A B.C. advocate for business tax relief is calling for major changes to a building fee levelled by many municipalities, arguing it is unnecessarily raising the cost of homes.
Paul Sullivan, a partner with Ryan ULC tax consulting and advocate with the Business Tax Alliance, argues that community amenity contributions (CACs) charged by B.C. cities amount to a pay-to-play scheme, while tacking millions of dollars onto the price of a large build.
CACs are contributions developers agree to make to cities during the development application process, which municipalities are meant to earmark for infrastructure such as community centres, daycares or parks.
Municipalities do not have the legal power to require CACs as a rezoning condition, but Sullivan argues cities have made them a de-facto requirement to get the green light for projects.
“When you pay your CAC you get your rezoning approved. So you don’t pay, it’s not approved,” he said.
“It’s part of the process that has become accepted in B.C. and particularly in the Lower Mainland.”
Sullivan said most people think of land, construction and labour costs as the key components of the price of housing, but typically don’t consider “soft costs” such as taxes and charges from other levels of government.
A recent analysis by Ryan concluded that various taxes and fees, including CACs, add up to nearly 30 per cent of a build cost.
“I’ve always been an advocate of at least make it fixed so the property owner or the land seller knows the cost, the developer knows the cost, but we don’t do that in most areas, we have it as negotiable,” he said.
“Homebuilders charge consumer the cost of building a home, and when 30 per cent is for charges like this, and you have the same people saying we need to create more affordable housing, its seems like the opportunity really rests with them to do so.”
Developers argue those added costs are passed on directly to buyers and renters, and that the cost of housing could be reduced if cities took less from the development to start with.
“The CACs being asked for on rental are crazy,” Reliance Properties developer Jon Stovell told Global News.
“We’re looking at one right now and its $40,000 per suite as a combination of on-site amenities and cash.
The practice and scope of CAC use varies from municipality to municipality, and the patchwork of rules can be difficult to navigate.
In April, Vancouver’s new ABC-majority city council voted to move ahead with a plan to set fixed rates for CACs on low- and mid-rise apartments.
And it appears the province is now set to implement reforms of its own, as it prepares legislation mandating provincewide zoning regulations that would overrule municipalities.
B.C. Housing Minister Ravi Kahlon said cities do rely on the funds from CACs to build infrastructure to go along with new development, but acknowledged “real challenges with the system.”
“It is a tough thing to take on, local governments don’t want to give up any control of what they charge, how they charge, but we need to have a level playing field across the province, ” Kahlon said.
“We need to have certainty, we need to know that when we’re having a proponent come through the door they know the cost up front so that if they choose to proceed then its on them, but it’s not changing on them later.”
In addition to more certainty about CAC costs, Kahlon said the public also needs more transparency about how much money is collected, and what it is being used for by local governments.
He said reforms to CAC use will be included in legislation his ministry is tabling this fall, once the legislature is recalled in October.
Developers are asking the province to use that legislation to formally lay out what cities can charge via CACs.
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