Ottawa to increase fees on new homes by up to $6,200

The City of Ottawa is hiking the fees on new home construction by 11 per cent, a month after the federal government introduced new funding tied to municipalities freezing development charges.

Council approved a plan to increase development charges by $4,700 to $6,200 on new single and semi-detached homes. Coun. Matthew Luloff dissented on the plan.

"We looked closely at the situation and I think the idea of freezing development charges at this time is very challenging for us," Mayor Mark Sutcliffe said after the council meeting.

Under the plan, the development charges on single and semi-detached homes inside the Greenbelt will increase from $43,494 to $48,265, while they will increase from $51,376 to $57,596 on homes built outside the Greenbelt. The new development charge fees will be transitioned in over 90 days.

• Sign up now for daily CTV News Ottawa newsletters
• The information you need to know, sent directly to you: Download the CTV News App

The development charges are one-time fees levied on new residential and non-residential properties to help pay for infrastructure, including roads, water and sewer infrastructure, transit and parks.

"How we're pricing out two generations of kids out of housing is unconscionable," economist Mike Moffatt said on X, the platform formerly known as Twitter.

"I really don't know how our political leaders can sleep at night."

Capital Coun. Shawn Menard told council that "there are consequences" to its decisions, noting expanding the urban boundary requires new infrastructure.

"It doesn't make sense for Ottawa taxpayers to subsidize growth when that growth actually costs us operating dollars every year," Menard said. 

Councillors admit the debate on development charges is polarizing.

"I think the sticker shock for a lot of younger people is the amount," Coun. Riley Brockington said.

"They see, at least in Ottawa $42,000, that's a lot of money. When you're still paying student debt and trying to get your feet off the ground, it's a significant amount of money."

Brockington notes Ottawa's development charges are low compared to other Ontario cities.

"That debate speaks to broader questions surrounding municipal finances, especially pertaining to growth and long-term planning," Coun. Sean Devine said during council.

"We owe it to our residents to have a substantial conversation about the growing pressures on how the city pays its bills. That would be a conversation about a primary revenue source which is revenues we raise from the taxation of property."

Staff originally proposed a 28 per cent increase in development charges, $12,000 on a new home, but the proposed hike was changed at the committee level.

City staff shared statistics showing how Ottawa's development charges compare to other cities in Ontario.   Development charges cost homebuyers $145,361 in Vaughan, $132,839 in Markham, $124,876 in Brampton, $118,308 in Mississauga and $97,041 in Toronto.

Ottawa's move to increase development charges comes after the federal government launched the new $6 billion Canada Housing Infrastructure Fund in April, which requires municipalities to freeze development charges for three years to qualify for funding. The federal funding will cover "urgent infrastructure needs," including improving wastewater and solid waste systems.

"We share the same goal which is to build more homes and more affordable homes and to do so as quickly as possible," Sutcliffe said.

"There are other municipalities that have more recently updated their development charges, so to have a freeze on one day when it doesn’t take into account which municipalities have updated their development charges and which have not, and we're in the category that have not for some time, I don't think that puts us in a good situation."

"I hope we still get the infrastructure funding, but we have to calculate are we better off freezing development charges and losing out all the revenue that we would need from that to build better communities – are we better off doing that to get the infrastructure money or are we better off forgoing the infrastructure money and having the development charges. Clearly, by a significant amount, we are better off increasing development charges to pay for the infrastructure in new communities than we are in accessing the infrastructure fund."

The office of Housing Minister Sean Fraser says the government is "monitoring developments" in Ottawa.

"And the impact that they might have on our existing agreements with the City, along with their eligibility for federal infrastructure or transit programs," said a statement to CTV News Ottawa.

The minister's office notes that the Housing Accelerator Fund agreement with the city of Ottawa does not include a clause on development charges.

"But we would certainly be mindful of any changes which would impact Ottawa’s ability to meet this target.  Failure to meet any of the targets within the agreement will impact the amount of funding a municipality receives.

Housing starts in April

The city's move to increase development charges comes as new statistics show housing construction slowed down in Ottawa this spring.

The Canada Mortgage and Housing Corporation says there were 391 housing starts in Ottawa in April, down from 926 starts in April 2023.  There were 114 starts for single-family homes last month, and 277 construction starts for all other units.

The seasonally adjusted annual rate of housing starts shows 4,816 housing starts in Ottawa for April, down from 6,789 in March.

Across Canada, the annual pace of housing starts in April edged down one per cent compared to March. The seasonally adjusted housing rate for housing starts in Canada was 240,229 units in April, down from 242,267 in April.