On July 19th, Toronto City Council approved new bylaws for development charges and a community benefits charge, and re-enacted the previous bylaw for the alternative parkland dedication rate. Updates to all growth funding tools were undertaken concurrently and in an integrated manner to meet a September 2022 transition timeline mandated by the Province of Ontario.
Toronto is projected to experience substantial growth over the next 30 years – a forecasted increase of more than 430,000 people and 185,000 employees in Toronto by 2041 – and growth funding tools help fund the services and infrastructure needed for a growing and thriving city. The tools fund roads; transit, sewer and water services; parks, libraries, and community centres.
Growth funding tools are important to ensure that growth pays for growth, so that growth doesn’t place a burden on existing residents in the form of higher property taxation or user fees. The City of Toronto is taking a measured approach by phasing in rate changes over a period of time and providing targeted relief to certain types of projects, such as affordable housing and rental initiatives.
Development charges are the City’s primary means to support growth-related capital projects, and are collected from developers at the time a building permit is issued.
The charges can only be used to fund capital costs related to new development – they cannot be used to recover costs for state of good repair, capital replacement or operational expenses.
To cushion the impact of the increase on the development industry, the City is gradually phasing in development charge rate increases over time, while supporting city-building objectives, including investing in infrastructure and services, encouraging the growth in housing supply overall and supporting the delivery of affordable housing.
The transition will implement rate changes over a two-year period, with 50 per cent of the increase implemented when the current bylaw expires in 2023, and full rates coming into effect in 2024. Also, the City would normally adjust development charge rates for inflation this November (an estimated 17 per cent), but to offset development pressures, the City will delay this increase until May 2023.
The bylaw continues to include the existing exemptions, including those for affordable housing, industrial uses and non-ground floor non-residential uses. Additional supports are provided for purpose-built rental housing and inclusionary zoning developments, by freezing the rates at current levels for those units. New exemptions are provided for more housing choice in communities across Toronto for multiplex projects with no more than four units on a lot, as well as an increase in the Toronto Green Standard rebate program.
While development charges are increasing and recover a significant share of growth-related costs, they do not fully fund growth in our city due to exemptions and legislative limitations. It is estimated that growth charges will only pay for 55 per cent of growth.
Toronto’s residential development charge rates are competitive with the rates in other municipalities in the GTA. The rates in Markham, Mississauga and Vaughan are higher and will continue to be higher than Toronto’s new calculated rates by as much as 30 per cent, effectively making Toronto’s non-residential rates the lowest in the GTA (due to exemptions for non-residential developments).
Community benefits charge
The community benefits charge is the new funding tool available through Section 37 of the Planning Act, replacing the previous authority to permit increased height and/or density in exchange for community benefits (density bonusing). The charge can be levied on developments and redevelopments that are at least five storeys high with at least 10 residential units. The charge is now linked to the appraised value of the land and restricted so it cannot exceed four per cent of land value at the time a building permit is issued.
The City anticipates the community benefits charge will result in the City collecting 40 per cent less revenue than the previous Section 37 density bonusing tool, before exemptions and transition, even though the charge may apply to a wider range of developments. The provincially regulated four per cent cap for the charge doesn’t allow the City to cover the capital costs of the facilities and services to support future growth across Toronto. A cap of nearly 14 per cent would be needed to fully cover identified eligible expenses.
Lower density developments (less than five storeys) aren’t subject to this charge. Additionally, the new regulation exempts long-term care homes and hospices, retirement homes, universities, colleges and Indigenous institutes, Royal Canadian Legion buildings and non-profit housing.
The City is providing a measured implementation process that balances the impacts on new development. Any application for a development under 10,000 square metres that is complete before the new bylaw is enacted in August will not be subjected to the charge. This protects developments that are in the pipeline, giving them time to adjust to the new rate.
To support important housing initiatives, Housing Now projects and other affordable housing initiatives will be exempt from the charge.
Alternative parkland dedication rate
The alternative parkland dedication rate is an important city-building tool that guides and funds the expansion and improvement of Toronto’s park system. The City has re-enacted the current alternative parkland dedication rate bylaw, so continued engagement on a new parkland dedication approach can be done. The City anticipates a new approach will be presented in early 2023. This re-enacted bylaw ensures that the City retains the ability to apply an alternative parkland dedication rate.
The review of all three bylaws considered input from stakeholders in the development industry and the general public, which was obtained through significant engagement efforts.