Ottawa council approves development charge increases despite potential impact on federal funding

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The City of Ottawa has approved a bylaw that will increase development charges on new housing construction, which means the municipality could lose out on accessing money from a multi-billion federal infrastructure fund.

At a city council meeting Wednesday, some of the Ottawa councillors said they reluctantly voted in favour of the bylaw, which will add up to $6,200 to the cost of a single-family home, because there were not a lot of other options at their disposal to pay for city infrastructure – echoing longstanding complaints from local governments that they need new ways to raise money.

“I understand why it’s not palatable to raise development charges,” Councillor Ariel Troster said. “I understand that the industry is pushing back. But until we have another alternative, this is the tool that we have.”

Federal Housing Minister Sean Fraser recently warned cities that increasing development charges would jeopardize their ability to access the $6-billion Canada Housing Infrastructure Fund. The fund was announced in last month’s budget and includes a condition that local governments freeze development charges as of April 2 for three years.

Such charges are one-time fees levied by municipalities on new residential and non-residential developments used to fund infrastructure such as water systems, public transit, roads and libraries. Provincial legislation mandates cities revisit development charges every five years; the City of Ottawa’s bylaw on the matter expires this month.

During Wednesday’s meeting, Vivi Chi, the interim general manager for planning, real estate and economic development, told councillors that if the proposed bylaw wasn’t approved, the city would not be able to collect development charges at all once the bylaw expired. She said the impact of freezing the charges for three years and not approving the proposed increase would be $130-million.

“So that would be a big risk for us to take right now,” Councillor Glen Gower said about pausing that sort of revenue, adding that “we don’t have full information from the federal government yet.”

The new infrastructure fund is among a pair of federal housing programs that require cities and provinces to make changes to density, development charges and other policies in order to qualify for billions of dollars for new housing construction. The other is the Housing Accelerator Fund, which requires cities to end zoning for single-family homes and allow fourplexes everywhere.

Ms. Chi told Ottawa councillors that the development charge increases won’t affect the city’s ability to access the Housing Accelerator Fund.

Micaal Ahmed, communications manager for Mr. Fraser, declined to comment on the Ottawa council vote and instead pointed to an earlier statement that says the federal government is monitoring developments in the city and the impact it might have on existing agreements.

In a media availability after the council meeting, Ottawa Mayor Mark Sutcliffe said he recognized it is difficult to increase development charges while governments are focusing on housing affordability.

“The idea of raising development charges at this time is very challenging for us,” he said.

Mr. Sutcliffe added, however, that, “by a significant amount, we are better off increasing development charges to pay for the infrastructure in new communities than we are in accessing the infrastructure funds.

“But we’re going to continue talking with the federal government, and I speak with their representatives regularly, and I hope that we’ll be able to work something out that will satisfy their concerns.”

Ms. Chi said she welcomes further discussion with the federal government on the infrastructure fund once more details emerge.

“We don’t know the parameters other than the blanket statement that DCs need to be frozen for three years,” she said.