Toronto is raising development fees by nearly half, adding tens of thousands of dollars to the cost of building most new homes, even as the city suffers a housing affordability crisis. The city council voted on Tuesday to increase development charges (DC) for residential buildings by 46%, with the increase phasing in until May 2024, arguing the money was needed to pay for new infrastructure associated with the added homes. The charge for non-residential buildings will increase by 40 percent. Development charges will be waived for the second, third and fourth residential units on a single property, provided there are no more than four units, in an effort to encourage small-scale density. Builders warned that higher fees for most homes would lead to less construction. And critics say the move would unduly shift costs onto new residents as a way to prevent a property tax increase for current homeowners. “The burden will fall on renters and new homeowners,” argued Jacob Dawang, with the advocacy group More Neighbors Toronto, in its official submission for the change. “The city’s budget should be shared more equitably between property owners who have lived in Toronto for decades and younger residents.” Toronto could face wave of apartment project cancellations as costs rise Ontario’s push to speed up housing construction may backfire, critics say Mayor John Tory said Toronto’s hands were somewhat tied by its limited options for generating revenue, and he was well aware of the tension between protecting affordability and raising development fees. “The development charges that are in place … don’t even begin to pay for the infrastructure we need to put in place to deal with a growing city,” he told the council “But we have to strike a balance, between that and the impact on the affordability of new homes ». Councilor Shelley Carroll noted the city will continue to have development fees below the Greater Toronto Area average, even as the new and higher levels are phased in. The increase in development fees came in the wake of a change in provincial legislation, which required the city to review and update its fees. A report by Toronto city staff says the city faces a capital bill of $67 billion over the next two decades, and that $14.9 billion of that is tied to costs generated by new development. Under the plan approved on Tuesday, development charges for detached and semi-detached homes will rise from $93,978 to $137,040. For an apartment with two or more bedrooms, the fee will increase from $55,012 to $80,218. For apartments with fewer than two bedrooms, it will increase from $35,910 to $52,367. Such a shift could have a profound effect on the amount of housing being built in the city, critics say. But Toronto’s chief planner, Greg Lindern, argues that the added costs are just one part of a bigger and more complex development picture, which includes inflationary pressures as well as supply chain and labor issues. “The city’s fees are just one aspect of a very large financial decision” developers must make, he said. The Greater Toronto Apartment Association noted that the city is already far short of the required amount of building. Within Toronto, an average of about 1,500 rental units are completed annually, with more than 4,000 needed to meet demand. The group called for the first phase of the development fee increase to be delayed by two years – starting in 2025 instead of 2023 – and said the industry needed help, not roadblocks. The rise also reignited long-standing criticism of the development fee regime. Such charges are calculated flat-rate on residential units of a certain size, without reference to infrastructure needs in the particular area in which a project may be located. The Morning Update and Afternoon Update newsletters are written by Globe editors, giving you a concise summary of the day’s most important headlines. Sign up today.
