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Ontario is changing what developers pay to build. Feds say it means ‘higher taxes’

Click to play video: 'Federal government tells Ontario to follow rules or risk losing housing funds'
Federal government tells Ontario to follow rules or risk losing housing funds
RELATED: The battle between the Ford and Trudeau governments continues over housing. The federal government has promised to divide $5 billion between the country's provinces and territories but only if they meet certain conditions. Global News' Queen's Park Bureau Chief Colin D'Mello has the latest – Apr 12, 2024

The Ford and Trudeau governments could be on another collision course over housing policy after Ontario tabled plans to change the fees municipalities are allowed to charge homebuilders.

In his latest legislation, Ontario Housing Minister Paul Calandra included some reversals of changes to development charges that will lead to higher costs.

Development charges are levied by cities and towns on new housing projects to pay for local services ranging from roads to sewers or fire stations. Developers generally then add those costs to the price of the new homes.

Ontario’s new bill — which has not yet been passed — revokes a previous phased-in approach to development charges that gave homebuilders a discount and made some costs around studies eligible for cities to charge for. Municipalities had vigorously protested both changes when they were announced.

In a continued escalation of tensions between Ottawa and Queen’s Park, the federal housing minister said getting rid of the phase-in amounted to “higher taxes” on new homes.

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“You can’t keep increasing taxes on homebuilding and expect to have more homes built,” Sean Fraser told Global News on Friday.

“When you look at the cost of land it can sometimes be hundreds of thousands of dollars. And you look at development charges which can sometimes push up to six figures. How are you going to sell a home at a price that young buyers can actually afford?”

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Calandra didn’t address the claim the change could mean higher prices for home builders but said building infrastructure around new houses is key.

“What we’re doing is making sure that there is enough capacity to build the infrastructure in the ground,” he said Monday.

“We’ve been after the federal government on this for months. We’ve been speaking to our municipal partners and the changes that we’ve made are really specifically to getting more infrastructure on the ground so we can meet our target.”

The public relationship between Calandra and Fraser has been strained for weeks.

First, the pair exchanged public blows over how to manage spending on affordable housing, with the federal government threatening to withhold funds after it said Ontario had failed to meet its end of the bargain.

Then, the federal government unveiled a pot of $5 billion for provinces and territories it said could only be accessed if premiers enforced a fourplex as-of-right policy throughout their jurisdiction. Ontario Premier Doug Ford has said that policy would be a “mistake” and the province has refused to contemplate the plan.

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The proposed changes to Ontario’s development charges were tabled as part of a broader housing supply bill that has introduced a slew of tweaks to how homes are planned and built in the province.

The legislation also included a reduction in the amount of parking developers need to build, special rules to fast-track the construction of student accommodation and a long-awaited use-it-or-lose-it policy.

Calandra said his plan to return to higher development charges is necessary to ensure infrastructure like sewers is available to service new homes.

“If you don’t get the infrastructure in the ground… it is the difference between building hundreds of homes and millions of homes across the province of Ontario,” Calandra said Monday.

“It builds on the $1.8 billion that we’ve set aside to build this type of infrastructure, so we’re doubling down on building this infrastructure and hopefully, the federal government will work with us.”

Fraser, however, said he didn’t want to work with provinces where fees are increasing.

“We don’t want to deal with provinces who are talking about more restrictive zoning policies and higher taxes on homebuilding,” he said.

“We want to work with communities who are going to allow more homes to be built, more kinds of homes to be built and a lower tax environment to allow those homes to be built.”

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