Real estate is about location, location, location, as they say. But once the location is in hand, it then becomes about timing, timing, timing for developers. When is the right time to advance the project? How much time will approvals take? Is this the right time to launch sales?
Lately, many of those considerations have been pushed aside and developers are just locked in on getting their permits in place ahead of March 21, 2025, when protection for in-stream projects ends and projects become subjected to substantially higher rates for the development cost charges (DCCs) collected by the Metro Vancouver Regional District (MVRD).
"Staff are seeing significant pressure on the Building Division from applicants to review and issue full Building Permits in advance of this deadline despite many applicants not intending to begin construction in the near-term given sluggish pre-sales," a recent City of Coquitlam staff report noted.
In the report, General Manager of Planning & Development Andrew Merrill made an official recommendation for Council to allow applicants to pay DCCs at either the excavation, foundation, or full building permit stage.
Under provincial legislation, specifically the Local Government Act, the collection of DCCs is required to take place when the building permit is issued. However, many local governments take a staged approach to building permits, issuing separate building permits for excavation and foundation work, for example, ahead of the full building permit. The Local Government Act does not account for this, leaving it to the municipalities to determine the stage when DCCs are collected.
Pressure On City Staff
In the City of Coquitlam, DCC payment is due just prior to the full building permit being issued — the final building permit stage. This means that when there is a looming deadline such as the current one for DCC increases, applicants who want to remain on the previous fee schedule — all applicants, presumably — have to rush through those various stages. Allowing DCC payment at any of the earlier building permit stages would thus reduce the deadline rush.
In an interview with STOREYS last week, Merrill cited this as one of two reasons behind the aforementioned report, which he authored, saying that he wants the Building Division to be working on a "nice and constant pace, rather than with these peaks and valleys."
"Once we get to the end of the one-year grace period that's allowed, in legislation, for in-stream applications to be grandparented under the old fee structure, [there's] a lot of pressure on the Building Division," Merrill said. "It's really hard to manage workloads because it meant that the Building Division had these periods of intense work with lots of overtime, working weekends, trying to crank out permits so our customers can get the lower rates they thought they were gonna get. The applicants hound staff with phone calls and emails. 'When's my permit coming out? What's the timeline?' That was causing a lot of angst among staff."
Coquitlam. / Pawel Serafin, Shutterstock
Merrill says the Building Division consists of about 45 people, split relatively evenly between the approvals team and the inspections team. The approvals team is the one that is feeling the pressure from applicants, as they are the ones that review the building drawings and issue the building permits. He says that on several occasions, he has brought staff in to work on Saturdays so they can work without having to answer phone calls or emails.
These rushes occur whenever there is this kind of deadline, Merrill said, recalling that the City issued well over 1,000 units worth of permits ahead of a deadline last year, many of which still have not broken ground.
Additionally, over the past five years, the City has seen around a 200% increase in permit volume, while the complexity of projects has simultaneously increased, said Merrill, who has been with the City for nearly 17 years. Five years ago, the permits were split relatively evenly between what is referred to as "Part 9" buildings under the BC Building Code — small, low-density housing — and "Part 3" projects — the medium-density and high-density projects. These days, the split is closer to 20/80. Various regulations have also gotten more complex, meaning more work goes into reviewing applications.
Pressure On Developers
The second reason he made the recommendation was to recognize the concerns of the development industry, who banded together last fall in a letter-writing campaign to the MVRD ahead of the DCC increases that came into effect on January 1. (Further increases are set for January 1 of 2026 and 2027.)
"There's a lot of economic uncertainty," said Merrill. "The housing market is really volatile. Construction costs are still high. There's labour shortages. Material costs are going up. We've got US tariffs. We're seeing projects delaying or slowing down because they can't meet their presale targets and are concerned about financing. So, are there things that the City can do — that are quick wins and low risk to us — to improve developers' cash flow, so that they can proceed with their projects and, therefore, we can meet our housing targets? We don't meet our housing targets if developers don't build."
"Applicants definitely have to regularly rush projects through the system to have them hit stages to avoid regular fee increase or code changes," Brad Jones, Chief Development Officer at Wesgroup Properties, told STOREYS. "I think this demonstrates how challenging the regulatory environment is, where there are so many fee increases and policy changes that projects have to be rushed to try to stay in the regulatory environment that they were started in. We regularly experience fee increases year over year that are significant and, every few years, major code changes that have significant impacts of the design and cost of buildings. The new housing sector operates in an environment where government changes fees and regulations so regularly that it destabilizes the environment in which we operate."
In addition to the flexibility for DCC payments, Merrill also recommended Council bring back the two-stage security payment plan that was introduced in early-2020 in light of the COVID-19 pandemic.
The City collects securities from developers to ensure they fulfill various development obligations, such as off-site work, landscaping, and servicing. Under the two-stage scheme, developers could pay 25% upon final adoption and 85% upon building permit issuance — these kind of securities are usually valued at 110% of the estimated cost of the obligation — rather than 110% at once upon final adoption.
"Both of those are fairly easy for us to do, they don't really cost us anything, but they help out both the [City] staffing side as well as the developer proforma side," said Merrill.
Changes In Coquitlam And Beyond
In a Council meeting on February 10, Coquitlam City Council supported and approved both changes, which has brought immediate relief to the Building Division.
"We've had a flood of applicants now coming in to take advantage of that, saying 'Don't worry about our full application, we just want an excavation [permit] as this point and we'll pay DCCs early.' And a number of applicants also want to take advantage of the two-stage security — both ones that have already paid securities and want a bit of a refund, temporarily, and those that are about to submit."
Council also proposed an update to the City's own DCC program, which is pending approval from the Province and includes an average increase of 3% — an inflationary increase, in effect — to DCC rates. The changes come as the result of Bill 16, the legislation the Province introduced to change DCCs and replace community amenity contributions (CACs) with newly-created amenity contribution charges (ACCs). The legislation redefined the kinds of amenities that can be funded by DCCs, such as adding fire protection facilities and recycling facilities, thus the fee rates need to increase.
Many local governments (and developers) have been frustrated with Bill 16, but Coquitlam has been particularly vocal about it, with members of Council regularly voicing displeasure — in direct comments or subtle jabs — during meetings. The Province's intention was to get rid of CACs, because they are usually negotiated by the City and the developer, and the Province wanted to increase transparency and certainty. From this perspective, the City of Coquitlam's frustrations are understandable, as Coquitlam was one of the rare ones that used set rates for CACs.
"We felt that we had a very successful and transparent system under our existing DCCs, CACs, and density bonus [programs]," said Merrill. "All three used set rates that were published, they were listed on the website, developers knew what those charges were, they could put them into their proformas early before they even bought land — unlike in other places like Burnaby or Vancouver where the CACs or density bonuses are a negotiated thing that can take years."
The proposed increases to the City of Coquitlam's DCC rates. / City of Coquitlam
Coquitlam and other municipalities are now also facing a deadline of June 30, 2025 to comply with changes introduced in Bill 16 as it relates to density bonusing. The deadline was originally June 30, 2024, but Coquitlam has asked the Province to extend the deadline by three years. (The City of Richmond recently asked for a one-year extension.) Merrill says the City is now tasked with figuring out how to shift in-stream projects from the previous scheme to the new scheme, mid-stream. (The Province hasn't even published the comprehensive guidance for local governments yet.)
As it relates to the DCCs, Merrill suggests there is a reasonable fix the Province can make.
"Part of the problem [is] the one-year grace period for in-stream applications is under the Local Government Act. Clearly, for big, complex, and high-density mixed-use projects, which is the majority of what Coquitlam builds and what the region builds, 12 months is no longer a realistic timeframe for somebody to get their building permit. Because these projects are so big and so complex, to move through rezoning, development permit, and building permit, and get your shovel in the ground... Nobody's doing that in 12 months, even if everybody was super fast. I think the provincial legislation hasn't kept up with the change in development forms and timelines that projects take these days."
For developers, they also had to hit the presale targets set by their lenders, within that 12 months, to secure construction financing. However, late last month, the BC Financial Services Authority introduced a pilot program that extended the 12-month "early marketing period" to 18 months for large projects, recognizing that 12 months is increasingly unrealistic. That change does not apply to DCCs, but a change on that front may be coming soon, as the MVRD has proposed extending the in-stream protection period for their DCCs from 12 months to 18 or 24 months.
As we said up top, you can forget location for the moment, right now it's all about timing, timing, timing.
