More Cases of Housing Taxes Unrelated to "Growth Paying for Growth"
Our previous examples were not isolated cases
Highlights
High development charges and other municipal housing taxes are often defended on the grounds that “growth should pay for growth.”
A previous installment of this series provided three cases of how housing taxes are used to finance worthwhile projects unrelated to new growth. Today, we provide four more.
Two weeks ago, we provided three case studies of projects that municipalities were spending money on from housing taxes. These projects had little to no relationship with the costs that new housing imposes on communities. This created a lot of interest, with some people wondering if these were isolated incidents.
We answer that question with four more cases. As with our previous examples, we do not question the merits of these projects or their necessity for social good but illustrate how initiatives that benefit the entire community are being paid for by a handful of new homeowners and renters, pushing up the price of housing.
To recap, the principle of ‘growth should pay for growth’ at its core means charging new homes only for the additional direct capital costs they impose on a municipality. Housing taxes are not meant to be socially redistributive or act as a revenue substitute, pushing costs from existing residents to future residents.
However, due to the alphabet soup of municipal housing taxes having little direct oversight and a lack of checks or balances, non-growth-related costs often get pushed onto new housing construction.
1. Ontario Works Review in Hamilton
Hamilton is looking to undertake a review of the way it administers Ontario Works, the program that provides social and financial assistance for people experiencing poverty. The city is expecting the work to cost around $130,000, attributing around 25% of this cost to new homes through the municipality’s community benefit charges (CBCs), a housing tax similar to development charges.
This is another clear example of non-housing costs being pushed into housing, as there is no clear connection to new housing. In fact, new housing is one of the best tools governments have for reducing poverty.
Unfortunately, the city’s background documentation does not indicate how the 25% figure was determined or how new housing leads to an increase in municipal Ontario Works expenses.
2. Truth and Reconciliation Recognition in Oakville
Oakville is looking to spend $900,000 on Truth and Reconciliation Recognition between 2023-2031 through its CBC. We wish to make clear, once again, that municipal spending on these forms of programs is both appropriate and necessary.
The question that must be asked is, “Is this an expense related to building new housing, or is this an initiative that benefits the community as a whole?” If it is the latter, then the community should collectively pay for it rather than pushing the cost onto new renters and homebuyers.
Oakville, however, is putting the entire expense onto CBCs, thereby assessing no benefit at all to existing residents for this project. This is problematic; if you think Truth and Reconciliation are important, as we do at the Missing Middle, then they should be important enough for everyone to pitch in, not just new residents.
3. A Safe Injection Site in Toronto
Toronto’s 2018 development charge background study listed a project for a safe injection site at a cost of $800,000. That same study also assigned a 0% benefit to existing residents for this site.
The implicit argument that the study is making here is that the expansion of addiction in our society is solely due to the construction of new homes, which is wildly inappropriate.
This is yet another example of how development charges (DCs) are used to shift costs from existing residents to new residents and avoid the scrutiny associated with funding worthwhile initiatives through property taxes.
The City stopped collecting DCs for this project in 2022, so the City of Toronto is no longer collecting money for this purpose.1 This episode, however, provides yet another demonstration of how municipalities misuse development charges and funding from other municipal housing taxes, combined with a lack of consideration for the financial well-being of new residents.
4. Long Term Care in All Municipalities
This is a slightly different example. Instead of a single project from a single municipality, this is the entire category of infrastructure that the Development Charges Act lists as eligible for DC funds.
As of 2022, 13 upper-tier and single-tier municipalities, such as Toronto, York Region, and Peterborough Country, impose development charges for long-term care homes.
Long-term care homes are vitally important, but the linkage between the need for them and new housing infrastructure is tenuous at best. Most people moving into a new home will be nowhere near retirement age, so using DCs in this manner is a wealth transfer from younger, newer households to older, existing ones.
This category of expenditure illustrates how development charges are being used to fund various socially beneficial projects that go well beyond the principle that “growth should pay for growth.”
What It All Means
Municipal housing taxes are not simply about “growth should pay for growth.” As a society, we are asking new homes, or more accurately, the residents of those homes, to not only pay for the infrastructure associated with new housing construction but also to subsidize costs the rest of the community is unwilling to pay.
We need to move beyond the sloganeering of “growth should pay for growth,” acknowledge that governments use new housing construction to subsidize existing residents, and have some difficult conversations about what expenses are appropriate for new residents to pay and what initiatives benefit the entire community and should, therefore, be paid for by the entire community.
Download a PDF of this article here:
A previous version of this piece stated: “The City was forced to stop collecting DCs for this project in 2022 because the province changed the eligibility requirements for DC projects to exclude public health through Bill 108, not because the city determined that a safe injection site is not related to growth.” This information was incorrect, as these sorts of projects can still be eligible post-Bill 108. MMI regrets the error.