BC government overhauls fees paid by developers to all cities, including CACs

Construction progress on The Butterfly tower in downtown Vancouver, as of July 3, 2023. (Kenneth Chan/Daily Hive)

The Government of British Columbia is eliminating the guessing game and negotiation process when real estate developers engage with municipal governments on the package of public benefits in exchange for added density and new uses.

Such changes through new legislation announced today will apply to both the Local Government Act governing BC municipal governments and the separate Vancouver Charter governing the City of Vancouver.

Known as community amenity contributions (CACs) in cities such as Vancouver and Surrey or the Community Benefit Bonus (CBB) in Burnaby, such public benefits supported by developers include public parks, libraries, childcare facilities, community and recreational facilities, and affordable housing.

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Developers either fulfill their CACs as a cash contribution to the municipal government or through the in-kind value of funding and building the benefits, such as incorporating a childcare facility into their new building development. CACs are typically only applied to market developments — not affordable housing, for example.

While some municipal governments have established a formula and fixed-rate-based system for determining CACs so that such costs are predictable for developers, other municipalities, especially Vancouver, have a case-to-case negotiation process on CACs that can take years before a rezoning application is able to enter public hearing. This not only adds to costs but delays the construction of housing.

Some areas have targeted CAC rates which provide guidance for the level of CACs provided, in addition to accounting for other policies, such as area plans.

The provincial government’s new legislation overhauls CACs into the amenity cost charge (ACCs) framework for a “more efficient and transparent development-finance tool.”

Through the new ACCs, the amenity costs and agreements will be clear and upfront in the planning process, instead of during the rezoning application review process.

Additionally, the legislation makes major changes to development cost charges (DCCs), which are known in Vancouver as development cost levies (DCLs). DCCs and DCLs are based on rates and paid by developers to build critical infrastructure to support building developments, such as water, sewer, drainage, and roads.

With the legislation changes, municipal governments will be able to use DCCs and DCLs to fund new and improved fire halls, police facilities, and solid waste facilities, instead of solely depending on property taxes for such costs. The municipal portion towards cost-shared provincial highway projects, such as interchanges and highway exits, will also be included in the changes.

While the types of costs that can be covered under DCCs and DCLs have been expanded, the provincial government will also limit the amount of DCCs and DCLs that can be imposed.

“As we take decisive action to deliver the kinds of homes people in BC are looking for, we’re also making sure communities and builders have the efficient and transparent tools they need to plan for growth with certainty. By doing this, we’re not just building homes for people, but also more sustainable, well-planned communities,” said Ravi Kahlon, BC minister of housing, in a statement.

Bridgette Anderson, president and CEO of the Greater Vancouver Board of Trade, added, “This new legislation is a welcome step toward more certainty and clarity that will improve the timelines to build the housing we need. So long as fees remain modest to not impact development, replacing community amenity contributions and creating a more proactive and comprehensive framework to plan, build, and fund growth is a positive move.”

The provincial government’s changes could force some municipal governments to shift away from their “growth pays for growth” model of funding community amenities and critical infrastructure, which adds to the costs of homebuyers, new renters, and businesses. For municipal governments, there could be added pressure to return to the practice of increasing property taxes as a means to offset costs not covered by CACs, DCCs, and DCLs following the changes.

This was also the subject of much controversy recently when a majority of Metro Vancouver Regional District’s board of directors — comprised of the region’s elected municipal officials — approved new regional DCCs on new building development to fund future multibillion-dollar projects related to water supply, sewage, and park space to accommodate population and economic growth.

In April 2023, Vancouver City Council directed City staff to create a new framework that transitions CACs for low-rise and mid-rise market residential projects into a more predictable fixed-rate system. At the time, City staff indicated their preference to maintain the negotiation process for larger projects — such as high-rise condominium towers and neighbourhood-sized redevelopments — to maximize the potential significant CACs.

In 2022, the City of Vancouver approved 71 rezoning applications with additional density, producing 7.8 million sq ft of new additional floor area. These projects will provide a combined total of $219 million in CACs, including $159 million in cash to the municipal government, collected over a set period of time, and $60 million as in-kind value as part of on-site development. Cash CACs must be paid within 24 months of City Council’s rezoning approval in principle, although City Council recently provided some extensions to developers given the current challenging market conditions.

The single largest CACs package gained in 2022 was from the approval of Westbank’s rezoning application for the 40-storey luxury condominium tower at 1668-1684 Alberni Street. In exchange for the density and uses, the developer will provide $37 million in cash CACs, which is also one of the largest 100% cash CACs in years.

One of the largest CACs packages spurred by a single tower building is also from Westbank, with The Butterfly Tower — now approaching completion — providing about $100 million in CACs, including $65 million as a cash contribution to the municipal government and $22 million for the seismic upgrade, renovation, and expansion of the site’s heritage church.

Currently, the City of Burnaby has a negotiation process for its CACs, but it differentiates from Vancouver’s system as there is a time limit to conclude negotiations. More time for negotiations may be permitted with City Council’s approval.

For a fixed-rate example, CACs within Surrey City Centre are currently $40 per sq ft per apartment and $15,000 per single-family home or townhouse. Surrey’s clear predictability with CACs also more easily allows new and smaller entrants in the homebuilding industry.

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