In an effort to spur the development of multi-unit residential housing, a divided city council approved a three-year moratorium on development charges for certain market housing, despite evidence development fees don’t.
Affordable housing is already exempt from development fees.
Developments affected by the moratorium include duplexes, triplexes, row houses, townhouses and small multi-unit apartments of 30 units or less.
Ward 4 Coun. Pauline Fortin’s motion calling for the moratorium also freezes development charge rates on single-family dwellings at current rates for three years.
Although it’s unclear how much the moratorium will cost the city (it will depend on how much development takes place), an example of $1.4 million from last year was provided.
Since growth-related infrastructure is required with or without these fees, this potential $1.4-million gap will still need to come from somewhere, and the city’s key tool is taxation.
The 7-5 vote in favour of the moratorium came during Tuesday night’s city council meeting, at which staff joined a handful of city council members in cautioning the group against it.
A moratorium on development charges is “short-sighted and will come at a higher cost in the future,” Ward 9 Coun. Deb McIntosh cautioned her colleagues, reiterating the charges’ “growth pays for growth” intent.
In 2019, McIntosh relayed, the city cut development charges in half for industrial, commercial and institutional properties.
“Did we see any measurable increase in development as a result of these DC reductions?” she asked city Planning Services director Kris Longston.
“There’s not really a clear indication that there’s any direct correlation between DC rates and development activity,” Longston said, noting that although the city charted development activity in the wake of past reductions they couldn’t prove an impact.
“Development activity, both residential, commercial, institutional and industrial, moves in cycles, and I believe there are larger market forces that affect those decisions — interest rates, construction materials, labour availability — that have a bigger influence on those decisions than DCs. ... There wasn’t a clear uptick in ICI activity when those rates were cut in 2019.”
When she introduced the motion calling for a moratorium on Tuesday, Fortin flagged the fact that several other Northern Ontario municipalities do not have development charges.
Spurred by a related question from McIntosh, Longston clarified that population changes in Northern Ontario from 2001 to 2021 were “stagnant or declining” in many municipalities, but grew by several thousand in Greater Sudbury, where there were development charges.
Concluding her thoughts on the matter, McIntosh said residents would unlikely support subsidizing new builds through taxation, which Fortin’s motion calls for, and that developers will continue to “sell or rent at whatever the market suggests they can charge.”
During her presentation, McIntosh quoted from a 2019 report by the Association of Municipalities Ontario (AMO) titled “The Importance of Development Charges.”
As the paper’s name implies, the AMO, which advocates on behalf of municipal governments throughout the province, is a strong proponent for development charges.
In Ontario, development charges are between five to seven per cent of the cost of a new home, and are not a root cause of the affordable housing and supply challenge in Ontario, according to the paper.
“A reduction in development charge collections will increase the cost of public services for all residents,” the AMO cautioned. “This will increase pressure from taxpayers to constrain growth and to constrain demands on the already stretched property tax dollar.
“Changes that reduced development charges has never resulted in reduced housing prices.”
One case study in Ottawa, where development charge concessions were made in a specific area, did not lower the price of housing compared to the rest of the city.
“Reducing DCs could exacerbate housing issues and create further barriers to long-term municipal financial sustainability,” according to the AMO report, which added that shifting these costs onto the general tax base will make life less affordable for everyone and create a disincentive to support new housing.
A more in-depth 2019 report by the Institute on Municipal Finance and Governance (University of Toronto) came to a similar conclusion.
“Both municipalities and the development industry are stronger when growth-related capital costs are recovered by DCs set within well-structured municipal funding regimes,” according to the report. “For the good of existing and prospective ratepayers, the full potential of DCs must be realized to ensure growth pays its own way.”
Lead researcher Adam Found told Sudbury.com in 2019 that there’s no evidence development charges discourage development. He pointed to the City of Kawartha Lakes, where a reduction in development charges was followed by a drop in construction, and an increase in development charges was followed by a spike in construction.
“If you really want to have an impact and you want the missing middle and the multi-family units, look at (changing) your tax class,” Ward 10 Coun. Fern Cormier said on Tuesday evening, adding that although development charges are a one-time cost, taxes are annual.
When it comes to spreadsheet items like development charges, he added, “The market will always beat everything else.”
Faced by opposition within council chambers, Fortin stuck to her guns.
“We have a housing crisis,” she said. “The federal government and the provincial government are stepping up to the plate, and it’s time for municipalities to step up, too. ... We need to take a bold move and invest in our housing.”
North Bay saw development spike when they eliminated charges a few years ago, Fortin said, reiterating a point former North Bay mayor Al McDonald made during a Future-Ready Development Services Ad-Hoc Committee of city council on Oct. 12, 2023. During that meeting, McDonald promoted the use of eliminating development charges to spur development.
Former Ward 4 Coun. Geoff McCausland, who spoke during the Oct. 12 meeting on behalf of Malette-Goring Inc., questioned whether North Bay’s spike in development was causation or correlation. Greater Sudbury also saw a significant jump in building permits at the same time, “with full development charges.”
A wrap-up report summarizing the committee’s findings noted that they did not hear any requests for wholesale removal of the charges from local development stakeholders.
This wasn’t Fortin’s first time tackling development permits, and said during a committee meeting last year that she “would like to get rid of them completely.”
In June 2023, she introduced a successful motion to freeze development charges at the previous year’s rates rather than have them increase by 9.9 per cent across the board as scheduled.
Tuesday’s vote was as follows:
In favour of the development charges moratorium
- Ward 7 Coun. Natalie Labbée
- Ward 1 Coun. Mark Signoretti
- Ward 2 Coun. Eric Benoit
- Ward 3 Coun. Michel Brabant
- Ward 4 Coun. Pauline Fortin
- Ward 5 Coun. Mike Parent
- Ward 6 Coun. René Lapierre
Against the development charges moratorium
- Ward 9 Coun. Deb McIntosh
- Ward 10 Coun. Fern Cormier
- Ward 11 Coun. Bill Leduc
- Ward 12 Coun. Joscelyne Landry-Altmann
- Ward 8 Coun. Al Sizer
Mayor Paul Lefebvre did not vote because he was not present.
The city is currently reviewing its development charges, which are much lower that comparator municipalities. City council is expected to approve a new development charges bylaw during their June 11 meeting, which would become effective July 1.
Tyler Clarke covers city hall and political affairs for Sudbury.com.
