Bill 73: New rules could double transit-related costs for Ottawa new home purchasers – creating a 12-fold difference

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Ottawa Construction News staff writer

John Herbert, executive director of the Greater Ottawa Home Bulders’ Association (GOHBA), has sent a letter to Ontario community services minister Yasir Naqvi outlining the association’s concerns about the proposed legislation to amend the Planning Act that, if passed in its current form, sets the stage for a potential doubling of Ottawa-area home purchasers’ transit-related costs.

The letter, sent on Sept. 10 following consultations on Aug. 21 with GOHBA representatives, outlines the concerns the association has about the legislation’s impact on housing affordability.

In the letter, Herbert suggests the current true cost of transit (including development charges, interest on the higher homeowners’ purchase costs, and the regular taxes that everyone has to pay) is $10,638 in the suburbs, compared to $1,785 for existing homeowners – a differential of six times.

Herbert, along with past and current GOHBA presidents Pierre Dufresne and Bob Ridley, attended the meeting.

Bill 73 would allow the city to double these costs, he indicated.

“One of the biggest contributors to the affordability challenge has become development charges,” Herbert wrote. “We believe that it is critical to open a discussion on alternative methods of financing municipal infrastructure.  One example of this problem is the category of transit charges in both the Development Charge (DC) Bylaw as well as the additional amounts that will come into effect with Bill 73.

(The government introduced the legislation in the spring, and it has been referred to the Standing Committee on Social Policy.)

“Under the current DC bylaw in Ottawa, new suburban homebuyers pay $6,409 in transit charges per single-detached unit, plus $2,704 in interest charges over the life of their mortgage, plus $1,525 being approximately the same amount as paid by existing home owners through property taxes beginning the year after occupancy.

“New homebuyers therefore pay a total of $10,638 towards transit and much of it is for a LRT system to which they will never have access.”

“Existing single family home owners will contribute $1,785 and many of them will have access to LRT. We believe it is inappropriate that new homebuyers must currently pay six times more for transit (LRT) than the buyers of existing homes.”

Herbert wrote that the situation will only worsen when Bill 73 is passed.  “Under the provisions of this bill, the transit charge will see a further increase, with the amount dependent on which of two approaches is used.  If we accept the approach preferred by the municipal government, the transit component will increase by an additional $5,746 plus another $2,410 in additional interest costs over the life of the mortgage.”

Herbert observed that the housing industry has compromised in order to try to reach a middle ground, but municipal officials have refused to budge.

The effect, he said, will result in a cost to new homeowners of $21,770 compared to $1,785 for existing homeowners.  “New homebuyers will pay 12 times more for transit than will existing homeowners, primarily inner city residents, who will have easy access to LRT.”

“Another specific element of Bill 73 that is of concern to us is a new Section 5.2 which proposes that services prescribed by the regulations would use a planned level of service rather than being subject to the 10-year period immediately preceding the preparation of the background study,” Herbert wrote. The method of estimating the planned level of service for a prescribed service and the criteria to be used in doing so will be prescribed in regulations that have been developed by Ministry-appointed technical working groups.

“We have not yet seen the final versions of this work but if we feel they are unworkable, the GOHBA will be proposing specific amendments to the bill when it comes up for debate.”
“The GOHBA’s concerns with housing affordability are only being reinforced by this legislation’s significant increase in tax levels on new home buyers and new businesses,” Herbert wrote.   “We continue to believe that it is time for a discussion on alternative methods of financing municipal infrastructure and that Bill 73 will only result in a further piling on of taxes on the backs of future new home purchasers and employers. The Government of Ontario has a responsibility to ensure that the Provincial Policy Statement and provincial plans are not undermined by taxation and financial burdens.

“Ultimately, public policy should ensure that transit-oriented communities be the most affordable and attractive communities for Ontario’s future residents and employers.”

Despite the GOHBA’s serious concerns about the impact of the legislation in boosting development charges to stratospheric levels, there are some aspects of the proposed legislation the association supports.

Herbert wrote that the GOHBA supports the proposed amendments to “enhance transparency and accountability in the development charges system.”

“The proposed legislative amendments will restrict payments outside the development charges regime for capital costs with serving new development and require municipal treasurers to certify that no payments have been received that are in contravention of the restriction,” Herbert wrote. “There are numerous examples of so-called ‘voluntary’ payment with no accountability or transparency taking place outside of any legislative framework. Housing associations across Ontario have previously expressed serious concerns with so-called ‘voluntary’ payments that are anything but voluntary, and support the proposed legislative amendment.

Herbert said the GOHBA will communicate with the government again after it introduces specific amendments to the proposed legislation.

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