New cuts to the fees that local councils can levy against home builders could have a major impact on property taxes in parts of the GTA, a new survey by CBC News has found, with one municipality saying property taxes could more than double.
Late last year, the provincial government passed Bill 23, the More Homes Built Faster Act, which eliminates some fees that municipalities charge to developers in exchange for the right to build certain types of homes — money that municipalities say they rely on to provide things like roads and sewers, public transit, parks and libraries.
CBC News polled all 25 municipal governments in the Greater Toronto Area Dec. 15 and 16, asking how much money they’ll lose by not collecting the development charges and how much they believe they’ll have to hike property taxes in the years ahead to make ends meet.
The bulk of those municipalities say it’s still unclear how they’ll contend with the dramatic loss of revenue.
“Obviously we’re in a bit of a bind,” Aurora Mayor Tom Mrakas said. “That’s what I’m hearing from other municipalities too.”
He said he’s looking at a potential six per cent property tax hike in the year ahead, or cuts to services to help make up for a predicted revenue shortfall of $29 million over the next 10 years.
Of the GTA municipalities polled, seven either didn’t respond, or sent auto-replies promising follow-up that hasn’t yet arrived. Another 10 told CBC News they are still crunching the numbers and haven’t yet arrived at a potential tax hike.
But the remaining eight — Aurora, Brampton, East Gwillimbury, Mississauga, Newmarket, Toronto, Vaughan and Whitchurch-Stoufville — all reported detailed estimates of the losses they face, and the tax hikes they’re considering to make up the difference.
Those tax hikes ranged more than 100 per cent in East Gwillimbury to as low of five to 15 per cent in Newmarket.
Hover over each municipality for details
Councils hoarding development fees, province claims
When it introduced the bill last month, the Conservative government said its aim was to help reach its target of seeing 1.5 million new homes built in the next 10 years. By eliminating the development fees municipalities can charge for affordable homes — those that are 80 per cent of the market average or less — the province believes it can spur developers to build more homes at a cheaper cost to buyers.
Municipal Affairs Minister Steven Clark has accused municipalities like Toronto of storing the development charges in reserve funds, rather than spending them on community improvements, and by jacking up development fees to exorbitant levels.
“In parts of the GTA, for instance, development charges rose by more than 600 per cent in the last 13 years,” Clark wrote in a November op-ed in the Toronto Star.
“Toronto alone has proposed another 46 per cent increase over the next two years — even as the city sits on a development charge reserve fund of more than $2.3 billion. In fact, the province estimates that municipalities across Ontario have about $9 billion in unspent development charge reserves.”
But some GTA politicians dispute that.
“What we don’t do is treat the development charges we take in as some sort of a piggy bank, where you can just go and take the college education fund of your children and spend it on a trip,” Toronto Mayor John Tory told CBC News.
“We set aside the money that in some cases we’re legally required to set aside by provincial legislation … and the rest of it is set aside because there are projects that we collected that money for, to build a sewer here or a park there. To spend it before you’ve even built the project on something else would be not responsible.”
Tory also said he’s holding the province to its word, when it says the city will be made “whole” should development charges drop so low that it cannot maintain basic infrastructure, as Clark has told the city.
Mayor urges province to repeal changes
CBC asked Clark for his response to GTA politicians who maintain they’ll have to raise taxes and/or cut services in order to make ends meet once the development charges on affordable units are eliminated.
“To be clear, this doesn’t mean that municipalities won’t get revenue from a new home build,” Clark spokesperson Victoria Podbielski said in an email. “It means that home ownership won’t keep moving further out of reach for Ontarians because of increased fees that add thousands to the price of a home.”
However, some municipalities argue it won’t necessarily make home ownership any easier, because residents can expect to face higher property taxes as local councils struggle to make up for the lost fees.
Mayor Virginia Hackson of East Gwillimbury, a town that’s seen rapid population growth in recent years and estimates property taxes will jump more than 100 per cent, called the move by the province “egregious and insulting” in a press release and said rather than push down house prices it will only “transfer the cost of growth from developers to residents.”
“We urge the province to repeal all provisions of the Act pertaining to development charges,” the mayor said in the release.
In Burlington, whose staff have not yet calculated the necessary tax hike, Mayor Marianne Meed Ward said there’s no guarantee that developers’ savings will be passed on to home buyers.
The province’s move “will devastate municipal finances and our ability to fund things such as parks, community centres, transit — all the amenities a growing community needs. Those costs will be shifted from for-profit developers to taxpayers,” the mayor said.
“We’ll show that as a line item on your next tax bill.”
$5 billion in lost development charges provincewide
The survey responses indicated that while residents in East Gwillimbury could be hardest hit, other municipalities are also predicting steep hikes:
The City of Vaughan is predicting annual losses of between $169 million and $174 million, and a property tax increase of between 77 and 88 per cent.
Whitchurch-Stouffville is predicting losses of $19.6 million over five years, and tax hikes totalling 52.3 per cent over four years, starting with a 20.3 per cent jump in 2024.
Newmarket residents can expect to see their property taxes go up between five and 15 per cent, according to staff.
MIssissauga expects to lose about $1 billion in revenues forcing an eight to 10 percent jump in property taxes. Staff there say that will add about $500 to the average tax bill on a house worth about $730,000, plus an additional $180 on residents’ water bills.
Brampton staff say Bill 23 will cost the city about $440 million in lost development charges and a property tax increase of at least nine per cent.
Both Aurora and Toronto may be facing property tax increases of about six per cent, according to staff in those two municipalities.
Provincewide, the Association of Municipalities of Ontario has said the changes to development charges will leave communities short $5 billion and see taxpayers footing the bill, either in the form of higher property taxes or service cuts.
Aurora’s Mrakas says it will likely be a bit of both.
“It’s probably going to be more of a slight [increase] in taxes and a slight cut in services…. Ultimately we would have to look at something like sidewalk clearing when it comes to snow removal.”
No ‘overnight change’
Clark insists that the changes are necessary. In a November letter to the Association of Ontario Municipalities, he wrote “municipal fees and taxes currently add an average of $116,900 to the cost of a single-family home in the Greater Toronto Area before a single shovel is in the ground. That’s the size of a down payment for many families, and puts the dream of homeownership out of reach for thousands of Ontarians.”
Dave Wilkes, CEO of the Building Industry and Land Development Association of the GTA, or BILD, agreed that developers add development charges into the price of a home.
But he cautioned prospective home buyers should not expect miracles when those charges are reduced or capped.
“It took years to get us into this situation. I don’t think we’re going to see overnight change in the cost of housing or the stabilization of the cost of housing, he said. “But when any input cost is reduced, that will work its way through the system.”
It’s not yet clear when any tax changes would take effect; that would depend on the budgets approved by each municipal council. Some municipalities are suggesting 2023, and others the following year.