Municipalities hold billions in new home revenues and continually seek more, further eroding housing affordability

Globenewswire.com
Dec. 1, 2021

Greater Toronto Area, December 1, 2021 -- A study of 16 municipalities across the Greater Toronto Area (GTA) found that there is over $5 billion in cash reserves currently on hand (as of year-end 2019) collected from taxes on new housing. The study was conducted by Altus Group for the Building Industry and Land Development Association (BILD).

 

The City of Toronto alone has amassed $2.6 billion in reserves (including development charges, parkland cash-in-lieu and section 37 cash contributions) by collecting significantly more in fees on new housing and commercial space development than it has spent, yet it continues to look to increase rates and add more costs to new housing.

“This is a story of missed opportunity for the City of Toronto, and in fact any city in the GTA that has accumulated large development charge, parkland cash-in-lieu or section 37 charge surpluses,” said Dave Wilkes, BILD President & CEO. “Either municipalities should deploy these funds for the purposes they were collected--more infrastructure, services, affordable housing and parks--or they could make a meaningful dent in the housing affordability challenge the region is facing by reducing, or at least capping, charges on new homes. There is a clear opportunity to right-size reserves and in doing so help solve the housing affordability challenge facing the entire region.”

The study, entitled New Homeowner Money in the Governmentʹs Bank: How Unspent Municipal Reserves are Impacting Building Livable, Affordable Communities in the GTA, reviews trends in the collection and usage of various government housing charges in the GTA. The study examined 16 municipalities, including a mix of upper‐tier, single‐tier and lower‐tier municipalities, and found that:

For the 2013-2019 period, the studied municipalities saw their combined development charge (DC) reserve fund balances increase to $3.25 billion as of 2019, an increase of $1.35 billion from 2013. The City of Toronto was responsible for the majority of the increase in DC reserves, as the City’s DC reserve fund balance rose by $839 million over the same period. Development charges are levied on new homes and commercial spaces to help the municipality pay for growth-related infrastructure and services. Durham Region ($695 million) and the City of Vaughan ($482 million) have also amassed significant DC cash reserves.

Parkland cash-in-lieu (CIL) revenues and expenditures have caused Parkland CIL reserve fund balances to increase by nearly 300 per cent over the 2009--2019 period, from $375 million in 2009 to $1.48 billion in 2019. Again, the City of Toronto saw the largest increase at $1.03 billion as of 2019, up 372 per cent or $815 million from 2009. The other major high-density-oriented municipalities have also amassed significant Parkland CIL reserves -- Mississauga ($133 million), Brampton ($98 million), Vaughan ($72 million) and Markham ($59 million). Parkland CIL are cash payments imposed on new developments to enable municipalities to acquire parkland and other forms of open space.

At the end of 2019, the City of Toronto had a surplus of approximately $303 million in its Section 37 reserve fund, with over 70 per cent of this balance attributed to four wards within Downtown Toronto. The use of Section 37 in “905” municipalities has generally been found to be relatively limited. Section 37 contributions are meant to help municipalities provide community infrastructure in areas that are denser than normally allowed.

“Municipal fees and charges are by far the largest component of the government-imposed taxes and fees that make up 22 to 24 per cent of the cost of a new home,” said Mr. Wilkes. “Within the City of Toronto, this percentage rises to nearly 27 per cent with the introduction of the new inclusionary zoning tax passed earlier this month. Overall taxes and other charges applied on new homes in Toronto have risen much faster than property taxes. Development charges have risen by 606 per cent since 2009 while property taxes have only increased by 22 per cent.”

BILD is calling on municipalities across the GTA to invest the funds they have already amassed to facilitate growth and support the building of housing the region needs for both current residents and some four million new residents who will call the GTA home in the next 30 years, before raising taxes and charges on new homes further.