New Metro Vancouver fees could add up to $24,000 in new home costs

New Metro Vancouver fees could add up to $24,000 in building costs for a new home

Construction progress on Landmark on Robson at 1400 Robson Street, Vancouver, as of August 7, 2022. (Kenneth Chan/Daily Hive)

In October 2023, the board of directors for Metro Vancouver Regional District are expected to deliberate on a proposal by regional district staff to exponentially increase the development cost charges (DCCs) associated with new building developments.

This will apply to both new residential and non-residential buildings, but a greater attention is being put on the impact this will have on housing.

For example, in the regional district’s Vancouver Sewerage Area (VSA) sub-region — which includes the City of Vancouver, parts of western Burnaby, Sea Island (Vancouver International Airport), and UBC and the University Endowment lands — the total regional DCCs of building a new single-family home would increase by $24,106 by January 2027.

This is up from $10,027 today, representing an increase of 240%.

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The DCCs would go up incrementally annually over a three year period between 2025 and 2027, with the hike taking place in January of each year (“Step 1” is January 2025, “Step 2” is January 2026, and “Step 3” is January 2027).

The DCCs percentage increase within the VSA is even higher for a townhouse, rising from $8,679 to $30,861 (+195%) over the same period, and an apartment, rising from $6,249 to $20,906 (+235%).

For non-residential uses in the VSA — such as restaurants, retail, office space, and industrial spaces — the DCCs per sq ft rate would rise from $5.02 per sq ft today to $16.78 by 2027, representing a 234% increase.

Over the same three-year cycle, there would be similar major increases for the rest of the Metro Vancouver region, which is divided into the sub-regions of the North Shore Sewerage Area (NSSA; includes West Vancouver and North Vancouver), Lulu Island West Sewerage Area (LIWSA; includes Richmond), and the Fraser Sewerage Area (FSA; includes Delta, eastern Richmond, most of Burnaby, New Westminster, Coquitlam, Port Moody, Port Coquitlam, Pitt Meadows, Maple Ridge, Delta, Surrey, White Rock, and Langley).

In real numbers, the VSA will see the greatest increases amongst all four sub-regions.

Depending on the sub-region location, the proposed combined total DCCs rate increases for residential projects are $18,506 to $24,106 per single-family lot, $16,952 to $22,182 per townhouse unit, and $11,360 to $14,657 per apartment unit.

Here is a full breakdown of the proposed rates for the total regional DCCs:

metro vancouver regional district proposed dccs

Metro Vancouver Regional District’s proposed Development Cost Charges (DCCs) for new development, between 2025 and 2027. (Metro Vancouver Regional District)

metro vancouver regional district proposed dccs 3

Metro Vancouver Regional District’s proposed Development Cost Charges (DCCs) for new development, between 2025 and 2027. Click on the image for an expanded version. (Metro Vancouver Regional District)

Map showing Metro Vancouver’s four separate sewerage areas (Yellow: North Shore/NSSA; Orange: Vancouver/VSA; Red: Lulu Island West/LIWSA; Green: Fraser/FSA). (Metro Vancouver Regional District)

According to regional district staff, the steep hikes are necessary for the regional district’s 30-year, $35-billion capital plan for expanding and improving Metro Vancouver’s water supply network and sources, liquid waste (sewerage) capacity, and regional parks.

For water infrastructure, this includes 90 km of new transmission mains, two new reservoirs, two new pump stations, and one new source water intake with treatment facilities.

For sewerage treatment, the regional district is planning various major new and improved facilities, with the single most expensive project set to be the new replacement and expanded Iona Island Sewage Treatment Plant facility near YVR Airport. At a cost of over $10 billion, ratepayers within the VSA will be mainly responsible for covering this project’s cost through fees, as the facility will directly serve their sub-region.

The regional district’s much-delayed North Shore Wastewater Treatment Plant is also facing significant cost overruns following a change in contractor in the middle of construction.

This comes to a total of $11.9 billion for water infrastructure projects and $21.8 billion for liquid waste.

The regional district is also planning to set aside $800 million for land acquisitions to expand its network and footprint of regional parks. The goal is to acquire about 4,440 acres of additional land for parkland between now and 2050, equivalent to replicating the land area of Stanley Park by more than four times.

metro vancouver new water supply dams reservoirs

New water supply options for Metro Vancouver. (Metro Vancouver Regional District)

Lower Seymour Reservoir dam option. (Metro Vancouver Regional District)

Upper Capilano Reservoir dam option. (Metro Vancouver Regional District)

During a presentation earlier this month, regional district staff stated their proposal to hike the total regional DCCs substantially is based on their “principle of growth paying for growth,” which was adopted earlier this year by the regional district’s board to maintain financial sustainability and regional affordability. Therefore, the notion is that “the growth infrastructure should be paid through growth.”

Out of the $35 billion capital plan, $11.5 billion is for projects to meet growth, and $23 billion is for non-growth related projects.

Metro Vancouver as a whole is forecast to see its population grow from about 2.7 million today to 3.8 million by 2050. The new additional homes needed to support the increased population also means a greater demand for water and sewerage capacity, and park space. This also comes with a significant increase in job space, which in turn needs more water and sewerage connections.

Preliminary conceptual artistic rendering of the new Iona Island Wastewater Treatment Plant and area ecological improvements. (Metro Vancouver Regional District)

Given the economic and financial implications, the regional district commissioned consultancy firm Coriolis Consulting to perform an analysis on the impacts of the proposed total regional DCCs.

Based on the findings of the firm’s September 15 completed study, there would generally be a reduction in the land value of development sites, an increase in the market price or rents of new homes or floor space, and/or a reduction in profit margins.

“The proposed Metro Vancouver DCC rate increases are significant and will add to the cost of new construction,” reads the analysis.

There was a social media outcry today, with particular concern that the proposed DCCs could impact the financial viability of much-needed secured purpose-built rental housing projects, and effectively offset the intended positive benefit of the federal government’s newly announced 100% rebate on the federal 5% GST applied to the construction costs of such rental housing projects.

This triggered a sharp response from federal Minister of Housing Sean Fraser, who delayed today’s announcement of a Housing Accelerator Fund supporting some of the region’s municipal governments.

“In light of a proposed development cost charge increase by Metro Van, I‘ve postponed today’s announcement of Housing Accelerator Fund deals with 2 cities who are members of the Metro Van board. We’re studying the impacts of this proposal and I hope to have more to say soon,” he wrote on X, formerly known as Twitter.

In light of a proposed development cost charge increase by Metro Van, I‘ve postponed today’s announcement of Housing Accelerator Fund deals with 2 cities who are members of the Metro Van board.

We’re studying the impacts of this proposal and I hope to have more to say soon.

— Sean Fraser (@SeanFraserMP) September 26, 2023

During a press conference on the provincial government’s new Housing Supply Targets for municipalities today, BC Minister of Housing Ravi Kahlon also chimed in on the regional district’s proposed fees.

“I had an opportunity to talk to Metro Vancouver and express my concerns to them about some of the changes that they’re looking at. But I also understand that infrastructure needs money,” said Kahlon, before noting the provincial government has provided municipal and regional governments with funding to support growth-related infrastructure.

“So I think it’s an important conversation that we’ll need to have with Metro Vancouver. But I think they they are aware of the challenge. And I hope that they’ll be reconsidering their path forward.”

Over the years, the regional district has been hinting substantial new revenue sources are needed to fund massive infrastructural upgrades. In April 2023, it also introduced water-related DCCs, which currently funds 50% of the cost for any new water infrastructure to meet population growth, with the remainder mainly paid by the general public through water sales.

The sewerage-related DCCs were first created in 1997, and then updated for the first time in 2017. Currently, this revenue source funds 82.5% of the cost of growing the infrastructure.

The intention now is to use the heightened DCCs to cover 99% of the development-related capital costs for both water and sewerage infrastructure.

According to the Coriolis report, without the proposed steep hikes to the DCCs, the regional district would need to pursue a combination of long-term debt, contributions from the operating budget (such as utility/user fees), reserves, and external contributions (such as from the federal and provincial governments).

The proposed DCCs will go through three readings with the regional district’s board of directors in October 2023, before the anticipated fourth reading and bylaw adoption in early 2024.

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