City of Vancouver to delay developer fee hikes due to economic conditions

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

A large portion of the previously scheduled rate increase for the City of Vancouver’s Development Cost Levies (DCL) will not happen as planned later this year.

Last week, Vancouver City Council followed City staff’s recommendation and approved a deferral of the DCL rate hike to 2024.

DCLs are developer-driven revenues that help support the municipal government’s cost of building new and improved amenities and infrastructure.

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The original plan — approved by the previous makeup of Vancouver City Council in June 2022 — was to increase DCLs for residential uses by 12.5% and non-residential uses by 20% on September 20, 2023. These were part of the two-year increases in the 2022 rate update.

Instead, the 2023 inflationary rate adjustment of 8.3% for both residential and non-residential uses will be shifted to September 30, 2024, with the rate of DCLs going up by 20.8% for residential and 28.3% for non-residential.

“The annual inflationary rate adjustment includes a review of current local market trends and forecasts to inform rate adjustments,” reads City staff’s report, noting that third-party consultants have informed the municipality that “current economic conditions are challenging.”

Based on their analysis, City staff state costs of building projects have been “negatively impacted by rising construction costs along with sustained Bank of Canada interest rate increases.”

If the municipal government were to go ahead with the original rate increase as planned, this would result in a significant total DCL increase of 20% to 30% for 2023 during a time when a growing number of projects are facing delays due to the escalating cost of construction.

According to a recent RBC Economics report, home construction costs in Canada have soared by 51% since the start of the pandemic in early 2020, with growing municipal fees being a part of the cost drivers. Costs are ultimately passed on to homebuyers and renters.

The Canadian Home Builders’ Association recently reported the City of Vancouver has the steepest municipal fees for new high-rise residential buildings in the country.

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