City of Waterloo increasing development charges for new homes

The City of Waterloo has approved new development charge rates. CTV’s Jeff Pickel explains what it means for developers and would-be homeowners.

It will soon be more expensive to build a new home in the City of Waterloo.

During a council meeting on Monday councillors voted unanimously to approve the adoption of a new Development Charge bylaw. Development charges are fees paid to a municipality to accommodate new developments. They help pay for important infrastructure such as roads, water service and emergency services, such as fire departments.

The newly approved bylaw increases the charge for residential developments; compared to the current rate, people building single or semi-detached residential buildings will be paying 12.9 per cent more, anyone building a apartment with three bedrooms or less will pay 20.5 per cent more, an apartment with four bedrooms or more will cost 12 per cent more and anyone building multiple units, such as a townhome complex, will face a 22.2 per cent increase.

The new rates come into effect on April 1.

According to a report from city staff, the last time Waterloo’s development charge bylaw was changed was in December 2019.

“From where we started the initial proposal to where we landed, we reduced the development charges quite significantly in response to what developers and the development community were telling us,” Waterloo Mayor Dorothy McCabe said.

“At the end of the day, we have very few funding mechanisms and development charges are really key for the city in order to build a complete community,” she added.

The changes mean a developer will need to pay the city $25,201 in development charges to build a single or semi-detached home.

Development pause concerns

During the meeting Melissa Durrell, executive director of Build Urban, urged councillors to make exceptions for developers who have been caught up in a pause on new developments due to Waterloo Region’s water shortage.

“These aren’t small impacts. Developers have already invested significant amounts in their projects on land, design and securing approvals,” she said. “So, a sudden increase in development charges could make some projects too expensive to proceed, and, ultimately, fewer homes being built.”

She asked council to allow for leniency since the ongoing delay is outside of developers’ control.

“The ask here is very simple: don’t penalize developers for delays caused by infrastructure constraints. We’re asking the city to allow projects that were on track to maintain their original development charge rates, delay the new higher fees for developments affected by the development pause and provide certainty through agreements where needed,” she said.

The city’s director of financial planning and asset management, Brad Witzel, noted the city already has an option available to help those developers under the Ontario Development Charges Act. The city and developer can enter into what is known as a “Section 27 Agreement.”

“These agreements can provide for payments to be made earlier or later than otherwise required under the act and can outline other terms such as instalment payments, interest, rate freeze periods or specified payment schedules,” Witzel said.

“This flexibility would allow the city and any impacted developers to enter into a Section 27 Agreement in the future if it can be demonstrated that the legislated 18-month [development charge] rate freeze period, which is effective the date the relevant application was approved … has been exceeded solely as a result of the regional water capacity issue,” Witzel explained. He added that city staff agree it is appropriate to make those agreements with some developers who have been hit by the pause.

Building a future

However, there are concerns about what the increase will mean for new home builds down the road.

“If a developer has to pay for this tax, they pass a rate onto that buyer,” Brain Santos, a member of the Cornerstone Association of Realtors’ government relations committee, told CTV News. “I’m disappointed to see this.”

McCabe said the best way to keep costs down, without sacrificing critical infrastructure work, is to get help from the provincial and federal governments.

“We have talked as municipalities for years to ask the province and the federal government to sit down with us and have a really frank and honest discussion around who pays for what,” she said.

Waterloo’s development charges are still lower than what builders pay in Kitchener or Cambridge.