Mayors' Council approves new development cost charge for transit expansion

Dec 8 2017, 3:01 am

All future new developments – residential, commercial, industrial, and institutional – in Metro Vancouver will have to pay a new development cost charge (DCC) to help fund the improvement and expansion of transit and road infrastructure.

Earlier this morning, TransLink’s Mayors’ Council approved the new tax, which will raise about $20-million annually starting in January 2020 – subject to final approval from TransLink’s Board of Directors and new legislation enacted by the provincial government.

Here are the draft initial rates when the tax is implemented in 2020:

  • Single-family dwelling: $2,100 per dwelling unit
  • Townhouse/duplex: $1,900 per dwelling unit
  • Apartment/condominium: $1,200 per dwelling unit
  • Retail/service: $1.00 per sq. ft.
  • Office/institutional: $0.50 per sq. ft.
  • Industrial: $0.50 per sq. ft.

The new DCC will fund between 10% to 15% of the total cost of TransLink’s $2-billion Phase One expansion plan. It could either be collected directly by TransLink or through the municipal governments.

But will it add to the cost of building new housing, possibly further exacerbating the region’s housing affordability and supply crisis?

The Mayors’ Council says no.

“The proposed rates are not expected to have any negative impact on housing affordability,” reads a report. “As housing prices are set by overall supply and demand in the marketplace, developers cannot unilaterally increase prices on individual projects.”

“Rather, the usual response to an increase in developer cost is to reduce what developers are willing to pay for land. As long as a new cost is small enough, it won’t have enough impact to result in reduced availability of development sites and therefore would not affect the sale price of new housing units.”

Previous discussions of such a tax revolved around a charge on new developments near major transit investments, specifically around SkyTrain stations.

However, the approved DCC plan will be spread across all new developments, regardless of proximity to SkyTrain, so that it will be “fair” and have a minimum impact on development patterns.

“If a new DCC is imposed across the region, then it is not likely to alter the development patterns as there is no way to avoid the charge. In fact, a region-wide DCC probably encourages densification because transit-served areas offer potential to offset the new cost with parking cost savings or increased buyer interest.”

“If the new DCC is only levied in defined benefitting areas, or if the rate is much higher in benefitting areas than in the rest of the region, there is a risk that development patterns are distorted.”

The organization that represents the collective interest of the region’s construction, development, and real estate industry says it supports the plan.

“UDI congratulates the Mayors’ Council on moving forward with the next step in fulfilling the funding for the full 10-year transportation investment plan,” said Anne McMullin, President and CEO of the Urban Development Institute.

“After nearly four years since the introduction of the Mayors’ Council Vision, it’s critical that the provincial and federal governments move quickly to follow through on their commitments to deliver on the overdue regional transit and transportation investments.”

The DCC will help pay for the Phase One cost of one new SeaBus ferry vessel, 56 additional Expo and Millennium Line train cars, 24 additional Canada Line train cars, two new and six refurbished locomotives for the West Coast Express, upgrades to the stations and systems of all three SkyTrain lines, and updated transit exchanges and new buses.

Senior governments previously announced funding to help support Phase One, with $370 million coming from the federal government and $244 million from the provincial government. TransLink is responsible for the remaining $1.3 million, which will come from annual transit fare hikes, property tax hikes, a contribution from existing sources and savings, and the DCC.

Phase One does not encompass the Broadway extension of the Millennium Line and the light rail project in Surrey. These projects are considered a part of Phase Two.

The Mayors’ Council requires the provincial government to pass legislation for the DCC during the spring 2018 legislative session. If the tax does not receive provincial approval, TransLink could be forced to scale back its transit expansion plans.

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