On top of other increases such as labour and materials, the cost to build will increase even further next year as the District of Muskoka prepares to increase its development charges.
At its November 15 meeting, District council approved a 7.9 per cent increase to development charges effective January 1, 2022.
That means the District development charge for a new single detached home in a serviced area will go from $12,617 to $13,588, while a rural home (on well and septic) will see development charges increase from $4,009 to $4,318 in 2022.
You can find the full list in the staff’s report, submitted to the committee of finance and corporate services in October, here.
Development charges pay for infrastructure related to new development such as roads, municipal water, sewer, and rural septage.
There has been a long-standing argument for keeping development charges low, particularly by councils who want to attract more development to their community. There’s also an argument for ensuring the development charges are high enough to service, and maintain, the infrastructure required by that development.
“Since the implementation of the [most recent]Development Charges by-law on January 1, 2020, which reduced the residential and commercial accommodation fees by 50% and commercial/industrial fees by 92% to 95%, this would be the second inflation increase and would be implemented effective January 1, 2022,” noted Suzanne Olimer, District commissioner of finance and corporate services, in an October report to District’s corporate and finance committee.
According to the staff report, “if a municipality chooses to index its development charges rate, the Statistics Canada Non-residential Building Construction Price Index for Ottawa-Gatineau or for Toronto must be utilized.”
Olimer said staff reached out to the District consultant to see if staff could apply a different indexing rate increase. “This was not permitted under the [Development Charges] Act. Essentially what this means is that we can choose to index our rates based on this index or we can forgo the index. Staff are recommending that we proceed with indexing of the DC (development charges) rates for two main reasons: The first is that we currently discount our residential and commercial DCs by 50 per cent, and then the second main reason is to preserve the buying power of the funds that we collect from our development charges,” she said.
Olimer added that road, water, and wastewater project costs have increased. “We are not collecting enough to cover the projects that are associated with growth.”
She reminded councillors that development charges exemptions are in place for development projects associated with the creation of affordable housing. She also noted that the District has a capital incentive program under the Muskoka Affordable Housing Initiatives program. “So we do try to move forward and provide for incentives to move forward with affordable housing, however, we do want to recommend the indexing of the rates,” she told council.
Her report also noted that if “the same number and type of development occurs in 2022 as the District experienced in 2020, the additional revenue resulting from the inflationary increase is estimated at $252,000.“
The majority of councillors seemed amenable to increasing what they reasoned were already discounted development charges.
“They’ve [developers]had a 50 per cent break for ten years now, and you know, if we need money… it goes on the taxpayers that are already existing. We can’t keep doing that. If they’re coming in, they should be paying their fair share,” said Councillor Allen Edwards. “I have family that’s in the construction business, all costs are going up and that includes our costs as well so I would support it [the increase],100 per cent,” he added.
Councillor Phil Harding had a similar stance. “We continue to dig ourselves deeper and deeper and regardless of whatever new buildings are built, you know the cost of plywood has gone up and doubled but people are still building homes, so to add a little bit more to make sure we protect all of Muskoka…we’re not asking to go back to 100 per cent DCs [development charges]or anything at the end of the day,” he said, adding that he’d be supporting the increase.
Councillor Don Smith expressed concern with housing shortages in the community, particularly apartment units. He also noted that development charges are cheaper in rural areas and despite planning efforts to direct development to urban centres he questioned: “Are we driving people out into the rural areas which are harder to service and will create greater service needs and greater cost in the future?”
Olimer said there are already development charge discounts in place for developers of high-density rental housing. She said development charges for multi-residential rental developments can be frozen for a period of up to six years. “And so what that means is that when developers want to build an apartment-style building, for example… they pay their first installment at the time of occupancy [and the rest in five yearly installments]and so that helps with the cash flow because theoretically they’ve been able to split up that development charge and they’ve been able to collect perhaps some of those funds from their tenants.”
In the end, a majority of council voted in favour of increasing the development charges, which will take effect at the beginning of next year.
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