Douglas Todd: Metro Vancouver's housing growth 'isn't free.' It's an election issue. |
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Douglas Todd: Metro Vancouver's housing growth 'isn't free.' It's an election issue.
Accommodating population growth raises a hard financial reality. New housing units require an average of $107,000 each in civic infrastructure. Who should pay for it?
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So says professor Andy Yan, director of Simon Fraser University’s City Program and a fellow of the Canadian Institute of Planners.
“It’s not a question of population growth or not,” says Yan. “It’s a question of how do we pay for it and who should pay for it fairly and transparently.”
Despite the financial burden that new housing places on taxpayers, Canadian developers are increasingly demanding that governments reduce the amounts they are asked to contribute for infrastructure: sewer and water hookups, electrical connections, schools, transit, community centres, road maintenance, park bike lanes, libraries, fire halls and sidewalks.
These are not luxuries, Yan says. They have to be maintained — and, if we are to host bigger populations, expanded.
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The mayors of Burnaby, Port Coquitlam and elsewhere have been pointing to the problem. Yet many developers, and even some politicians, Yan said, are OK with voters having the misleading impression that builders who pay fees toward city services are somehow “bailing out” taxpayers.
There is a hard financial reality that comes with absorbing population growth. And nowhere more than in B.C., where the population has expanded by 20 per cent since 2015, while Metro Vancouver’s population jumped 30 per cent in the same decade.
International migration, which is almost entirely responsible for Canada’s population growth, has slowed in the past year. But efforts to build more market housing and rental units, mostly in the form of residential towers and small apartment blocks, continue apace.
It costs an average of $107,000 to provide the municipal infrastructure for each new housing unit in Canada, according to the Canadian Urban Institute — an average that means costs can go lower, but also higher, depending on the capacity of a municipality’s existing infrastructure.
“The tax base and other revenue sources of municipalities do not come close to meeting the many demands on local governments, including for community infrastructure,” says a Canadian Urban Institute study.
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“More than 60 per cent of all public infrastructure — from local roads and transit systems, through recreation and community facilities, to waterworks and firehalls — is the responsibility of Canada’s 3,500 municipal governments.”
A recent Postmedia News survey of 16 of the largest municipalities within Metro discovered they have recently approved more than 132,000 new housing units that aren’t yet under construction. The lack of construction is partly because of a housing market downturn, leading to declining rents and profits.
Housing experts say some developers are rushing to get building approvals while civic politicians are being pushed by the NDP provincial government to speed up and simplify approvals and lower municipal fees for construction.
The Canadian Urban Institute cautions that “many housing projects currently in the pipeline can only proceed if certain essential infrastructure is provided. At the top of the list are drinking water, wastewater, storm water drainage, energy distribution, local streets and ‘new’ infrastructure categories like digital-fibre broadband networks.”
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There is an important debate to be had over who should cover these infrastructure costs.
While some developers argue taxpayers should subsidize them because they’re providing much-needed housing, a public good, there are counter-arguments.
One is that nearly half (47 per cent) of the condos built between 2016 and 2023 in Metro were bought by investors, not people who intend to live in them. And another is that some cities, like Vancouver, are approving much more housing than required by population projections.
It’s illustrative to multiply Metro’s 134,000 approved new housing units by the Canadian Urban Institute estimate that each one will cost an average of $107,000 in infrastructure. The arithmetic suggests these units would require Metro municipalities to spend about $14 billion on infrastructure and services.
Despite the sobering fiscal message, many developers in B.C. continue to press municipalities to lower development costs charges, a common term for developer payments toward infrastructure.
Too many members of the public, Yan said, have the false impression that developers’ cost charges are “a profit gain for municipalities. But they’re just the cost of providing services. In most cases they’re just maintaining the system.”
While some continuing infrastructure costs are small, such as repairing a traffic light, street cleaning or pruning boulevard trees, others are staggering. The North Shore wastewater treatment plant, for instance, will cost about $4 billion. And the projected price tag for a new Richmond wastewater treatment plant is $6 billion.
The politics of providing infrastructure usually doesn’t get voters excited, or even interested, because it’s “not sexy,” Yan said. “Nobody cuts ribbons for the replacement of sewage pipes at 41st and Arbutus.”
But such things are important to the public’s ongoing lives as they want their city to work.
“A lot of these projects aren’t spectacles. They’re just the grinding, thankless work of keeping a city and region going,” Yan said.
The question of who should pay for infrastructure should be a key issue in this November’s B.C. civic elections, Yan said: “I think this election is about growth and maintenance.”
After all, property taxes in municipalities throughout B.C. have gone up dramatically in the past four years, often by more than 20 per cent. They’ve risen at more than double the rate of inflation in the cities that are growing the most rapidly.
Yan asks how much taxpayers should subsidize the more than half of recently built condo units in municipalities like Vancouver, the City of Langley, Surrey, the District of North Vancouver and Port Coquitlam that have been bought by investors, people who don’t plan to live in them.
Some developers act as if such home construction is a form of philanthropy, he said, since condo investors often rent out their units. But Yan notes rents are often expensive and tenants can be left in a precarious position if owners change their minds about what to do with their investment.
In addition, a coalition of 30 B.C. housing experts, called Housing Reset, are concerned that cities like Vancouver have adopted the attitude of “build it and they will come.”
Vancouver, suggest its critics, is cutting too many corners and forgoing too many fees so that developers can construct far more housing units than are required.
Many governments, Yan said, want to subsidize developers, especially during a housing affordability crisis, “but the flip side of that is there are private entities that profit.” Civic officials need to be more transparent about who is benefiting from projects.
The upshot is that, when it comes to infrastructure, it can be extremely difficult for politicians to get the public-private balance right.
All-in-all, Yan said: “It’s a reminder that civilization is expensive.”
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