Construction companies and building associations join developers in tussle over fee hikes for new residential developments
Construction companies and building associations have joined several big-name developers in calling on Metro Vancouver to reconsider proposed development fee increases for building new homes.
The opposition has prompted the regional authority’s mayors committee to call a meeting on Oct. 17 with about 20 concerned groups.
“What ended up happening, quite organically … is that more and more developers and groups started submitting letters and seeking a delegation to speak to the board of Metro Vancouver,” said Beau Jarvis, CEO of Wesgroup Properties.
The chairman of the Metro board, Burnaby Mayor Mike Hurley, confirmed a special meeting has been arranged.
Previously, the development cost charges collected by Metro covered 50 per cent of the cost of new infrastructure for water services and 17.5 per cent of the cost of new infrastructure for handling liquid waste. The proposed increases would allow Metro to cover the full amount of new infrastructure and would also be used for park acquisitions.
The fees vary depending on type of housing and area, and are guided by a principle that “growth pays for growth.”
The protest against the development cost charge increases started with a few high-profile developers writing letters to Hurley in mid-September.
“It was ourselves, Anthem, and Polygon that kicked it off. And it just kept growing,” said Jarvis of Wesgroup.
Both homebuyers and taxpayers should bear the cost of building new infrastructure for new homes, according to those who want a review. They point out that under Metro’s mantra of “growth pays for growth,” it will be mostly new homebuyers who shoulder the bulk of the cost.
“The challenge we have is how (infrastructure) is funded,” said Chris Gardner, president of the Independent Contractors and Businesses Association, which represents 4,500 members.
“If you talk to local politicians, you’ll hear this phrase that ‘growth pays for growth’ as if that makes sense, but it doesn’t. It doesn’t make sense that all the cost is going to be borne by the people moving into that neighbourhood. We have to find a new way to fund community-related infrastructure.”
The developers are asking for a two-year pause on the fees to allow projects that are already underway to be completed.
Evan Allegretto, president of Intracorp Projects Ltd., said in a letter to Hurley that viability issues have already stalled many projects accounting for over 10,000 proposed homes.
Developers are also asking for fees to be paid at the end of a project instead of at the beginning when they’re already borrowing money.
“At a time when the real estate sector is grappling with multiple macroeconomic pressures — particularly a 475-basis point rise in interest rates and a sharp 50 per cent increase in construction costs — the additional (development cost charge) increases of over 230 per cent in the Vancouver sewage area represent a dramatic cost escalation,” Orion Construction president Joshua Gaglardi wrote in his letter.
Jarvis said the increases are based on an estimate of what infrastructure costs will be.
But, “has anybody had an opportunity to analyze that number?” he asked. “I know that we certainly haven’t. What engineering specifications are being used? What escalation and indexing factors? How much can be deferred?”
Hurley said there are many issues at play and that it’s too easy “to point fingers at the smallest level of government.”
He pointed to the escalating cost of materials, such as concrete, developers having paid too much to acquire land, the absence of federal government funding and banks’ rates to finance rental housing.
“To ask us to fix these issues is unfair,” said Hurley.
He said there is room to discuss the timing of payments for these development cost charges, but there’s urgency to get new homes built.
“The bottom line is that these are must-haves, not nice-to-haves and someone has to pay. If their only solution is to raise taxes, then the discussions are not going to go very far.”