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Development Charges Are Finally Being Cut. What Happens Next? · The Missing Middle Podcast

• 0:00
  SPEAKER_00: Development charges can add up to$200,000 in direct cost to the price of a new home in Ontario, and add more in indirect cost as they are embedded into the price and assess GST, ESP, and land transfer taxes, creating a tax-on-tax situation.
• 0:16
  SPEAKER_00: Now it hasn't always been this way.
• 0:18
  SPEAKER_00: DCs used to be relatively modest, but they have risen by over 5,000% in the city of Toronto since the year 2000.
• 0:25
  SPEAKER_00: If other prices in our economy had risen at the same rate, a small cup of coffee at a donut shop would cost$66, and a new small family-sized sedan would cost$1.3 million.
• 0:37
  SPEAKER_00: Today, we'll be talking about development charges and how they could be lowered without increasing property taxes.
• 0:43
  SPEAKER_00: And the state of Ontario's housing market with the president of the Ontario Real Estate Association, Kim Fairley.
• 0:50
  SPEAKER_01: Demographics, hosted by Mike Moffat and Kara Stern.
• 0:54
  SPEAKER_00: So, Kim, it's uh great to have you here today.
• 0:57
  SPEAKER_01: Thank you so much for having me.
• 0:58
  SPEAKER_01: This is wonderful.
• 1:00
  SPEAKER_00: Well, well, absolutely.
• 1:01
  SPEAKER_00: Uh, so our two organizations back in March worked together on a report called A Pathway to Development Charge Reform, which Alex Beheshti and I co-authored through the Missing Middle Initiative and was published by O'Reilly.
• 1:14
  SPEAKER_00: Now, the report talks about the importance of reducing development charges and provides seven recommendations on how development charges can be reduced without increasing property taxes.
• 1:25
  SPEAKER_00: The very first recommendation in that report was, and I quote, provide immediate relief to home buyers and accelerate housing construction through a two-year DC suspension program.
• 1:37
  SPEAKER_00: Then, less than two weeks later, the federal government and the province of Ontario announced an agreement that would cut development charges by as much as 50% over three years.
• 1:46
  SPEAKER_00: Not exactly what the recommendation was calling for, but pretty close.
• 1:50
  SPEAKER_00: So I want to speak about both the development charge agreement and the HST agreement between the federal government and the province of Ontario.
• 1:58
  SPEAKER_00: So you put those two things together.
• 1:59
  SPEAKER_00: You know, what impact do you see it having on Ontario's housing market?
• 2:03
  SPEAKER_01: Great question.
• 2:04
  SPEAKER_01: I think it's going to have a lot of great impact on our housing market province wide.
• 2:10
  SPEAKER_01: And I know that there are different markets within the province.
• 2:12
  SPEAKER_01: So you'll see different factors hit all of those areas.
• 2:16
  SPEAKER_01: But the reality is the government did a fantastic job.
• 2:19
  SPEAKER_01: So we want to commend Premier Ford, Minister Flack, and the federal government for all of those announcements that they did a couple of weeks ago.
• 2:27
  SPEAKER_01: Is it the exact recommendation?
• 2:28
  SPEAKER_01: No, but it definitely falls in line with it.
• 2:31
  SPEAKER_01: We're really looking to how do we help move that needle along in home ownership and affordable home ownership.
• 2:38
  SPEAKER_01: That really doesn't.
• 2:39
  SPEAKER_01: So we're really excited about it.
• 2:40
  SPEAKER_01: The$8.8 billion announcement was huge when it comes to helping municipalities with those development charges.
• 2:48
  SPEAKER_01: And they're really geared to helping municipalities that have high ones lower those for the consumers.
• 2:55
  SPEAKER_01: It's a really great program.
• 2:57
  SPEAKER_01: We're really hoping that municipalities take that offer up and lower the DCs, help make the housing more affordable for folks in their area.
• 3:06
  SPEAKER_01: In regards to the HST announcement, again, another step in the right direction to try to get first-time home buyers, especially into the market.
• 3:14
  SPEAKER_01: And hopefully the government works with us on some of the other recommendations and maybe expands that to the general public, like the actual everyday consumer, where those folks could really make a difference when it comes to getting first-time home buyers if they can't maybe take in the that affordability for a brand new build, which a lot of them can't.
• 3:35
  SPEAKER_01: But if they expand it, that really opens it up to resale homes, right?
• 3:39
  SPEAKER_01: So if I'm looking, I'm a first-time homebuyer.
• 3:41
  SPEAKER_01: Um, I maybe can't afford that, you know, million or eight hundred thousand dollar house, even with the HST rebate.
• 3:48
  SPEAKER_01: If it's expanded out, it really could open that resale area up for first-time home buyers, which is which is really huge.
• 3:55
  SPEAKER_01: So I can see it really swing the market provincially in an upward position.
• 4:00
  SPEAKER_01: And I know again, they're all different in different areas, but I think it's gonna be a very positive thing.
• 4:05
  SPEAKER_00: Yeah, I I think it's gonna be positive as well.
• 4:08
  SPEAKER_00: And I was recently on Matt Brown's uh podcast uh with the head of the uh London and area uh home builders.
• 4:16
  SPEAKER_00: And he was saying that in London, they're already seeing the impact uh of the HST move.
• 4:22
  SPEAKER_00: You know, development charge move hasn't uh hasn't been implemented yet.
• 4:26
  SPEAKER_00: But even with just the HST move, they're seeing a lot more activity uh in in showrooms and actually increased sales already.
• 4:34
  SPEAKER_00: So, you know, you had mentioned that this is a different market across the province, but are you hearing that it's having any impact yet?
• 4:42
  SPEAKER_00: Uh, you know, because it seems to be in London.
• 4:45
  SPEAKER_01: Yeah, I think it does for sure.
• 4:46
  SPEAKER_01: I mean, we're talking homes up to$130,000 in a price difference.
• 4:51
  SPEAKER_01: That's a big deal.
• 4:52
  SPEAKER_01: I mean, even for me up in Sault Ste.
• 4:54
  SPEAKER_01: Marie, I'm a northern kid.
• 4:56
  SPEAKER_01: Um, you know, our new homes average between six and seven hundred thousand based on, you know, what it looks like.
• 5:02
  SPEAKER_01: And even for that spectrum, that's a big difference for people up in the northern areas to have that swing, you know, into their favor when it comes to being able to buy that house.
• 5:13
  SPEAKER_00: So I'm really glad you brought up the Northern Ontario thing, because I have to admit, we don't talk about the northern part of the province enough here on the podcast or at MMI.
• 5:23
  SPEAKER_00: So, you know, beyond just development charges and HST, like how different is the northern housing market from the one that most of us know in southern Ontario?
• 5:32
  SPEAKER_01: It's different in a lot of ways.
• 5:34
  SPEAKER_01: And one, just because year market averages are different.
• 5:38
  SPEAKER_01: What happens typically in southern Ontario, we see normally the opposite happen in northern Ontario, but it still doesn't mean that we don't have the same concerns at the end of the day, right?
• 5:49
  SPEAKER_01: Affordability is still affordability.
• 5:51
  SPEAKER_01: Um, you know, I'll just talk a little bit about Sault Ste.
• 5:54
  SPEAKER_01: Marie in general.
• 5:55
  SPEAKER_01: When we talk about development charges, the Sioux has none.
• 5:58
  SPEAKER_01: So we're sort of like this little unicorn in the north.
• 6:02
  SPEAKER_01: There are other northern communities that do have development charges.
• 6:05
  SPEAKER_01: And when it hit us back in the day, the realtors, at least in the Sioux, sort of come together, came together and realized how much of an impact that would have had.
• 6:13
  SPEAKER_01: And thankfully, city council listened at the time.
• 6:16
  SPEAKER_01: Um, but it's not to say that other municipalities, you know, should take that same, that same way, because we do know that DCs definitely do help with certain things like infrastructure build and and and things like that.
• 6:29
  SPEAKER_01: So we don't want to say that we're totally against that.
• 6:32
  SPEAKER_01: It's just for a community like us, we knew it would have such a big impact on that affordability stance.
• 6:37
  SPEAKER_01: So we're really happy that they took that way.
• 6:39
  SPEAKER_00: When I talk about how development charges are too high, and you know, I'll point out that the development charges again have increased by over 5,000% since 2000 in the city of Toronto.
• 6:50
  SPEAKER_00: You know, I often get pushback that it's simply impossible for municipal governments to function without high development charges.
• 6:56
  SPEAKER_00: But you've pointed out that you live in a city that doesn't have them at all.
• 7:01
  SPEAKER_00: So, so how is that possible?
• 7:02
  SPEAKER_00: Like, like how does the Sioux able to function with such, well, basically no development charges at all?
• 7:09
  SPEAKER_01: It's part of that municipal service corporation.
• 7:11
  SPEAKER_01: So for us up in Sault Ste.
• 7:13
  SPEAKER_01: Marie, we do have a public utilities corp, which helps cover that cost of infrastructure build or repair throughout the whole community.
• 7:22
  SPEAKER_01: So we see that bill basically stretched out across everyone, which is really great because the amount of growth in the Sioux alone in the last five years has been pretty substantial.
• 7:34
  SPEAKER_01: So when I'm hearing some of my colleagues across the province go, you know, building, building a house is too expensive.
• 7:40
  SPEAKER_01: Building um, you know, we've got all these other things that really sort of factor into the way that builds can come apart.
• 7:47
  SPEAKER_01: Like for us, we're seeing that growth be like tenfold.
• 7:50
  SPEAKER_01: So we've got subdivisions going out left, right, and center, which is fabulous.
• 7:54
  SPEAKER_01: It's exactly what our small community needs.
• 7:57
  SPEAKER_01: Hopefully, it can be sort of something to look at for other communities to say, let's work together.
• 8:02
  SPEAKER_01: How are you doing it?
• 8:03
  SPEAKER_01: How can we do the same thing for our municipality as well?
• 8:07
  SPEAKER_00: Yeah, I think there really is that lack of awareness of best practices.
• 8:12
  SPEAKER_00: And uh, you know, I think there can be issues around awareness of just how high development charges are.
• 8:18
  SPEAKER_00: So, you know, I mentioned Toronto, but you know, my hometown of London rates are up about a thousand percent from the time when I bought a home in 2004.
• 8:26
  SPEAKER_00: I think I paid about 4,700 bucks, and now it's close to about 50,000.
• 8:30
  SPEAKER_00: And that's not unusual either.
• 8:32
  SPEAKER_00: You know, Whitby, Mississauga, Markham, Oakville, they've all had their DCs rise by you know a thousand, two thousand, three thousand percent since the year 2000.
• 8:42
  SPEAKER_00: Yes.
• 8:43
  SPEAKER_00: You go into places like York region, it's you know, the combined effect is about$200,000.
• 8:48
  SPEAKER_00: So it's massive.
• 8:49
  SPEAKER_00: But if they had simply kept up with inflation, you know, we'd be probably talking about maybe$8,000, 10,000,$12,000, which, you know, it's still a lot of money, but I I don't think we would have been working together on a paper if it was only uh if they'd only risen at the rate of inflation uh at the last 20, 25 years.
• 9:06
  SPEAKER_00: So my question to you, and I I know you've done some polling on this, but you know, do you think the general public is aware, you know, how high development charges are in some cities and and how quickly they've grown?
• 9:17
  SPEAKER_01: Yeah, I listen, honestly, I don't think that the the consumers and the public are educated enough about it.
• 9:23
  SPEAKER_01: The reality is you go to look for a house and you just like that cost is clumped into what the ask prices for that property.
• 9:31
  SPEAKER_01: So if if DCs are something that a municipality needs, then we're really just asking as well.
• 9:36
  SPEAKER_01: Be transparent about it.
• 9:38
  SPEAKER_01: Show and educate your consumers, your constituents, what those fees are going towards.
• 9:43
  SPEAKER_01: And and there are definitely communities, especially in the Western area, that really rely on the DCs to make that infrastructure.
• 9:51
  SPEAKER_01: And that's fabulous.
• 9:52
  SPEAKER_01: But they just be open and honest so that if consumers are really concerned about it, then they know, okay, here we go.
• 10:00
  SPEAKER_01: Your DC is say$10,000 round.
• 10:02
  SPEAKER_01: And this is what we're spending it on.
• 10:05
  SPEAKER_01: Um, because we're hearing that some communities, again, are collecting these DCs and they're just sort of they're not sure what to do with it.
• 10:11
  SPEAKER_01: Do they use it every year?
• 10:13
  SPEAKER_01: Maybe they're saving it for a rainy day in an emergency situation.
• 10:17
  SPEAKER_01: And if that's the case, then just be open.
• 10:19
  SPEAKER_01: And maybe this is an opportunity with the announcement of the$8.8 billion that those DCs can go down.
• 10:25
  SPEAKER_00: Yeah, so I I love that word that you use, transparency.
• 10:29
  SPEAKER_00: Uh, there are seven recommendations uh in this report.
• 10:32
  SPEAKER_00: And there's a bunch of sub-recommendations.
• 10:34
  SPEAKER_00: So could we could consider closer to 15 or 20.
• 10:37
  SPEAKER_00: But if we look at the high level, there's there's seven.
• 10:40
  SPEAKER_00: And I gotta say, my absolute favorite one, and this is something that we've worked on in the missing middle, is around creating transparency when it comes to development charges, right?
• 10:49
  SPEAKER_00: That it should be a separate line item on the bill that the home buyer can see it should be made exempt from GST, PST, and land transfer tax.
• 11:01
  SPEAKER_00: Because, you know, my viewpoint is like it's one thing to ask a homeowner, hey, you know, kick in a few bucks so we can get a library for the neighborhood.
• 11:07
  SPEAKER_00: Yeah, I think most people would say that reasonable.
• 11:10
  SPEAKER_00: Say that's reasonable.
• 11:11
  SPEAKER_00: But like, why am I paying, you know, GST and PST, you know, for the privilege of building uh infrastructure for the town?
• 11:20
  SPEAKER_00: So, you know, I totally agree on that one.
• 11:23
  SPEAKER_00: So that one's my personal favorite.
• 11:26
  SPEAKER_00: Do you have a particular favorite when it comes to the recommendations?
• 11:28
  SPEAKER_00: Is it that one or is there another one uh that uh you you come back to quite often?
• 11:33
  SPEAKER_01: Yeah, honestly, all of them are my favorite because they work so well together.
• 11:38
  SPEAKER_01: Like it's one fluid line, in my opinion.
• 11:41
  SPEAKER_01: You we've got transparency, obviously, is a great one.
• 11:44
  SPEAKER_01: The hold off, we've got, and it and it just works really well, especially with the announcements that just came out.
• 11:50
  SPEAKER_01: So it's really hard to pick and choose one because they all honestly work so well together and can do so much good for these municipalities, for consumers, our buyers, our our first-time home buyers.
• 12:01
  SPEAKER_01: It's it's hard to pick a favorite one, but but honestly, they just they're all great recommendations.
• 12:06
  SPEAKER_01: We're really excited.
• 12:08
  SPEAKER_00: Well, we are as well.
• 12:09
  SPEAKER_00: And I, you know, I I like in the report that we kind of focus on efficiency, right?
• 12:14
  SPEAKER_00: It's not just changing like what pocket the money comes out of, but you you mentioned wastewater uh earlier, that that one, you know, if you change how you fund uh or finance a wastewater plant, right?
• 12:29
  SPEAKER_00: If you put it on uh a bond to finance that plant, you're basically financing at a at a lower interest rate than what we do now, which is putting it on DCs, it goes on to residential mortgages, it raises the price of homes, right?
• 12:44
  SPEAKER_00: So you could still have the fee assessed to new homeowners, but you're paying it at a lower interest rate.
• 12:51
  SPEAKER_00: And I often think that that's what a lot of people miss about this debate, where they they treat it as zero sum, and that's going, okay, well, if I'm paying less, that means that you're paying more.
• 13:01
  SPEAKER_00: But you know, in the report, we focus on the idea that we can create efficiencies in the system that it's not just moving money out of one pocket into another.
• 13:11
  SPEAKER_01: Exactly.
• 13:12
  SPEAKER_00: So let's uh we we talked about our work, uh, but I think we should also highlight the uh great work of David Coletto over over at Abacus.
• 13:20
  SPEAKER_00: So uh you guys commissioned uh some polling data.
• 13:24
  SPEAKER_00: We'll we'll link to that in the show notes.
• 13:26
  SPEAKER_00: It's it's some really interesting stuff.
• 13:28
  SPEAKER_00: And one of the things that jumped out to me is that 71% of Ontarians agree that development charges make housing less affordable.
• 13:35
  SPEAKER_00: So, do you think the public is on board with reducing DCs?
• 13:38
  SPEAKER_00: I know they've done it temporarily, but you know, could we see this be a permanent thing?
• 13:42
  SPEAKER_01: Yes, I think the public is more aware of what DCs could actually mean.
• 13:47
  SPEAKER_01: So before we talked about the transparency aspect and outlining those, but I think in general, because data is at our fingertips and the government, both governments, federal and provincial, are talking about housing and housing affordability.
• 14:03
  SPEAKER_01: This is really where DCs are starting to become a very popular topic of conversation and what that means.
• 14:10
  SPEAKER_01: So, yes, I think the public is interested in having those DCs reduced because it just helps with the overall concept of affordability in general, not just on housing.
• 14:19
  SPEAKER_01: We're talking groceries, bills, expenses in your everyday life, gas, goodness knows what gas is going to get to before the end of the summer.
• 14:27
  SPEAKER_01: But these are all major concerns that wrap itself up together.
• 14:31
  SPEAKER_00: Yeah, they they really are.
• 14:33
  SPEAKER_00: And I feel like the conversation has changed.
• 14:35
  SPEAKER_00: Like it used to be, you know, five years ago, I talked about development charges and I'd have to actually explain to people what they are.
• 14:41
  SPEAKER_00: And uh nowadays it's like, yeah, yeah, no, we we get it, Mike, and we might agree with you or or disagree with you, but we at least we understand what what you're talking about.
• 14:50
  SPEAKER_00: Now, if we go back to the polling, are are there any other results uh from that abacus poll that you'd like to highlight?
• 14:57
  SPEAKER_01: So, yes, the polling really pointed out that two in five Ontarians are really concerned with the costs of DCs and that being pushed onto home buyers.
• 15:05
  SPEAKER_01: And again, it just really ties back to affordability.
• 15:08
  SPEAKER_01: What is it gonna look like?
• 15:10
  SPEAKER_01: We're finding the generation of home buyers is getting younger, and those younger folks are more concerned.
• 15:16
  SPEAKER_01: You know, I've got an 18 and a 20-year-old sitting at home, and my 20-year-old says, Ma, I don't know if I'm ever gonna be able to afford a house.
• 15:22
  SPEAKER_01: So, really concerned, and she fits right into that polling concerning area, right?
• 15:28
  SPEAKER_01: She's 20, about to be 21.
• 15:30
  SPEAKER_01: I was 24 when I bought my first house, and I had no second thought on whether things would be affordable to this degree.
• 15:36
  SPEAKER_01: Uh, so it's a whole new spectrum of folks.
• 15:39
  SPEAKER_01: We're also sort of seeing that it's not a partisan thing, right?
• 15:43
  SPEAKER_01: Where before it was, are there certain ones, you know, the government tends to have sometimes conversations around election time or things like that.
• 15:51
  SPEAKER_01: But this is a concern across all of our major parties.
• 15:55
  SPEAKER_01: So it's really, really a big deal to be talking about it.
• 15:58
  SPEAKER_01: It's really an awesome thing to see that all of them are on board to try to make some change.
• 16:03
  SPEAKER_01: So some really cool information came from that polling.
• 16:07
  SPEAKER_00: Yeah, no, absolutely.
• 16:08
  SPEAKER_00: And uh, you know, I'm delighted by the policy uh it itself.
• 16:13
  SPEAKER_00: But, you know, the fact that you've got a liberal prime minister working with a progressive conservative premier, you know, to lower development charges in cities like Toronto and Hamilton that have former new Democrat mayors, uh, you know, it is, uh I think it is great to see.
• 16:28
  SPEAKER_00: So, you know, it governments can work together, even if they're uh of different partisan strife.
• 16:34
  SPEAKER_01: It's really cool to see the collaboration these days.
• 16:36
  SPEAKER_01: And I think that's just a testament to show that this government's really as a whole, all the all the parties are really looking towards the best interest of the consumers in in Ontario, which is a really nice thing.
• 16:49
  SPEAKER_00: Yeah, I I think it's uh great too.
• 16:52
  SPEAKER_00: My final question uh for you is I always like to ask about thoughts or predictions.
• 16:56
  SPEAKER_00: So this could be policy related or market related, but you know, what are you watching?
• 17:02
  SPEAKER_00: What are you thinking about over, say, the next six to 18 months when it comes to housing in Ontario?
• 17:08
  SPEAKER_01: I think the general consensus is going to be our municipalities taking up the, you know, that funding to help lower DCs.
• 17:17
  SPEAKER_01: Is it helping their market improve?
• 17:19
  SPEAKER_01: Is it helping builders get into the market as well?
• 17:23
  SPEAKER_01: Offering those first-time home buyers options.
• 17:26
  SPEAKER_01: You know, not every municipality has that issue.
• 17:29
  SPEAKER_01: For me, up in the north, obviously, we've got an influx of subdivisions going in.
• 17:34
  SPEAKER_01: So that's not a major concern.
• 17:36
  SPEAKER_01: But there are areas where, you know, getting these builds done is a huge problem.
• 17:41
  SPEAKER_01: So I'm really, I'm really hopeful and optimistic that some of these big announcements that have come out is really going to move the market um forward and just rebalance everything as well when it comes to market and pricing, bring us back to a steady market rather than uh sort of an off-kiltered one.
• 17:58
  SPEAKER_00: Yeah, I couldn't agree, Martin.
• 18:00
  SPEAKER_00: I I think that point you made that there's still work to be done, uh, particularly on development charges on implementing this, I think is an important message to leave off on.
• 18:08
  SPEAKER_00: So we can't put up the mission accomplished banner too quickly here.
• 18:12
  SPEAKER_00: There's still a lot of uh of hard work.
• 18:14
  SPEAKER_00: But I'd like to thank you so much uh for being on today.
• 18:18
  SPEAKER_00: This was uh a fantastic chat.
• 18:20
  SPEAKER_00: Uh and again, I'm I'm excited to have somebody on from Northern Ontario because it is a geography we don't speak about enough.
• 18:27
  SPEAKER_00: So so thank you for uh sharing uh your viewpoint on on life in the north.
• 18:32
  SPEAKER_01: Thank you.
• 18:33
  SPEAKER_01: Thank you.
• 18:33
  SPEAKER_01: Listen, the opportunity is amazing.
• 18:35
  SPEAKER_01: Thank you so much for reaching out and and working with us in general, especially on these reports.
• 18:40
  SPEAKER_01: Um, big, big thank you to at least asking a little bit about the north too.
• 18:46
  SPEAKER_01: Um, you know, it's not to take away from our big cities because there are definitely things that trickle from the big cities down um to us, and we see them tend to happen, you know, years or months later.
• 18:57
  SPEAKER_01: So it's really important to still advocate on their behalf, but appreciate that you're putting a little love to the north as well.
• 19:03
  SPEAKER_00: So thank you for being here, Kim.
• 19:05
  SPEAKER_00: And uh thank you to our audience for watching and listening.
• 19:08
  SPEAKER_00: And thanks to this episode's producer, Kara Stern, and our editor, Sean Foreman.
• 19:13
  SPEAKER_00: And if you have any thoughts or questions about$66 a cup of coffees, please send us an email at the missingmiddle podcast at gmail.com.
• 19:21
  SPEAKER_00: And we'll see you next time.