The cost of the new Capstan Skytrain rapid transit station in the Vancouver suburb of Richmond is being paid in part by residential developers.
According to TransLink, Metro Vancouver’s transportation network, the construction of the station cost around $62 million.
Of that amount, TransLink paid $30 million, and the rest was raised by the City of Richmond from developers with projects in the Capstan Village area.
TransLink says the deal “represents a unique funding partnership” by which the city collected funds from area developers to help pay for the project in exchange for density bonuses.
The arrangement is one way to answer the question, “Who pays for residential growth?”
A common belief in municipal government and urban planning circles is that “growth should pay for growth.”
That means municipalities should charge new developments for the infrastructure that supports them, instead of raising property taxes that all homeowners in the jurisdiction must pay.
In Vancouver, Community Amenity Contributions (CACs) are in-kind or cash contributions negotiated with property developers when city council grants them development rights by rezoning.
Rezonings increase the demand on facilities and services by new residents and employees who are drawn to the area.
CACs lessen the impact of new developments on the community by adding and expanding such resident amenities as parks and open spaces, child care facilities, community centres and libraries, as well as transportation, as in the Richmond example.
“The city took a piece of the ‘land lift,’ which is the difference in the value of the land before and after it’s been rezoned,” says Larry Beasley, a former Vancouver chief city planner.
Beasley says CACs were “very effective.”
“Densification plus amenities gave quality living, which some people have called ‘Vancouverism,’” he says.
Former Vancouver city councillor Colleen Hardwick says originally the contributions were site- or location-specific.
“For example, the Expo Lands development (on the north side of central False Creek) got extra height and density beyond which it would have been zoned for in return for without an amenity contribution,” Hardwick says.
In late 2023, the B.C. provincial government brought in legislation that replaces CACs with amenity cost charges (ACCs).
The legislation requires local governments to pre-zone land and reduce the use of current rezoning processes.
According to the province, “Currently, some high-growth municipalities use the rezoning process to negotiate with homebuilders for funding needed for amenities…These negotiation processes can be drawn out, delaying construction and add additional and sometimes unexpected building costs. These associated delays and costs can affect people buying and renting these homes.”
The government says ACCs are “more efficient and transparent development finance tools.”
“Instead of amenity costs and agreements coming together during the rezoning stage, this tool is part of the upfront planning process, giving builders and municipalities a better, clearer and more transparent understanding of costs associated with a housing project from the start.”
CACs and ACCs are not the only ways B.C. municipalities can pay for growth.
Development cost charges (DCCs), called development cost levies (DCLs) in Vancouver, are paid by developers to build “hard infrastructure” to support new developments.
The provincial legislation enables DCCs and DCLs to fund new and improved fire halls, police facilities and solid waste facilities.
Some urbanists say too much reliance on funding from new developments can put the brakes on it and make the housing crisis worse.
Andrew Sancton, University of Western Ontario professor emeritus of political science, says in some parts of the Greater Toronto Area development charges can add as much as $135,000 to the cost of a new house.
Sancton says to lower the cost of housing Canadian public policy should revert to the past practice of having municipalities pay for the cost of new infrastructure associated with development.
The result would be increased levels of municipal borrowing and modest increases in property taxes in some places.
Vancouver developer and retired architect Michael Geller is of a similar mind as Sancton.
“All of the charges paid by developers are passed on to consumers, which raises the costs high enough to discourage new building,” says Geller.
Although the payments are based on the premise that new development should pay for itself, “the result is excessive costs that inflate the price of new residential building, which, in turn, raises the price of all housing, not just new housing.”
Geller says municipal fees on new housing should be reconsidered.
“All municipal services – existing and new – should be funded by property taxes that everyone in the municipality pays,” he says.
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