Development fees are a cost that are accounted for in the overall cost of the project, with a reduction in them resulting in a project being less expensive. It should be noted that the Development fees make up a relatively small portion of the entire construction cost. As such, a program like this is useful and is intended to compliment some of the other incentive programs. This program would also require Council to identify a funding source for this type of grant program. It is also recommended that the grant be paid out once the affordable units have been completed.

Development Charges Grants

Traditionally, Development Charges (DCs) have been fees collected from developers at the time a building permit to help pay for the cost of infrastructure required to provide municipal services to new development, such as roads, transit, water and sewer infrastructure, community centres and fire and police facilities. The Provincial Government has recently made changes to the Development Charges Act through Bill 108, More Homes, More Choices Act, 2019, that came into effect on January 1, 2020.

The new legislation has now separated the “hard” (e.g. roads, water and sewer infrastructure, police, fire etc.) and the “soft” (e.g. general government, libraries and ambulance facilities) services, and removed the “soft” services from the Development Charges Bylaw. As a result, the costs associated with providing the “soft services”, like libraries and ambulance, will now be addressed by a separate Community Benefits Charges. In February 2020 the province announced further proposed changes to the Community Benefit Charges to restore libraries and ambulance to “hard services” include parkland acquisition, affordable housing and child care facilities in the “soft services”. Due to the COVID pandemic the province has not released any additional information about these proposed changes.

Another one of the big changes that is intended to encourage the development of affordable housing is making Development Charges payable in equal annual installments for three types of development: rental housing; institutional development; and non-profit housing – 5 years for rentals and institutional (6 payments in total); and, 20 years for non-profits (21 payments in total).

A CIP could include a Development Charge Equivalent Rebate Program for affordable housing projects that are not eligible for the reduced DCs offered through an exemption under the Development Charges Bylaw (discussed later in the report). The grant would be equal to an amount offsetting full or partial rebate of the Development Charges still owing. A grant program would require that the City’s Development Charges account be made whole in accordance with the Development Charges Act. In other words, the developer would be required to pay the full Development Charges, which would be deposited in the appropriate DC account. The Developer would then be provided a rebate/grant in the amount of the Development Charges from another account set up (and funded) for the purpose of providing incentives for affordable housing.