effective outcome of using funds charged only to new developments. Is that fair? Once again, I don't think so. Because it's not reasonable to say that because new housing got built, it's now imperative that we rename Dundas Square. The two are unrelated matters.
By and large, this is the issue that many take with development charges. It doesn't appear to be "growth just paying for growth." It's growth paying for a lot of stuff. And it has a direct impact on housing affordability. In tomorrow's post, we'll expand on this last point and talk about what lowering/eliminating DCs could mean for apartment rents.
Yonge Street divides Toronto between east and west. It's an iconic street (though it has its ups and downs). Since 2018, the City has been studying ways to redesign and improve the stretch that cuts through the middle of downtown.
It is a story that we have seen in many other cities around the world, perhaps most famously in NYC. Here is a street where pedestrians outnumber vehicles and yet we allocate more space to the latter (within a fixed ROW). This study hopes to fix that.
They've narrowed things down to four Alternative Designs (downloadable, here). All of them prioritize pedestrians, but in different ways. As of right now the preferred option is Alternative #4. It looks like this:
The section around Dundas Square (from Dundas Sq up to Edward Street) is fully pedestrianized with only emergency vehicles having access during the day. This segment has the highest pedestrian volumes. The other blocks allow for a combination of one-way and two-way vehicular traffic.
Vehicular access is obviously still important for things like loading, but it's pretty clear that the future of Yonge Street is pedestrian priority. We should probably be doing this right now. If you'd like to voice your own opinion, you can do that here until Friday, December 6, 2019.
Here are a couple of cut-up snippets from a recent post by Seth Godin titled: “Waste and the new luxury.”
Luxury goods are built on a foundation of waste.
The front lawn is a luxury good, a sign that you don’t need to graze your cows on every square inch, and that you’re willing to waste the lawn.
There’s a new luxury that’s occurring, though, one that’s based on efficiency.
A luxury that’s based on investing in renewables, in resources that might be seen as endless, in smart design, in the satisfaction of knowing that others are benefitting, not paying, for the experience or the object you’re buying.
