Ottawa, Ontario, November 20, 2024

The Greater Ottawa Home Builders’ Association (GOHBA) is extremely concerned with the City of Ottawa’s rising development charges (DCs) and the impact of DC increases on housing affordability and supply locally.

 

The City of Ottawa has already implemented two increases in DC rates since adopting its new DC Bylaw in May 2024. That bylaw itself introduced an average 11 per cent increase in DCs within Ottawa’s built-up areas.

• October 1, 2024: The City indexed DC rates by 7.8 per cent, despite not indexing rates in the first year of its last two new DC Bylaws (2019 and 2014).
• October 30, 2024: Rates increased again following the adoption of the new Infrastructure Master Plan.

 

The City is now planning three more increases to DCs in the next few months:

 

1. November 27, 2025: The City plans to add corporate studies to the DC By-law at 400% increased cost compared to 2019.
2. April 1, 2025: The City plans to index DC rates once more.
3. May 2025: The City is expected to adopt a new Transportation Master Plan, leading to further DC increases.

 

In total, the City of Ottawa will increase DC Rates six times within a year.

 

These periodic changes obscure the true increase in DCs.

 

From Oct 1, 2023 to Nov 27, 2024 alone, for Singles, Semis, Towns and Apartments, DC Rates will have increased:

 

• 28% inside the greenbelt
• 23% outside the greenbelt
• 26% in serviced rural areas
• 29% in unserviced rural areas

 

A full breakdown of DC Rate increases by type, dollar and percentage is available here.

 

GOHBA’s Recommendations to the Provincial Government on Development Charges

 

GOHBA has identified eight overarching issues with development charges that could be addressed with changes to The DC Act to enhance housing affordability and supply:

• Municipalities need to provide an updated DC Background Study and methodology to support proposed rates.
• Municipalities need to ensure flexibility in local service policies.
• Stop Cash-In-Lieu being used to fund Benefit-To-Existing.
• Ensure transparency in municipal DC reporting.
• Ensure DCs are spent on the infrastructure projects they were collected for.
• Projects that do not belong in a DCBS often disproportionately cost more to future home buyers.
• Lack of a transition clause has meant thousands of dollars in increased costs to some home buyers virtually overnight.
• The List of Corporate Studies eligible under DCs needs to be scoped to prevent unnecessary increases.

 

 

Issue #1 – Municipalities need to provide an Updated DC Background Study and Methodology to Support Proposed Rates

 

Shortly prior to Council’s passing of the May 2024 DC By-law, the City of Ottawa released revised DC rates without an explanation of what was changed in the methodology or calculation.

 

Methodology used to calculate the rates contained in the City’s amended DC By-law in October were not released until the day of Planning and Housing Committee.

 

A DC Background Study (DCBS) is a legislative requirement to support the DC by-law, rates and fees to be collected as proposed by a municipality. The DCBS provides a detailed list of projects being included, the estimated cost of the projects, any adjustments or credits, and the proportion of costs being allocated to DCs in addition to other details.

 

It is a legislative requirement that the DCBS be publicly available at least 60 days prior to the passing of the DC by-law. It is also a legislative requirement for the proposed by-law and the background study to be made available to the public at least two weeks prior to the statutory public meeting.

 

It is not appropriate for a City Council to approve a DC Bylaw and Fee Schedule without the required supporting information to be presented in the DCBS.

 

Issue #2 – Municipalities need to ensure Flexibility in Local Service Policies

 

While the City’s Amended DCBS says that a local service must be listed in the DC study in order to be funded through DCs, staff acknowledge that flexibility is needed as new projects can arise that weren’t contemplated or included in the DCBS but are DC-eligible, as well as a timely priority that must be constructed prior to the next DC update.

 

But, staff have not yet agreed to revise the policy to reflect the flexibility they acknowledge is needed.

 

This is a concerning and totally impractical way to proceed with DC-eligible projects, considering new DC-eligible items pop up that could not have been foreseen, and given the potential for DC by-laws to have a life of up to 10 years before expiring.

 

If there is no ability to construct DC-eligible projects, then development will be delayed potentially by years, which will impact housing availability.

 

Issue #3 – Stop Cash-In-Lieu Being Used to Fund Benefit-To-Existing

 

GOHBA’s review of Ottawa’s Amended DCBS has revealed a practice in the DCBS of using Cash-In-Lieu CIL (which is already a charge on growth for parks and/or park improvements) to fund/offset the portion of DC projects that should be paid for by the existing tax base.

 

Projects may be assessed to have a benefit-to-existing (BTE) allocation meaning existing residents will benefit from the project, not just new residents. The BTE proportion is required to be excluded from funding with development charges; rather, the BTE is to be collected from existing residents typically through taxes or rates. Staff confirm that the City is taking collected CIL from new developments and being applied to fund the taxpayers BTE portion of project funding.

 

This means that growth is actually paying for more than 100% of the portion that is laid out in the DCBS, and the City is depriving itself of CIL money that is supposed to be used to improve parks and acquire parkland necessary to service new growth. Growth is paying for growth…and then some.

 

Issue #4 - Ensure Transparency in Municipal DC Reporting

 

Every DC By-law cycle private industry has to spend significant effort and money to review a municipality’s DC reserves in order to conduct a proper review as part of a DC By-law renewal. This speaks to the larger issue of municipal transparency in reporting and calculating of DCs.

 

An HBA or other entity shouldn’t have to appeal a DC By-law in order to try and extract basic information on DC reserves and expenditures from a municipality. Municipalities should be publicly reporting this information on an annual basis as matter of proper reporting.

 

Therefore, GOHBA has recommended changes to the DC Act compelling municipalities to provide a detailed list and accounting of funds that have been collected, spent, allocated between growth and non-growth, funds borrowed for growth projects, repayments, and interest payments, and/or transferred, between services and/or capital facilities in addition to an indication of when the funds will be transferred back.

 

Issue #5 – Ensure DCs are Spent on the Infrastructure Projects they were collected For

 

Related to the above, municipalities are allowed to borrow from DC Revenues for other capital projects with relative impunity, and do not even have to commit to a payback plan.

 

This practice often pushes housing-enabling infrastructure out of the DCBS horizon because a municipality cannot pay for its share as it has committed the funds elsewhere, thereby delaying much-needed housing and increasing the cost. It also allows municipalities to collect more in DC revenue than the cost of original project.

 

The Ontario government needs to implement changes to ensure that development charges are spent on the growth- and housing-related infrastructure that they were collected for in a reasonable timeframe. Therefore, GOHBA has recommended changes to the DC Act that would require a municipality to return borrowed funds within 2 years.

 

Issue #6 - Projects that do not belong in a DCBS often disproportionately cost more to future home buyers

 

GOHBA has identified many items in the City of Ottawa’s 2024 DCBS that do not appear to reflect development charge elibigle expenses, accurate costs and indicate inappropriate cost allocations.

 

For example, the City wants to build a major indoor aquatic facility – a 50-metre pool complex that can attract major swim meets to the City. The aquatic facility is supposed to cost more than $54 million and it clearly provides a city-wide benefit yet the City wants new homebuyers to pay for more than half of it -- $30 million.

 

Why should young people looking to buy a new home have to pay a disproportionate amount for a high-end aquatic facility that will have limited public availability?

 

Similarly, moving forward new home buyers across Ottawa are paying for 100% of the interest on the construction cost of phase 1 of the LRT - a transit line that’s been open for five years, serving existing communities and that replaced an existing bus transit way. New home buyers, for the next ten years or more, are paying for that cost.

 

Issue #7 - Lack of a transition clause has meant thousands of dollars of increasing costs to some home buyers virtually overnight

 

The 2024 Ottawa Development Charge By-law and its subsequent amendments have not contained transition clauses, unlike the 2019 and 2014 By-laws.

 

A transition clause is essential to ensure that the DC rates reflected in existing agreements of purchase and sale remain accurate. It is not financially feasible for a builder to absorb the increased DC cost over many units.

 

Therefore, GOHBA has recommended changes to the DC Act to require an appropriate transition period from one DC By-law to the next.

 

A transition period will allow sale agreements already entered into to be respected and building permits can be pulled at the rate stated in the purchse agreement. A transition clause represents a principle of procedural fairness that benefits municipalities, builders and homebuyers expect and deserve.

 

Issue #8 – The List of Corporate Studies eligible under DCs needs to be scoped to prevent unnecessary increases

 

On November 27, 2024 the City of Ottawa is adding another increase in DCs with its plan to bring corporate studies back into its DC By-law, as per Schedule 6 to Bill 185 (the Cutting Red Tape to Build More Homes Act, 2024).

 

To be clear, GOHBA does not object to the principle of having growth-related corporate studies in a municipal DC Background Study (DCBS) and By-law. But what we do find egregious is the over 400% increase in corporate study costs from Ottawa’s 2019 DCBS to its 2024 DCBS:

 

• In 2019, Ottawa’s DCBS listed 8 items at a Net Municipal Cost of $13.99 million and Total DC Eligible cost of $9.60 million.

 

• In 2024, Ottawa’s DCBS lists 22 items at a Net Municipal Cost of $70.16 million and Total DC Eligible cost of $50.75 million.

 

For comparison, specific line items that were carried over from 2019 to 2024 show a wide range of increases for DC Eligible Costs:

 

Corporate Study	2019	2024	% Increase
Development Charges By-law Review	$0.48 M	$2.27 M	373%
Redevelopment Studies - Community Design Plans	$0.93 M	$1.31 M	40%
Community Infrastructure Plans	$2.58 M	$3.64 M	40%
Greenfield Studies - Community Design Plans	$1.45 M	$2.04 M	40%
Servicing Studies – Development	$2.43 M	$3.83 M	58%
Rural Servicing Strategy	$0.44 M	$1.42 M	223%

 

To provide some further comparison to the 402% increase in Net Municipal Costs for Corporate Studies and the 429% increase in DC Eligible Costs, over the same time period:

 

• Ottawa’s DC Rate for a single-detached dwelling in Ottawa outside the greenbelt has increased 72%.
• The non-residential building construction price index (which in the basis for indexing DCs in Ontario) has increased 32%.

 

While the City has said that the new Corporate Studies list contains items from the 2019 DCBS that were dispersed amongst project items, it has not provided its own comparison of those items or the increase in costs.

 

See the related Press Release: Ottawa home builders draw attention to rising development charges, call on province to amend DC Act