A building is demolished on Ontario St. in Toronto last week, on a site that will become two residential towers. The federal and Ontario governments plan to spend $8.8-billion to reduce development charges in a bid to revive the market.Fred Lum/The Globe and Mail
The federal government and Ontario will spend $8.8-billion to reduce the province’s municipal real estate development charges by up to 50 per cent, offering another boost to home builders at a time when new home sales across the country have plunged.
The taxpayer funds will help cut up to $200,000 in taxes and fees for a new home in Ontario, the governments said, marking the latest incentive designed to revive the homebuilding market.
Developers have long complained about the steady increase in development charges, which are fees municipalities require developers to pay to help cover the cost of providing infrastructure such as roads and sewage.
The development charges, along with higher borrowing and construction costs, have made it difficult for home builders to launch projects.
“This will lower upfront costs and create certainty for builders to build affordable homes you can buy and rent,” Prime Minister Mark Carney said at a news conference to announce the funding.
The governments said the funding would remain in place for three years and requires municipalities to also cut development charges, also known as DCs.
Ontario Premier Doug Ford said the funding would be prioritized for municipalities that agree to cut development charges by up to 50 per cent, as well as those that have already lowered the charges in recent months.
“If you don’t cut DCs, you aren’t getting any money,” Mr. Ford said at the news conference. “But if you do, we will be there to support you,” he said.
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Ontario municipalities raise an average of about $3.5-billion in development charges every year based on figures from the last 10 years, according to trade group Building Industry and Land Development Association.
Minto Group, a major Canadian home builder, said the development charge reductions could lead to more new home sales. And that would lead to more home building.
“It’s a huge chunk of the cost structure,” said Michael Waters, Minto’s chief executive. Mr. Waters said his company has seven to eight large homebuilding projects on hold in Ontario. He said Minto could launch the projects if they got the preconstruction sales.
“We build if we can sell,” he said. “If this generates more sales, then absolutely I think us and many others will build.”
The development charge funding is the latest government incentive to help save the home builders, who faced a drop in new construction home sales of more than 70 per cent in major regions like Toronto and Vancouver.
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In an interview Gregor Robertson, Canada’s Minister of Housing and Infrastructure, called Monday’s announcement “the biggest scale partnership ever between Canada and a province for housing and infrastructure.”
He said he’s hopeful partnerships with other provinces will follow, noting Vancouver’s market is “a close second” to Toronto in facing homebuilding and housing market challenges.
“We’re working hard at getting as many [provinces] as we can as soon as possible,” he said.
Last week, Ontario and the federal government said they would rebate the harmonized sales tax (HST) for most buyers of new-construction homes, creating a 13-per-cent discount for purchasers. That rebate would help individuals, investors and corporations buy up thousands of new condo units that have been completed but remain unsold.
The downturn in the housing market has pummelled the Toronto region’s preconstruction condo market. About 7,000 newly built condo units are completed and unsold and 15,000 more unsold units are expected to hit the market over the next few years, according to Urbanation Inc.
Mr. Carney acknowledged that the federal government’s initiatives were designed to help the condo market in Toronto.
“By helping buyers attain new homes and helping builders start new projects, we will unfreeze the condo market in the greater Toronto area,” he said in prepared remarks.
Editor’s note: This article has been updated to correct the spelling of Urbanation.