Taxpayers have the right to know what their tax dollars are being used for. New home purchasers are likewise entitled to know how municipalities use the development charges they pay as part of the cost of their houses. If you’ve followed the media in the past year, you know that development charges are increasing, and it’s important to understand just what these fees are for.
When new home communities are built, the need for roads and amenities in the area increases. Development charges are the fees set and maintained by municipal governments under Ontario’s Development Charges Act (in effect since 1998) to cover nearly all the cost of the infrastructure and increased services needed because of residential growth. Contrary to what many people think, these necessities are not covered by taxes. Factored into new home pricing are also the cost of the land, materials and labour, plus building permit fees, planning fees and other costs of doing business. Development charges do not include the Land Transfer Tax, GST or other taxes the purchasers of new homes must pay.
In Ontario, development charges differ by municipality. They can cover the new schools, roads, sewers, water pipes and other land infrastructure, libraries, community centres, recreation centres and sports fields that are needed to handle the residential growth. These charges do not pay for cultural facilities such as museums, theatres or art galleries.
If you bought a new home or are thinking of buying one, go to the municipality where the home is located and ask what the development charges are being used for. Find out whether they are being allocated according to the municipality’s claims. These charges add a lot onto the price of your new home and you should expect accountability on the part of your local government as to their use.
Remember that if and when you sell that same home, the new owners will not pay development charges. This seems a bit convoluted when determining “growth,” as the person who bought new may be the sole occupant, where the resale purchaser may have a large family. Regardless, builders have no control over the way development charges are set up. Make sure you get what you pay for.
Hugh Heron is principal and partner in the Heron Group of Companies, president of Heathwood Homes and a member of the board of directors of Canada Mortgage And Housing Corporation, as well as a past president of the Toronto Home Builders’ Association.