Workers are seen at a condo development in the Liberty Villiage area in Toronto, Ont. Wednesday, April 11, 2012Kevin Van Paassen/The Globe and Mail
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A large number of Toronto condo developers rushed to beat the recent increase in development charges, seeking to contain costs – and potential condo prices – at a time when an unusually high volume of condo projects is coming on stream.
City officials analyzed the numbers in response to a request from The Globe, and found that 43 condo buildings obtained building permits in the January rush to secure lower development charges.
The city announced in September that it would be hiking development fees, which are collected from developers when a building permit is issued to help pay for things like roads, transit and sewers. The increase was significant –fees on a two-bedroom condo unit, for example, are set to rise about 70 per cent from the time of the announcement, to $21,203 from $12,412. The full increase in fees is being phased in, and one jump in rates took place on Feb. 1. The next one takes place Aug. 1.
Developers generally pass the fee increases on to buyers. But in the current market, with a flood of new condo buildings resulting in downward pressure on prices, that's tougher to do. So many developers are rushing their plans to avoid as many of the phased fee increases as they can.
For GianPiero Di Rocco, vice-president of Edilcan Development Corp., that meant speeding up the design of his Etobicoke condo building.
He says that often developers will get permission to start doing their below-ground work (excavation and shoring) on a condo site and, while that's happening, will take the time to design their building and then get their building permit for the above-ground work (which is when the fees kick in).
"In order to effectively cap your development charges, you have to get your first [above-ground] permit from the city," he says. "Generally when you start construction you have a foundation permit, and as you're doing this work – because it takes so long – you have time to make an application for your first [above-ground] permit..."
He said his team, which was working on the third phase of a development called One Valhalla, incurred extra costs to complete the working drawings faster, "in order to come up with a set of drawings that were worthy to apply for a building permit for."
He felt the cost of speeding things up would be less than the fee hikes.