Western Canada: The unmentioned costs of building thousands of new homes. Who pays for it?

Good morning. Wendy Cox in Vancouver today.

The federal and provincial governments both have housing targets they’ve pledged to meet.

Prime Minister Justin Trudeau launched his government’s Housing Accelerator Fund in September – the plan is to have 2,000 housing units within three years. Also in September, the B.C. government announced its new targets for municipalities, including 28,900 new units for Vancouver and 4,902 units for Victoria within five years.

The numbers and the targets are easy to communicate and provide ample opportunity for news conference visuals. The Globe and Mail’s story about the Prime Minister’s announcement in London, Ont., included a photo with lots of people in orange vests, work boots and hard hats.

Cutting the ribbon on a new sewage plant, though, isn’t a photo-op being promoted by anyone. No mayor is getting coverage for ensuring a new neighbourhood has the appropriate road interchange or a pedestrian overpass.

Such are the mundane and very, very expensive responsibilities for municipalities.

Strategies and plans for tackling the acute housing shortage in Canada rarely mention that all those needed units – Canada Mortgage and Housing Corp. has estimated the country will have a shortfall of 3.45 million units without urgent action by 2030 – will also need to come with appropriate sewage and water infrastructure, with roads and light standards, schools, libraries and community centres. All of that lands on municipalities.

“People don’t just live in a building. They live in a community,” Halifax Mayor Mike Savage told Frances Bula in a Globe story this week.

But coming up with the money to build a whole community is not easy.

In Calgary, Frances examined the plan to house 60,000 residents in four new developments on its northern edge. It’s the kind of increase in housing supply that federal Housing Minister Sean Fraser and others have been asking for.

But that supply comes with a gigantic infrastructure bill. In response to a request from The Globe, the city for the first time provided a detailed breakdown of what it would need to spend: from $315-million to $375-million for water, waste-water and storm-water systems; $35-million to $50-million for road interchanges; $15-million to $20-million for pedestrian overpasses; $20-million for a new fire hall; and $150-million over the years for parks, public transit, community centres and libraries.

How to pay for it?

Cities such as Calgary and those in the Metro Vancouver region have stuck with a formula in which new growth pays for new growth. Taxpayers fund 50 per cent of the cost of new growth and fees charged to housing developers cover the other 50 per cent. The logic is that existing residents also benefit from many of the new amenities.

But with the bills to provide those amenities increasing as fast as the need for the new housing, mayors and councils are facing a choice: raise taxes for everyone or boost the developer fees.

Metro Vancouver’s senior staff had calculated that the Lower Mainland was going to need $35-billion in new basic infrastructure (sewer, water, parks and liquid and solid-waste services) in the next 30 years. Of that, they found that $11.5-billion would be related to the million extra people expected to arrive during that time. The rest of the expense would be needed to serve existing residents.

Last year, those staffers recommended some tax increases for existing residents – up to 11 per cent and 12 per cent annually in future years – but also called for an increase to developer fees so that they would cover 99 per cent of the basic infrastructure costs attributable to growth. The change was expected to add as much as $15,000 in new charges on each new house or apartment in the region by the end of a three-year phase-in.

Mr. Fraser has suggested those hikes may make the cities in the Vancouver Metro region ineligible for the federal accelerator fund.

His office issued a statement saying the minister is going to talk to the province about whether the proceeds are really being used to pay for growth “rather than to address existing fiscal challenges.”

This is the weekly Western Canada newsletter written by B.C. Editor Wendy Cox and Alberta Bureau Chief Mark Iype. If you’re reading this on the web, or it was forwarded to you from someone else, you can sign up for it and all Globe newsletters here.