When a family buys a new home in the Greater Toronto Area (GTA), as much as a quarter of the price consists of fees, taxes, and charges imposed by the three levels of government. More than half of that amount is levied by the municipality in the form of charges intended to pay for growth-related infrastructure, additional services, and new parks. Given the accumulation of large reserves of growth funding charges by municipalities and the housing affordability crisis we are facing in the GTA, it makes sense that the public — our industry included — wants transparency and accountability around how these charges are collected and spent. That’s why last month, the Ontario Home Builders’ Association (OHBA) called on the province to audit major municipalities’ collection and use of growth funding charges.
Across the GTA, municipalities collect $116,000 per new housing unit, on average, in growth funding charges, including development charges, community benefits charges and parkland cash-in-lieu. The rates for the most significant of these charges — development charges — are based on background studies that municipalities are required to produce every few years, projecting how much new infrastructure and services will be required to support the residents of new housing being added. Development charges have increased between 250-800% since the early 2000s.
Ensuring that residents get the infrastructure and services they need is important. Unfortunately, for more than a decade, GTA municipalities have been collecting far more in growth funding charges than they have been spending, accumulating an estimated $6B in reserves. This estimate is based on the financial information returns municipalities file annually with the Ministry of Municipal Affairs and Housing.
When challenged about the intended use of these large reserves, municipalities state that the funds are allocated. However, in most cases it is not clear whether the funds have been allocated for the new infrastructure and services for which they were ostensibly collected. Transparency and accountability are missing here.
As part of its efforts to address the housing supply and affordability crisis in Ontario and the GTA, the provincial government has brought in measures in Bill 23, the More Homes Built Faster Act, to slow the increases in development charges and remove development charges from affordable housing projects. Municipalities have objected that these measures will be detrimental to their finances but an independent analysis conducted for the OHBA demonstrates that they are overstating the impact. Taking into account the totality of their reserves and the grants they have received, major municipalities in Ontario, and Toronto in particular, are well positioned to accommodate the changes.
Given the significant impact of municipal growth funding charges on housing affordability, it is important that we have all the facts about how they are being collected and spent. An independent audit is the best way to get this clarity as we chart a sensible path forward in addressing our region’s housing supply and affordability challenges.