In His Own Words: Paying More Than Our Fair Share
By Dave Wilkes
What goes into the cost of building a new home, condo building or office development is more than meets the eye. It is not only the cost of the land, the excavation of the site, the materials and labour, but also the fees that municipalities across the region charge homebuilders and developers to construct the infrastructure required to service new development.
Infrastructure includes parks, libraries, roads, transit, sewers and emergency services. Investing in infrastructure benefits existing and new homeowners and those working in offices throughout the region. This investment is paid for by fees, known as development charges, which are charged to builders and developers by local governments across the GTA.
But ultimately, development fees are paid for by the new homeowners and businesses. The fees vary depending on infrastructure needs in specific areas as well as the type of unit being built and the number of people who are expected to live in or utilize the space.
For example, a new one-bedroom condo in the City of Toronto currently is assessed a development charge of $17,138. A non-residential non-industrial building is assessed a development charge of $207.52 per square metre. Current proposals being considered by Toronto would approximately double those charges.
Our members recognize and accept their responsibility for supporting the infrastructure that is required to service new neighbourhoods. But as municipalities across the region look to replace aging existing infrastructure, we are concerned that new neighbourhoods will be asked to absorb the costs disproportionately.
There is no doubt we need to reinvest in our cities, but these costs should be the responsibility of all of us, not just shifted onto those buying new properties.
The numbers back up our concerns. Altus Group, a leading provider of data solutions to the real estate industry, indicated in a recent report provided to BILD that in Toronto, residential property taxes rose 2 per cent on average annually, between 2009 and 2016, while development charges increased 14.3 per cent on average annually between 2009 and 2018.
Our industry is committed to working with our partners in municipalities to fund growth. But we must ask the tough questions about how we pay for infrastructure in an equitable, transparent manner — and how we ensure that these costs are shared fairly between development charges that are paid by new development and property taxes that are paid by all. We all are responsible for ensuring that we build the type of cities we want.
How we answer the question of who pays for what, and the share of the costs between new and existing tax bases, will define the types of cities we build and the costs of the homes and offices in our cities. We need to find the right balance so that new homes are affordable and not priced beyond the reach of all but the wealthy.
On behalf of those who purchase new homes and offices, BILD intends to ask these questions this year as part of the fall municipal elections.
DAVE WILKES is President and CEO of the Building Industry and Land Development Association (BILD).