Thursday, October 26, 2023

If the Federal Government Wants Lower Development Charges, It Must Consider Increasing Infrastructure Funding

Pump room inside Langley City’s Water Reservoir

In June, I posted that the Metro Vancouver Regional District was considering increasing Development Cost Charges. The Regional District uses these charges to pay for water, sewer, and park infrastructure related to new housing (population) and commercial building growth.

One of the tenets of local government-funded infrastructure in BC is that "growth should pay for growth." Put another way, property tax and utility fees shouldn't be used to build new infrastructure to accommodate population growth.

Development Cost Charges are a per unit or square footage charges developers pay when constructing new buildings. The provincial government regulates and approves all Development Cost Charges.

Langley City is currently in the process of increasing our Development Cost Charges, as is the Metro Vancouver Regional District. Now, these charges are not a free lunch. If they are set too high, it can drive the cost of housing or commercial buildings up.

The Metro Vancouver Regional District Board is voting on proposed increases to its Development Cost Charges tomorrow, but there is a wrinkle. The Federal Government has decided to pause the Housing Accelerator Fund for all municipalities in Metro Vancouver. Langley City recently applied for $9.67 million from the program to help speed up and increase the number of housing units being built in our community.

The Federal Government wants the region to delay the implementation of the proposed regional Development Cost Charge increases. For specific projects, such as below marking housing built by non-profits, the Regional District will already reduce or eliminate Development Cost Charges. Still, the Feds want the region to consider expanding the reduction or elimination of Development Cost Charges to for-profit, market-priced rental construction (among other things.)

Unlike the federal or provincial governments, local governments in BC, such as the Metro Vancouver Regional District or Langley City, must have balanced budgets. For each exemption or reduction in Development Cost Charges, local governments must raise that "lost" revenue with property tax or utility fees that all property owners and renters pay for.

So if we exempted for-profit, market-priced rentals from Development Cost Charges, the City and region would have to transfer the cost of building new infrastructure to accommodate growth from developers to everyone.

There is another path forward. The federal government could come forward with additional, significant funding to pay for water, sewer, parks, and transportation infrastructure required due to population growth. They could even link it to reductions in Development Cost Charges.

I know that local governments, the province, and the federal government want to support building more housing faster, but we also need to pay for the infrastructure required to service these new housing units. While Development Cost Charges are far from perfect, they are essential for local governments, including Langley City, to pay for building basic infrastructure.


Anonymous said...

Why shouldn't everyone - particularly disproportionately older and wealthier homeowners who have benefited enormously from the huge increase in the value of housing - not help pay for growth? It's not as if new infrastructure only benefits or is needed for new housing, existing residents benefit and in many cases the new housing isn't for new residents - its for young people that do not have their own homes!

Nathan Pachal said...

While developer fees pay for upgrading pipes, roads, and acquiring parkland, and only for the part that is for growth, everything else is pay for via property tax and utility fees. So when a road is repaved or aging sewer line is replaced, it is property tax and utility fees that are paying for it which everyone pays.

Anonymous said...

Another point in response to the Anonymous commenter is that increased DCCs and other development-related charges can help suppress land values, which reduces how much existing/long-time landowners can gain from their properties.