If you're a longtime reader of this blog, you might remember this post from 2020, which was about a cost comparison that developer Urban Capital had done between a project they completed in 2005 and a project they were doing in 2020. What they uncovered was that the biggest culprit in terms of rising costs was none other than development charges. This line item had increased by 3,244%!
Everyone in the development industry knows that this is the reality. Not only have developers needed to carry a big budget for development charges, but they've also had to carry allowances for escalations; and that's because they have tended to jump multiple times throughout the course of a single project. It's frankly hard to keep up.
So for anyone to say that development charges have generally increased at the rate of inflation -- which some do say -- I'm guessing they don't know math, they don't know how inflation works, or they're lying because taxing new homes is politically easier than the other ways of collecting municipal revenue.
Thankfully, the Bank of Canada has an easy-to-use inflation calculator. And if one were to plug in 2005 and 2020, it would tell you that over this 15-year period, the average annual rate of inflation was 1.63% and that, as a total percentage change, this equates to 27.43%. So, 3,244% vs. 27.43%. It's not even close.
For a long time, nobody cared to listen to developers complain about this. The market was, you know, too good. Isn't this just developers being greedy? Well, that is no longer the case and consumers are waking up. Here's an excerpt from a Globe and Mail article published this week:
But cities started to enjoy that revenue stream too much. They began to gorge on development fees, a flow of money that allowed politicians to keep property taxes low. Who was going to complain? Future owners of homes are often people who don’t yet live in the city and can’t vote. It’s the city-building equivalent of that Monty Python joke about an innovation in how to raise government revenue: taxing foreigners living abroad.
But even more importantly, municipalities are now waking up. Last week, the City of Vaughan -- which previously had the dubious distinction of the highest DCs in the Greater Toronto Area -- announced that it would be reverting back to the rates they had in effect on September 18, 2018, and that these rates would remain in place until November 19, 2029.
This takes the development charge for a single-family home from $95,466 per unit back down to $50,193 per unit. This is significant! And given the current strains on housing affordability, these savings will almost certainly flow through to end purchasers. (FYI, all of the developers who have signed the CANT pledge have all agreed to pass on any tax savings dollar for dollar.)
Here's a quote from Vaughan Mayor Steven Del Duca:
Development charges have become an unfair tax burden on homebuyers. Too many of our residents, in particular young families in our community, have seen their dream of buying a home close to where they grew up, disappear completely as housing prices have spiraled out of control. We have a housing affordability crisis and it’s time for us to get real about the solutions needed to solve it. Today’s decision by Vaughan Council to dramatically reduce our development charges for the foreseeable future is a strong step in the right direction. I urge other municipalities to follow our lead and do the right thing.
He makes a good point. It behooves other cities in Ontario to follow their lead.
We're back with the 24th edition of Paragraph Picks, highlighting a few hand-selected pieces from the past week or so.
@hagaetc writes about the exodus of Norwegian entrepreneurs, driven by an untenable wealth tax on unrealized gains, highlighting the urgent need for Norway to abandon punitive taxation policies and foster innovation to ensure a sustainable post-oil economy. "In the past two years alone, a staggering 100 of Norway’s top 400 taxpayers, representing about 50% of that group’s wealth, have fled the country to protect their businesses." https://paragraph.xyz/@hagaetc/norway-shrugged
@mdean shares how AI art’s true potential lies in its ability to transcend its inherent aesthetic, enabling cross-media experimentation and ambiguity, even as the majority of the space still gravitates toward “truthful” AI art that conforms to its recognizable style. "AI is a marvellous tool which allows for an inherent aesthetic, OR any aesthetic you like. That’s its power." https://paragraph.xyz/@mdean/marcozine-n19
@yb writes about the rise of onchain AI and how it's being driven by open-source experimentation and collaboration between crypto and AI pioneers. "The key point I want all of you to takeaway here is that if you want to understand how this agent meta will play out, your best bet is to follow these AI hackers closely and understand what’s top of mind for them." https://terminallyonchain.xyz/simulator
@n1ftey writes about the urgent need to address exploitative corporate practices in AI development, advocating for ethical frameworks that prioritize transparency, fair compensation, and collaboration to empower creators rather than exploit them. "The problem lies not with the tools but with the corporations that wield them." https://paragraph.xyz/@jldart/the-unseen-cost-of-ai
Thanks for the shoutout Reid