The Metro Vancouver Regional District (MVRD) Board has approved the proposed increases to development cost charges (DCCs) that have been at the centre of a conflict with the federal government, and Minister of Housing Sean Fraser in particular.
The DCCs in question are the longstanding liquid waste DCC, the water DCC implemented in April 2023, as well as a new DCC for park acquisitions, which would be charged by MVRD on all residential and non-residential development in the region. MVRD uses the collected fees to pay for new infrastructure needed to support the region's growth.
As proposed — and now approved — by Metro Vancouver, the increases would be implemented in phases across several years, with the ultimate goal of lowering the "assist factor" for each of them to 1%. Currently, the assist factor for the liquid waste DCC and water DCC are 17.5% and 50%, respectively, which means that 82.5% and 50% of the capital costs related to liquid waste and water infrastructure projects are funded through the DCC.
All in all, the proposed changes could result in increases of over $20K for single-detached homes and townhouses, and nearly $15K per unit for multi-family buildings, at a time when developers across the housing spectrum are in unison about the cost to build holding them back from delivering the housing that the country desperately needs.
The first increase will come into effect on January 1, 2025, followed by further increases in the two subsequent years.
Fraser put a big spotlight on the DCCs after he cited the proposed increases as the reason why he was suspending Housing Accelerator Fund (HAF) announcements that were planned for Burnaby and Surrey — in a tweet just a few hours before he was planned to make the announcements.
Earlier this week, the MVRD Board received a follow-up letter from Fraser looking for a resolution.
"I appreciate that cities need access to funding to build out the infrastructure that the growth we are trying to incentivize will rely on," Fraser said. "I am not suggesting that development charges, generally speaking, are unacceptable. [...] I am concerned that at this particular moment in time, a drastic increase in development charges will inhibit our ability to seize the opportunity to incentivize a rapid increase in construction."
Fraser then said he wanted to "collaborate on a resolution that ensures Metro Vancouver can support the infrastructure demands which growth will create" that also respects "the spirit of building as many new homes as possible."
He recommended the DCC increases be delayed — without specifying how long — and that MVRD uses that time to amend its bylaw regarding DCC waivers, whether that be exempting purpose-built rentals from the increase, reducing the mixed-use threshold for which the current waiver applies, introducing waivers for private developers that provide the development to a non-profit upon completion, or extending waivers to private developers that deliver non-market rental units.
The possibility of MVRD exploring new DCC waivers was previously reported by STOREYS, with MVRD saying earlier this month that they had begun conducting a "bylaw review to potentially extend the waiver or reduction to profit-oriented developers of affordable rental housing."
Developers have also voiced concern about the increases, with the Urban Development Institute, which represents developers and their interests, sending a letter to MVRD earlier this week saying they were "outraged' about the proposed increases. However, in an interview on Thursday, MVRD Commissioner and Chief Administrative Officer Jerry Dobrovolny said that decision to phase the increases was a product of their consultation with the development industry.
"We brought these [increases] forward with a three-year phase-in period based on the consultation we did with the development industry," Dobrovolny told STOREYS. "One of the things we clearly heard from them was that one of the biggest concerns is cost certainty and being able to factor them into proformas for projects, so we went to three years in response to that."
"Our three- or four-year increase [with the one-year delay] is about the same as the impact that interest rates had the last 12 months," Dobrovolny adds. "It's about half the impact that inflation on materials has had in the last 12 months. It's about half the impact that land prices have had in the last 12 months. So, while it's a major change that we're proposing, over four years, it's equal or less to the impact of other major factors in the last 12 months."
An amendment was brought forth to delay the enactment of the DCC increases by one year, with the first increase coming into effect on January 1, 2026, but the motion was defeated in a vote on Friday morning.
Members of the board, which consist of mayors and councillors from the various member municipalities were generally split into two sides.
One side, led primarily by Port Coquitlam Mayor Brad West, was against the one-year delay and voiced anger towards the federal Ministry of Housing for effectively holding HAF funding "hostage." West said the situation was just "politics" by politicians who are worried they will be out of office soon, while others called it a "threat" and "coercion."
West also pointed out that there is no guarantee that Metro Vancouver municipalities will be granted HAF funding even if they delay the increases, and that swaying off course could create future problems as it relates to infrastructure needs.
"If we're a victim of anything, it is of timing," said West. "It's of the fact that at the same time that the Minister is trying to roll out these [HAF announcements] with much fanfare, we're at this stage of the process [of increasing DCCs]. And under pressure from the opposition and others, they're trying to glom onto anything that might improve the political environment for them. I don't believe for one minute that delaying, or even scrapping, this DCC [increase] would result in one iota of affordable housing being built. Not one."
The other side consisted of many who recognized the political aspect of it, but nonetheless believed that the one-year delay is acceptable, both to increase the likelihood of the HAF funding and to facilitate new housing construction. Jerry Dobrovolny, Commissioner and Chief Administrative Officer of MVRD said that he believes MVRD can absorb the financial impact — which he estimated at about $100M — of the one-year delay, but not a two-year delay.
Core to the decision was that the MVRD 2024 budget and 2024-2028 financial plan were the next items on the agenda and a decision had to be made on the DCCs so that MVRD can transmit the new rates to member municipalities, which are also working through their budgets at the moment. Surrey Mayor Brenda Locke introduced a motion to delay the decision, but the motion was defeated.
After well over two hours of debate, two options were presented: approve the DCCs as originally proposed or approve the DCCs with the one-year delay today. The former was passed with an 82-58 vote. (40 directors were in attendance, but their votes are weighted by the size of their respective municipalities.)
An amendment to approve annual reviews of the DCC bylaws, its economic impact, and the DCC waiver program was also approved.
Prior to the vote, however, the possibility was raised that the original proposal could be approved today and later be amended to delay the enactment, but it's unclear whether that will happen.