Housing costs

[tomh009]

Well ... if we are building new housing and bringing in more people, we do at some point need to add parks or other recreational facilities, too. So, is that extortion?

The article did say it's partly funded by federal government grants, but not which portion. But, in any case, I don't believe development charges were increased in order to pay for this project.

Will only new residents be allowed to use this facility?

The point is that additional construction requires additional infrastructure. The question is who should pay for that.

A quick back-of-the-envelope calculation says that Kitchener could cover all the development charges ($48M and a bit per year) by increasing property taxes 9current revenue about $165M). So, a roughly 30% property tax increase to everyone (and a lesser rent increase for tenants). It can work, but is it fairer to "extort" existing residents than to "extort" new residents?

[bravado]

I just don't see a world where we can raise one of the input costs of a house by up to 900% over 15 years and then claim that "oh well input costs really don't have much to do with overall price."

They clearly do. As does supply. As does incentives and other big market/policy forces. Housing is still at least partially a commodity, let it act like one. It certainly used to. There's something so frustrating about how we think about housing and constantly pull our hair out writing dissertations - meanwhile red states in the US just keep building sprawl, adding more supply, and prices keep coming down while blue states and big cities argue bitterly whether or not to allow ADUs on 1% of the city land and spend the rest of the time feeling suspicious about Big Developers™. Sometimes we can just remove costs and let normal economic forces work like they used to. We've added huge costs to housing and prices have gone up. In provinces and states where they don't have development charges, prices have not gone up as much.

We should be working hard to remove costs from housing, especially generationally unfair ones. While we are doing this politically easy fix, we can be doing the harder political fixes around supply and zoning.

[tomh009]

We should be working hard to remove costs from housing, especially generationally unfair ones. While we are doing this politically easy fix, we can be doing the harder political fixes around supply and zoning.

Alas, I don't think a 30% property tax hike is a politically easy fix. Maybe some compromise solution to reduce development fees without a huge property tax increase could be workable.

On a related topic, the multiresidential development charges are excessively high and subsidize the infrastructure for SFH development. Balancing that should be easier, but it would of course impact SFH costs.

[nms]

That's quite a leap to make. Housing is a relatively inelastic good so reducing the price to match a reduction is cost might not result in a new equilibrium. I mean, are you suggesting highly elastic and competitive goods producers aren't perpetually looking for ways to cut costs to increase profits? How often do your favourite products decrease in price when worse, cheaper materials are used and labor is off-shored?

Again, if we need to be absolutely perfect in our approach before we ever think about doing any public policy, we won't get anything done. 

Development charges have increased well over inflation every year since they were created. If we can't try to reduce the actual cost of housing until we eliminate the artificially limited supply first, then we should just give up caring about housing now. And yes, fees and taxes are a cost just as much as material and labour. If we increase the supply of homes, we will lower the price. If we remove costs, we will lower the price. If housing was as inelastic as you guys say, then developers should be able to charge whatever they want and have much better margins than they do today in 2025. Developing seems like a very shitty industry with bad margins - despite sitting on a good they can charge anything for...

How did we pay for things before DCs? Can anyone remember back to the ancient history of "the 90s"? I find it offensive that someone trying to buy a house today and start their life has to pay fees that didn't even exist for previous generations, let alone grow by 100% yoy. What is the purpose of taxes and public debt if they are only used to support some people and not others?

Among the ways that municipalities paid for big ticket items in the past included loans and financing (eg RIM Park was the most public example, or the Ion financing), adjusting taxes to ensure that capital reserve funds were funded for multi-decade cycles, and in some cases asking citizens to vote for special levies to support things (this would have been back in the early 20th Century). Also, limiting the number of municipal paid for services (eg no recreation centres or libraries) meant property tax revenue went to other things. And upper tier governments fully funded services that have long since been downloaded to municipalities.

Another area of support came from private individuals, whether local industrialists, unions, religious groups, or service clubs who funded facilities and festivals. For instance, the Lions funded the outdoor pool in Waterloo Park (long since demolished), other service clubs built affordable housing or sponsored sporting facilities, and local industrialists heavily funded the University of Waterloo and Conestoga College when they launched.