Property developers have, again, asked Metro Vancouver regional government members for development fees to be waived, deferred or redirected citing escalating costs to construct new homes.
The most recent pitch came last Thursday as developers lined up to speak at a special committee of the region’s mayors.
Citing higher finance interest rates and rapidly inflating construction costs, the developers have taken issue with what are called development cost charges (DCCs), which are to pay for new roads, parks, sewers and water pipes surrounding new construction or associated with the population increase that comes with it.
Surrey Mayor Brenda Locke opened the meeting with an explanation of the region’s position, so far: “Metro Vancouver’s DCC program is a critical funding program that is needed to support our region’s growth-related infrastructure program. Without increasing DCCs, households would need to pay for the vast majority for the costs of new infrastructure through their utility bills; there would be a double-digit levy increases. Still, we are mindful of the impact it may have on development.”
As it stands, existing taxpayers pay taxes to Metro Vancouver to maintain existing infrastructure. When enough new homes are built to require new or larger pipes, that is where DCCs come into effect.
And as a result of Metro Vancouver having gone decades without increasing DCCs on new home construction, it has been left with a funding deficit to pay for growth-related projects.
The developers’ concerns chiefly arise from much higher fees coming into effect next year.
In October 2023, the Metro Vancouver board, comprising of municipal council members, unanimously approved new DCCs to pay for $11.5 billion of growth-related park, water and sewer infrastructure over the next three decades. Fees will vary slightly within the region; however, one townhouse unit in Vancouver, for example, will be charged $30,861 by 2027, up from $10,027 today. (Developers are also asked to pay for local (municipal) DCCs, which are also rising in price.)
Chris Gardner of the Independent Contractors and Businesses Association spoke to the mayors and claimed, “The growth-pays-for-growth model is broken.”
Beau Jarvis, president and CEO of Wesgroup, also questioned the “growth-pays-for-growth” concept. Citing developers putting projects on the shelf, so to speak, Jarvis asked for a motion for deferral of the DCCs at the Nov. 1 general meeting.
Developers have collectively already pitched proposals that would see everyone pay for existing and new infrastructure. This could be done by having senior governments — ie. income tax revenue — contribute to new infrastructure. Or it could be done, as Locke noted, by raising property taxes across the board.
But, as Burnaby Mike Hurley stated, “tell that to the small business owner in Burnaby. Are we going to tax them 10 per cent more?”
And Hurley repeated longstanding doubts that removing DCCs would equate to more affordable housing.
“I have a hard time buying that these savings will be passed on to consumers. It hasn’t been the history so why would it be the future?” asked Hurley.
Yet another possible solution, pitched Thursday as presented by Intracorp BC president Evan Allegretto, would be to have DCCs financed directly by new homebuyers. It's understood such a proposal would see the government providing interim financing, if necessary.
In this scenario, developers would be eased of the burden of financing the DCCs, which are ultimately rolled into the price or rental cost of a new home.
Allegretto said this would free up capital for much-needed projects.
“It’s about being able to take temporary debt,” said Allegretto, who clarified to Glacier Media Oct.23 that such a scenario still sees the homebuyer pay the DCC — as is presently the case — and be required to come up with the same amount of money for the purchase.
Rather, a second mortgage from Metro Vancouver would go on title of the project until completion, with the buyers ultimately paying it off, added Allegretto.
“I’m very attracted to this suggestion,” said West Vancouver Mayor Mark Sager.
Delta Mayor George Harvie expressed concern housing projects were being delayed and suggested provincial property transfer taxes “should be targeted.” (Such taxes go into general revenue coffers.)
Discussion also turned to broader market conditions.
Allegretto said developers have lobbied senior governments to build more homes and that “we have used every demand tactic,” referencing the likes of foreign buyer and speculation taxes.
Jonathan Cooper, senior vice-president of Strand, said “part of the problem is median household incomes in B.C. and Metro Vancouver are only going up a few percentage points a year and so the reason there are so many projects on the sideline — be they rental or strata — is that in the presence of constrained incomes, there is a limit on what homebuyers and renters can afford to pay and layering costs on top becomes counterproductive.”
Hani Lammam, executive vice-president of Cressey, said construction prices are so extraordinary that “even with free land we cannot build homes people can afford.”
Having heard from several developers, Port Coquitlam Mayor Brad West questioned Cooper if the development industry has lobbied the federal government on a chief demand measure: immigration.
“In the last number of years, when we’ve seen this runaway train with respect to population growth, particularly around non-permanent residents — I don’t mean to be provocative but I never heard the development industry say, ‘whoa, whoa tap the brakes, this is too much.’”
Cooper’s initial response was to say his wife is an immigrant from Asia, prompting West to interject and say his concern is the level of immigration and not a rebuke of immigration entirely.
West also questioned if the industry has raised concerns about construction capacity in light of 180,000 new people moving to B.C. last year.
“One of the challenges that we are facing, particularly in B.C. but right across the country, is that we have been experiencing historic unprecedented population growth. And in fact, I’ve heard many economists and people in your industry say It is so large you can’t outbuild it; it is so large there are not enough people to build this stuff,” said West.
“Has the development industry lobbied to say it can’t manage this?” asked West.
Cooper said millions of homes need to be built and that fact only “strengthens the argument to allow the private sector to build more housing” through more enabling policy.
Some unclear banter came from the audience at which point Locke said “we’re going to have to get a gavel for the front.”
Editor's note: This article was edited Oct. 23 to add more information from Allegretto.
