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Federal housing minister's 'fiasco' flip-flop on housing funds puzzles B.C. mayors

Mayors from Burnaby and Surrey were ready to accept a combined $138 million to fund an acceleration of housing permits and new affordable housing projects until the federal housing minister kiboshed those plans.
Central Surrey is under renewal, as city hall implements new plans to densify a new regional downtown core. In order to pay for new roads and pipes to service these new homes, developers must submit development cost charges.

Federal housing minister Sean Fraser has pulled the plug — at least for now — on funding for Burnaby and Surrey, saying he wants to review proposed development cost charge (DCC) increases by the Metro Vancouver regional government, for which they are part of.

“In light of a proposed development cost charge increase by Metro Van, I‘ve postponed today’s announcement of Housing Accelerator Fund deals with [two] cities who are members of the Metro Van board. We’re studying the impacts of this proposal and I hope to have more to say soon,” stated Fraser on Tuesday, via social media platform X (formerly Twitter), while providing no further explanation.

Fraser made the impromptu announcement after initial plans to announce funding for Burnaby and Surrey, with the former to receive $43 million and the latter expecting to receive $95 million from the nearly untouched $4-billion Housing Accelerator Fund program announced in 2022.

Burnaby Mayor Mike Hurley called the cancellation a “fiasco,” saying he was never briefed by Fraser, despite meeting with him on Monday, in Ottawa, alongside Metro Vancouver staff to discuss housing.

“I heard through a tweet. When you guys saw it, it was the first I heard about it. I don’t think that’s the way business should be done,” said Hurley.

Surrey Mayor Brenda Locke said Wednesday that she was “confident it’s going to happen” despite "some confusion."

Locke told Glacier Media there was likely confusion about how the DCCs were to apply to below-market housing projects.

“Metro Vancouver will forgive DCCs for below-market units and I think that’s the information that wasn’t transferred properly” to Fraser, said Locke.

The federal program aims to incentivize home building and works as such: the federal government will give money to municipalities that draw up an “action plan” to accelerate home building. Municipalities must increase building by 10 per cent and have a growth rate exceeding 1.1 per cent. The money can, in turn, be spent on four categories: funds required to create the action plan; investments in “affordable” housing; investments in housing-related infrastructure; and investments in community-related infrastructure to support housing.

Locke and Hurley said they could use the money to hire new staff to accelerate permitting but the largest amounts would go to affordable (below-market) rental housing projects the cities can support.

Hurley called it “nice seed money,” as it’s hard to stretch $43 million beyond a few hundred affordable units.

Both Locke and Hurley said they both favour the proposed DCC rate hikes.

Locke said she favours the “growth pays for growth” notion, especially knowing the fees will not apply to below-market projects.

“I know they look very high but that number will be phased in (over three years),” said Locke.

For decades, existing homeowners have either been footing much of the bill for new parks, community centres, water pipes, sewage plants and roads to accommodate new homes on undeveloped land, or, the regional government had not been collecting enough money for future infrastructure.

Now, the need for and costs of such infrastructure is at the root of the proposed DCC increases at Metro Vancouver.

Metro Vancouver is faced with needing to add even more infrastructure; however, without increasing the DCC rates, existing homeowners (who have already contributed to existing infrastructure) would continue to face even greater property tax increases.

“We don’t want to burden existing taxpayers for paying for infrastructure that’s really for new developments and to bring new people into the country. We believe growth should pay for growth,” said Hurley.

Metro Vancouver is proposing to increase DCCs by roughly $23,000 per new single-family home; $21,000 per new townhome; and $14,000 per new apartment.

For example, fees for a townhouse in Vancouver will rise from $10,027 today to $30,861 by 2027.

On the flip side, regional developers have claimed the higher charges add to the cost of new housing, which could disincentivize homebuilding or drive prices up.

On behalf of Metro Vancouver, Coriolis Consulting conducted an analysis for impact on land values, developer profit margins and end unit pricing on residential units. Coriolis concluded it will add to cost of new construction but it remains “ambiguous” as to how those costs will be divided (ie. will developers take a cut on profit margins (which are not made public) or will the higher DCCs simply add to the final price tag of a new unit?).

Meanwhile, an online “public engagement” session, where the public may email its thoughts, closes this Friday. Meanwhile, Metro Vancouver is consulting with developers, First Nations and municipalities. Planners intend to table a final proposal at the end of October and a new bylaw could be passed by January 2024 for the following year.

Sonu Kailley, Metro Vancouver’s acting director of financial planning, told the board the region will grow to 3.8 million people by 2050, up from 2.8 million people in 2020.

“In order to service that (growth), Metro Vancouver’s infrastructure needs to be built in advance, such that when people get connected to the system that when they turn on the tap water is flowing, when they flush the toilets water’s treated in accordance with legislation,” said Kailley.

“We realize this is a sizable increase,” added Kailley.

Regional politicians have long been calling on senior governments to fund these infrastructure projects (essentially from income taxes), including, most substantially, upgrades to four sewage treatment plants. The 30-year capital plan requires $34.4 billion of funding, of which $11.5 billion is attributable to growth, according to Metro Vancouver. A smaller component of the higher charges is $803 million for new regional parkland, with planners estimating the region needs 1,800 more hectares of space added to the existing stock of 14,000 hectares.

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