Development cost charges (DCCs) have been a popular tool for funding municipal infrastructure intended to accommodate growth, but a Conference Board of Canada report released March 12 recommends monitoring their use.
“Development charges should be used only to provide new physical subdivision infrastructure,” the report recommends, noting that their contribution to new home prices should be capped.
The report also discouraged channelling DCCs into general revenue, which can lead to a perception in some municipalities that developers essentially “buy” permission for projects.
Data from Altus Group included in the report shows that Vancouver has the highest DCCs for high-rise development in the country at $157 per square foot (based on an 800-square-foot apartment). This is more than seven times that of Calgary, the second most expensive jurisdiction in the country at $21 per square foot.
Meanwhile, Saskatoon’s rate for single-family development is $32 per square foot, based on a 2,000-square-foot residence. This is the most expensive in Western Canada, being $4 more than Vancouver.
DCCs have a direct impact on residential prices, the report states. DCCs account for 14.2 per cent of the price of a single-family home in Saskatoon, even more than the 10.3 per cent contribution to high-rise costs in Vancouver.
While a number of factors play into residential values – in Vancouver, the country’s most expensive housing market, DCCs represent a smaller share of new home values than elsewhere – the Conference Board of Canada says the impact of development cost charges is significant. This is seen especially in smaller, generally affordable markets like Saskatoon and Regina.
“Financing new construction infrastructure through municipal borrowing is generally cheaper than paying for it privately by adding the cost to the amount borrowed by new home buyers,” the report states. “Not relying on development charges therefore helps to keep new housing more affordable.”
