Homebuilders issue warning about proposed $12,000 hike in Ottawa development charges

The Greater Ottawa Home Builders Association warns a $12,000 increase in development charges on new homes will create an unexpected cost for homebuyers planning to buy a new home in Ottawa this year.

The planning and housing committee will vote Wednesday on a new development charge bylaw. Development charges are one-time fees levied on new residential and non-residential properties to help pay for growth-related capital infrastructure, including roads, water pipes, transit, emergency services and parks.

Under the proposal, development charges will increase on new single and semi-detached homes within the Greenbelt from $43,494 to $55,678, while charges on new homes outside of the Greenbelt will increase from $51,376 to $63,337.

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"The biggest concern here is it's an extremely high level of jump, in terms of the cost," Jason Burggraaf, executive director of the Greater Ottawa Home Builders Association, told Newstalk 580 CFRA's The Morning Rush with Bill Carroll.

Burggraaf says people expecting construction to begin on their new home in June or July will face a new cost pressure immediately.

"Those people who are going to be looking at their homes being built in June of this year, are going to be looking at an increased rate and an increased cost in their home," Burggraaf said.

"They bought that home months ago, with the understanding that their home was going to cost $40,000 in DCs and now that presumably is going to go up to $55,000 in DCs.  They're going to be on the hook for that increased costs if they want to get their house built."

Staff say of the $15.6 billion in capital costs associated with the Development Charges Study, $3 billion has been deemed recoverable from residential development charges.

"The sole purpose of development charges is to fund a portion of servicing costs, thereby enabling growth to offset the associated capital expenditures, which allow development to proceed in a timely and efficient manner," the report says. "It reflects the city's goal to establish a development charge schedule that reasonably reflects servicing benefits received in the broad areas of the city."

The chair of the planning and housing committee says it's important to have the funding available for infrastructure.

"My concern is that if we don't collect the funds for development charges and if we're unwilling to charge the taxes necessary to support building the infrastructure that the infrastructure just won't get built," Coun. Jeff Leiper told CTV News Ottawa Tuesday afternoon. "And that is a big quality of life consideration for people who are buying those new homes."

Burggraff is concerned the city is looking to use development charges to fund things like new aquatic facilities.

"One of the big contributing things to that price increase is not the actual cost of upgrading a road or building a new sewer pipe in existing neighbourhoods or out in the suburbs, it's these other projects which are being included in the DCs that really should be the cost for everyone," Burggraaf said.

"There is an Olympic quality aquatic centre, that's one of the items everyone is paying for on the DCs on a new apartment or new house, but the majority of that is being paid by new development as opposed to existing taxpayers."

In a statement on social media, Coun. Shawn Menard said Ottawa has some of the lowest development charges on single family homes among big cities in Ontario.

"It is highly unlikely that minor cost savings derived from lowering DC’s results in a large reduction in cost to homebuyers/renters. Developers will charge what the market will allow and will maximize profits," Menard said.

"It would be far better, in my view, to reform DC’s to charge based on costs to the municipality (i.e.: lower them for inside the green belt apartment unit typology, and increase them substantially for sprawl single unit typology)."

Menard says development charges are "one of the only ways to differentiate charges" based on the area and "charge properly for sprawl development."

Leiper expects the proposed development charge increase to be reduced during Wednesday's meeting.

"It's been an intense level of discussion between, particularly, developers in the city over the past couple of weeks," Leiper said. "I would anticipate that the rates that we'll see tomorrow will be somewhat lower than what were originally shown to the public."

The City of Ottawa's report estimates 82,457 new homes to be built in Ottawa between 2024 and 2033, however, staff note the city has not completed an update to the Infrastructure Plan and the forecasts are consistent with the calculations in the 2019 study.

Ottawa's current Development Charges Act expires on May 22, 2024.

The planning and housing committee meeting is set for 9:30 a.m. Wednesday, in the Champlain Room at Ottawa City Hall.

With files from CTV News Ottawa's Katie Griffin