New fee cuts that local councils can levy against homebuilders could have a big impact on property taxes in parts of the GTA, a new CBC News study has found, with one municipality saying property taxes could double more.
Late last year, the provincial government passed Bill 23, the More Homes Built Faster Act, which eliminated some fees that municipalities charge developers in exchange for the right to build certain types of housing — money that municipalities say that they rely on to provide things like roads and sewers, public transportation, parks and libraries.
CBC News polled all 25 municipal governments in the Greater Toronto Area on Dec. 15 and 16, asking how much money they stand to lose if they don’t collect development fees and how much they think they’ll have to raise property taxes in the coming years to make ends meet .
The majority of these municipalities say it is not yet clear how they will deal with the dramatic loss of revenue.
“Obviously, we’re in a tight spot,” Aurora Mayor Tom Mrakas said. “I hear this from other municipalities as well.
He said he is looking at a potential six percent property tax increase next year or service cuts to make up for a projected $29 million revenue shortfall over the next 10 years.
Municipalities say they’re all for more affordable housing, but Ford’s decision to waive construction fees on certain types of housing will cause taxes to rise. (Jane Robertson/CBC)
Of the GTA municipalities surveyed, seven either did not respond or sent automated replies promising follow-up that have not yet arrived. Another 10 told CBC News they are still crunching the numbers and haven’t come up with a potential tax increase yet.
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 increases they are considering to make up the difference.
These tax increases ranged from over 100 percent in East Guillimbury to 5-15 percent in Newmarket.
Hover over each municipality for details
Councils hoard development fees, province claims
When it introduced the bill last month, the Conservative government said it aimed to help meet its goal of seeing 1.5 million new homes built over the next 10 years. By eliminating construction fees that municipalities can charge for affordable housing — those that are 80 percent of the market average or less — the province believes it could incentivize developers to build more homes at a lower cost. low price for buyers.
Municipal Affairs Minister Stephen Clarke has accused municipalities like Toronto of keeping development fees in reserve funds instead of spending them on community improvements and raising development fees to excessive levels.
“In parts of the GTA, for example, development fees have risen more than 600 percent in the past 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 though the city has a development fee reserve fund of more than $2.3 billion. In fact, the province estimates that Ontario municipalities have about $9 billion in unspent development charge reserves.”
Steve Clark, Ontario’s Minister of Municipal Affairs and Housing, addresses the media at Queen’s Park in Toronto on October 25, 2022. (Evan Mitsui/CBC)
But some GTA politicians dispute this.
“What we’re not doing is treating the development fees that we charge as some sort of piggy bank where you can just go and take your kids’ higher education fund and spend it on travel,” said Toronto Mayor John Tory CBC News.
“We set aside the money that in some cases we are legally required to set aside by provincial legislation … and the rest of it is set aside because there are projects that we’ve raised 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 irresponsible.”
Tory also said he’s taking the province at its word when he says the city will be made “whole” if development fees fall so low it can’t support basic infrastructure, as Clark told the city.
The mayor is calling on the province to reverse the changes
The CBC asked Clark about his response to GTA politicians who say they will have to raise taxes and/or cut services to make ends meet once the affordable unit development fees are eliminated.
“To be clear, this does not mean municipalities will not receive revenue from new construction,” Clark spokeswoman Victoria Podbielski said in an email. “This means home ownership will not continue to be put out of reach for Ontarians due to increased fees that add thousands to the cost of a home.”
However, some municipalities argue that this will not necessarily make home ownership easier, as residents can expect to face higher property taxes as local councils struggle to make up for lost fees.
Mayor Virginia Hackson of East Guillimbury, a city that has seen rapid population growth in recent years and estimates property taxes will jump more than 100 percent, called the province’s move “exciting and insulting” in a press release and said, that instead of imposing it house prices would only “shift the cost of growth from developers to residents”.
“We call on the province to repeal all provisions of the law relating to development fees,” the mayor said in the release.
In Burlington, whose staff has yet to calculate the required tax increase, Mayor Marian Mead Ward said there is no guarantee that the savings to developers will be passed on to homebuyers.
The province’s move “would destroy municipal finances and our ability to fund things like parks, community centers, transit — all the amenities that a growing community needs. These costs will be passed on from the for-profit developers to the taxpayers,” the mayor said.
“We’ll show this as a line item on your next tax bill.”
$5 billion in lost development fees across the province
Survey responses show that while East Gwillimbury residents could be hardest hit, other municipalities are also predicting steep spikes:
The city of Vaughan projects annual losses of between $169 million and $174 million and property tax increases of between 77 and 88 percent.
Whitchurch-Stouffville projects losses of $19.6 million over five years and tax increases totaling 52.3 percent over four years, starting with a 20.3 percent jump in 2024.
An aerial view of Whitchurch-Stouffville in June 2022 shows areas under construction for housing. (Patrick Morrell/CBC)
Newmarket residents can expect their property taxes to rise between five and 15 percent, according to staff.
Mississauga expects to lose about $1 billion in revenue, forcing an eight to 10 percent jump in property taxes. Staff say that would add about $500 to the average tax bill for a house valued at 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 fees and a property tax increase of at least nine percent.
Both Aurora and Toronto could face property tax increases of about six per cent, according to staff in those two municipalities.
Across the province, the Association of Municipalities of Ontario said changes to development fees would leave communities with a $5-billion shortfall and leave taxpayers to foot the bill in the form of higher property taxes or service cuts.
Aurora’s Mrakas says it will likely be a little of both.
“It will probably be more light [increase] in taxes and a slight reduction in services… We’ll end up having to look at something like sidewalk cleaning when it comes to snow removal.”
No “overnight shift”
Clark insists the changes are necessary. In a November letter to the Association of Municipalities of Ontario, he wrote that “municipal fees and taxes currently add an average of $116,900 to the price of a single-family home in the Greater Toronto Area before a shovel is in the ground. This is the size of a down payment for many families and puts the dream of home ownership 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 are adding development fees to the price of a home.
But he warned prospective homebuyers not to expect miracles when those fees are reduced or capped.
“It took years to get us into this situation. I don’t think we’re going to see a sudden change in housing prices or a stabilization in housing prices, he said. “But when all the input costs are reduced, that will work its way through the system.”
It is not yet clear when the tax changes will take effect; this will depend on the budgets approved by each municipal council. Some municipalities propose 2023, others next year.
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