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Hefty Development Fee Hikes are Yet Another Deterrent to Housing

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Toronto is looking at hiking fees for processing development applications at the worst possible time. The increases would be yet another deterrent when we’re in such dire need of more housing.

A new fee schedule is slated to be presented soon to city council. Applications for minor variance-related applications could rise 42% while consent-type requests could go up 58%. Official Plan Amendment (OPA) fees could increase 97%.

They essentially amount to a regressive tax measure that will impose more financial burden on developers and ultimately be passed on to consumers in the form of higher housing costs. The plan certainly runs contrary to the city’s stated objective of creating more affordable housing and rental units.

The application fees are intended to recover the cost of services provided by all divisions of the city engaged in a review. The hikes are supposed to reflect changes in development trends, including the larger size and complexity of applications. The current fee schedule came into effect Jan. 1, 2017.

READ: Builders Sound Alarm as Toronto Proposes Huge Increase to Development Charges

According to the city, the annual processing cost for development application reviews between 2016 and 2021 increased by $26M and now stands at near $83M. If approved, the new schedule will be effective Sept. 1, 2022.

Developers and builders understand the necessity for regular fee reviews, but the big problem is that the hikes do not correlate with the level, quality and efficiency of customer service from the city.

New-home buyers in Toronto already face some of the highest government-related charges in North America. A report in 2021 by Oxford Economics also pegged Toronto as second on the list of least affordable cities in North America largely because of the cost of housing compared to income.

It is difficult for the city to justify such increases without assurance or a plan to provide more timely and better service.

The annual average development application volume increased by 8% between 2016 and 2021, with OPA/rezoning and minor variances applications increasing 21% and 13%, respectively. However, there were persistent staff vacancies in the planning and other associated city departments.

Any fee hikes, therefore, should result in better customer service levels and a commitment to ensure there are sufficient and sustainable staffing levels to meet timeframes regulated under the Planning Act, the city’s own STAR application process timeline targets and the Bill 109 time commitments.

Moving forward, the city’s Concept 2 Keys (C2K) initiative should have greater authority and autonomy to ensure staff levels in relevant departments are better managed to address systemic and chronic staff vacancies. This is absolutely critical if we are to address the current housing supply crisis.

Improvements must be made to the process for reviewing development application fees. The current process is based on historical application volumes and staffing levels, not anticipated workload. A full evaluation of staff complement, meanwhile, should be undertaken in future reviews.

Further, the current system of reviewing the fees every four years is not nimble enough to respond to actual activity. It is too simplistic and does not accurately capture nuances associated with development approvals.

The next time the city reviews the fees it should do a complete evaluation of process maps and service delivery timeframes to see how they can be improved. This is important as the current maps date back to 2012. The development and planning landscape has changed considerably since then. The maps are not reflective of the current needs of the development industry and how a development review occurs.

At the very least, any future review of development application fees should ensure that the proposed hikes better reflect the level of service and reality of the situation.

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