The following letter was sent by ICBA to the Metro Vancouver Board Directors on September 28, 2024:
September 26, 2024
Chair Hurley and the Metro Vancouver Regional District Board
Metro Vancouver
Metrotower III, 4515 Central Boulevard
Burnaby, BC V5H 0C6
Via email to: BIS-Secretariat@metrovancouver.org
Re: Metro Vancouver DCC Increases
We are writing regarding Metro Vancouver’s proposal to sharply increase current Development Cost Charges (DCCs). ICBA and our members are concerned about the impact of such substantial cost increases on the supply and timing of new housing development in Metro Vancouver, as well as the implications for the affordability of shelter in the region.
Metro Vancouver policymakers need to think carefully about both the intended and unintended consequences of large additional increases in DCCs.
DCCs are funds collected from landowners/developers by a municipality. They are intended to offset some of the infrastructure costs arising from additional demand on local services stemming from new development. DCCs are typically used to help finance capital projects involving roads, water systems, sewerage, and park lands.
The DCC increases planned by Metro are significant. To the extent they affect land values, the result may be to alter the “highest and best use” of a given property, potentially shifting it from a redevelopment site to one that will be held indefinitely, as noted in the study which Metro commissioned from Coriolis. Higher DCCs are expected to reduce land values and decrease profit margins for developers.
Today in Metro Vancouver, housing starts, real estate transactions, and greenfield development are notably sluggish, and the cost of new development and construction have reached record highs. Reduced profitability will have a negative impact on the financial feasibility of projects considered by developers and slow overall residential development. Higher DCCs on in-stream projects may lead to some being shelved. In general, the proposed DCC increases will add to the already significant financial barriers to residential development in the region. It is sobering to observe that there are multiple tens of thousands of proposed dwelling units in the region which have been approved but have not commenced construction. This is a reflection of very challenging economic conditions in the development and building sectors.
We submit that the manner in which DCCs have evolved in Metro Vancouver has created an inequity in the burden associated with paying for capital projects. In particular, new development bears a disproportionate share of the cost of projects and related infrastructure services that benefit existing residents as well as new homeowners/renters. It is unclear why the latter should face a much higher burden than the former, in a context where all residents presumably benefit from the completion of projects and other capital improvements.
More generally, escalating development and building costs, together with higher taxes, fees and other municipal/regional levies, have led to a risker environment for developers and builders in the residential sector. This is having and will continue to have a negative impact on the provision of new market supply in a region that already has Canada’s least affordable housing.
Academic evidence suggests that in certain circumstances, higher fixed development charges can reduce construction volumes, thereby putting upward pressure on market prices for both new and established dwelling units.[1] Given the acute shortfall of housing supply in the lower mainland and the projected increases in the region’s population owing to Canadian immigration policy, ICBA submits that governments should not be adopting measures that will or are likely to dampen homebuilding.
We note that Section 564 (4) of the Local Government Act (LGA) states that in setting development cost charges, a municipality needs to take a number of factors into consideration, including whether or not the charges will deter development or the construction of reasonably priced housing. ICBA believes the proposed DCC increases are inconsistent with this requirement under the LGA.
Accordingly, we call on Metro Vancouver to delay implementation of the proposed DCC increases for a period of two years to permit time for additional financial analysis and consultation and allow in-stream projects to be advanced without having to incur higher DCCs.
Thank you for the opportunity to provide input on this important topic.
Sincerely,
INDEPENDENT CONTRACTORS AND BUSINESSES ASSOCIATION
Chris Gardner
President and CEO
[1] “The Economics of Community Amenity Contributions and Real Estate Taxes,” prepared by the B.C./Federal Expert Panel on Housing Supply and Affordability, by Tom Davidoff, Tsur Somerville and Stada Analytics, May 12. 2021, p. 5.
