REAL ESTATE: Peel development charge increase means homebuyers pay extra $18,000

Peel development charge increase means homebuyers pay extra $18,000

Published on Sunday September 23, 2012

If you’re thinking of buying a newly built home in the Region of Peel, you might want to schedule another meeting with your banker, thanks to a 99 per cent increase in development charges just passed by regional council.

At a recent meeting councillors from Mississauga, Brampton and Caledon voted to increase development charges for each single-family residential unit from the old rate of $17,830 to $35,532, effective Oct. 4. The increase will not apply to homes that have already received permits for construction or are well into the planning stage.

While the move was pushed by councillors who demanded that developers must pay for growth, both those for and against the dramatic increase admit it’s consumers that will pay the extra amount — almost $18,000.

“The development industry has raised huge objections to the region’s increase,” Mississauga Mayor Hazel McCallion told the Star. “That’s passed on to the person who buys the property. Developers add it to the cost of a house.”

Phil King, president of Orlando Corporation, was on the development industry working group that advocated against Peel’s sharp increase.

“Affordability of homes is a huge concern. More than $17,000 a unit increase on a single family home is a large number to accept,” said King, who addressed council Thursday. “Ultimately it gets passed onto the consumer, but they don’t see it. It’s the first-time buyer that gets hit the most.”

He said attempts to convince the region that some of the pricing factors they used in their cost calculations were too high, but staff and councillors didn’t listen.

King said his industry association, Building Industry and Land Development (BILD) has not yet decided whether it will appeal the increase at the Ontario Municipal Board.

McCallion said the move by regional council sends a clear message: “Our philosophy is that growth should pay its way.”

McCallion and other councillors, such as Mississauga’s Nando Iannicca, insist Peel’s new development rates are in line with other regions in the GTA and that Peel is only trying to catch up with the costs for roads, water and storm water infrastructure that development charges pay for.

“We’re saying to the industry, ‘it’s a privilege to develop here. Here are the real hard costs — you have to pay them,’” Iannicca said.

He said developers have and will continue to make a solid profit from doing business in Peel, but they must pay their fair share.

Asked if such a sharp increase might price Peel out of the market, he pointed to the staff report that shows even with the stiff increase Peel’s development charges are still competitive with Halton and York regions.

“I look out my window and don’t see development slowing down. I’m certainly not going to ask residents to subsidize developers.”

 

===============================================================================================

COMMENT :

We have discussed this type of fee before , the Development Cost Charge ( D.C.C. ) .

Local Gov’ts are legally empowered to charge these DCC fees on new developments within their jurisdiction. The theory is, each new living unit will attract more people, and thus more impact on local services ( ie schools, roads, parks, hospitals) . Hence this “future impact” is, in theory,  funded by this added fee.

Generally, once a developer has approval to proceed, the DCC’s are paid up front before construction starts.

There is no rhyme nor reason to DCC’s  aka where  the cost is broken down to show justification…it is basically at the Local Gov’t’s discretion.

As I have noted , THE biggest cash cow for DCC’s is High – Density…..in Richmond,  the maximum would be 16 – storey Hi – Rises. My rough estimates are that ever Richmond Hi Rise would provide over $1 Million in DCC’s…..wheras the same land for SFH may provide $150,000….see the incentive to densify?????….its a Cash Cow !!!!. This is why I continually criticize the Hi Density policy…FOLLOW THE MONEY….it has nothing to do with Saving the Environment and other “Go Green” Bullshit propoganda.

If one digs into City web-site, one can come across periodic  staff reports votes to increase DCC’s . What is interesting is the classic comparison game. The City will have a list of other Local Gov’t  DCC increases, and try to manouvere aka “sell” its increase as mid – range. Of course, this game is played with other issues….but it ends up a continual leap frog , as all Local Gov’t are in the loop of comparison.   I am aware that Richmond City Hall pisses off other Local Gov’ts, given the City seems to believe in the Golden Goose, and awards Council and Staff generous raises , which sets a term of reference for negotiations in other Cities .

IMHO, the D.C.C.’s and Property Taxes are the Local Gov’t equivalent of the Federal Reserve/Central Bank…aka it is their money printing machine ( as well as other sources of revenues… ie Permits, Fees , Fines etc). They can ratchet up their demands for cash, at least  till the taxpayers squeal.

This example from PEEL, Ontario shows the grab the Local Gov’ts make…in this case $35,000..DOUBLE the previous.Who pays ?  Ultimately,  the Homeowner, …..already in debt via mortgages.  IMHO, there is something going on.

Why didn’t PEEL do gradual increases IF an increase is justified….when was the last increase made?. …..what I have noticed is when development starts to slow down, DCC’s are increased . The developers may squawk, but there is often a window that the developers can pay the old DCC fees before the new ones are imposed. Maybe its a scare tactic by the City to shake the tree for more funds…..?

 

It is also my view that DCC increases are a sign that the economy is slowing, the time is ripe to do the cash grab….as to do it during boom times would hurt the Golden Goose. Local Gov’ts get used to the gravy train, and when they sense DCC slow down, it is like property taxes….adjust the Mill Rate.

Example…if say PEEL had 100 NEW properties developed during the booms, that would result in $1.7 Million in DCC’s

However, if there are only 50 NEW properties, there is a major drop in DCC revenues, the only remedy is to double the DCC rate.

( NOTE: If I had to move to PEEL, I would look at an older home….or perhaps play vulture, and look for bargains in a Buyers market which seems to be what the indicators show. There is no way in hell I would pay for a new house that has extra $17,000 built- in cost via DCC.)

Ultimately, What I see is that Local Gov’ts everywhere have swallowed too much Kool Aid…believe in the “Golden Goose”, but we, the average Citizens, will suffer the consequence if we don’t take charge from these “drunk on power” free – spending idiots in Gov’t.

The question one has to continually ask….” IS  THERE ANY BENEFIT TO THE AVERAGE CITIZEN FROM THIS …..OR HAVE WE REACHED A TIPPING POINT WHERE EACH NEW UNIT SIMPLIFIES  DEGRADES THE QUALITY OF LIFE  FOR THE AVERAGE CITIZEN AND THE ONLY  R-E-A-L  BENEFICIARIES ARE CHOSEN FEW ??? “

Advertisements
Gallery | This entry was posted in Uncategorized. Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s