May 06, 2008 - 03:52 PM

By Jillian Follert

DURHAM -- A new report says increasing development charges are forcing many would-be homebuyers out of the market in Durham Region and across the GTA.

On Tuesday, the Building Industry and Land Development Association (BILD) released "Over The Top," a report highlighting how climbing development charges impact housing affordability.

BILD represents more than 1,500 members in the residential development, home building and renovation industries -- all of which stand to gain if new home prices are more accessible.

The report says residential development charges in several GTA communities are now more than $30,000, with Brampton the highest at an average of $35,398 for a single family home.

It also lists eight GTA municipalities that have more than doubled their residential development charges for single family homes since 2001, including Scugog, Brock and Uxbridge.

"Over the last two or three years, we've seen so many more people buying condos," said BILD CEO Stephen Dupuis. "It's not because the public overwhelmingly wants to buy condos all of a sudden, it's because people are being priced out of the market."

Every time a new housing development is built in Durham Region, that means more roads, sewers, sidewalks, traffic lights, parks and other services must be built to support them -- and they carry a hefty price tag.

Instead of paying for growth-related costs through property taxes, local municipalities collect development charges to foot the bill.

Costs vary by municipality, but in most cases a single detached residential home would come with at least $20,000 in charges, paid by the developer and passed on to the homebuyer in the price of the property.

This week's BILD report says development charges are part of a larger financial burden faced by new homebuyers, that includes GST, PST, land transfer tax, land dedications and other fees, which result in government-driven costs representing up to 20 per cent of the total home price.

Mr. Dupuis said the root problem is the way municipalities are funded.

BILD wants the Province to increase infrastructure funding, reverse the downloading of social service programs and reduce dependency on property taxes as the sole source of municipal funding.

"We're completely and totally empathetic to what the municipalities are facing; there is a lot of pressure on them," he said. "It is inappropriate for the property tax base to be funding a lot of these things."

In Durham, development charges are set by the municipalities, the Region, the school boards and Durham Region Transit and all are collected by the lower-tier municipality.

As an example, charges for a new single detached home in Oshawa currently sit at $7,437 for the City portion, $14,571 for the regional portion, $958 for the public school board and $337 for the separate school board, for a grand total of $23,303.

At the municipal level, the charges cover things like local roads, traffic lights, sidewalks, recreation centres, fire halls, libraries and parks.

Regionally, the money funds police services, sewers, water and regional roads.

The charges can only be used to fund growth-related costs, not maintenance or infrastructure renewal.

"Growth doesn't pay for itself," says Evan Rodgers, Oshawa's manager of policy and special projects. "If all these growth-related costs were paid through existing taxes, we would definitely see tax increases. This is a way to avoid imposing inordinately high costs on the taxpayer."

That sentiment was echoed by Mary Simpson, director of financial planning and purchasing for the Region of Durham. She declined to comment on the BILD report specifically, but said the Region is working with that group to convey to them why the charges are as high as they are.

"The cost of capital is going up," she said. "Some of it is related to demand. There's a lot of infrastructure building happening for growth and for rehabilitation and that all pushes demand. We're also dealing with a commodity crisis."

To that end, the Region is now considering hiking its development charges this summer.

They're looking at a proposed 27 per cent increase for residential charges, that would take the Region's portion form $14.571 to $18,536 as of July 1.

On the commercial side, the proposed increase would see charges jump from $5.58/square foot to $17.14/square foot after a two-year phase-in process.

"These are full-cost recovery rates, we're not making a profit," Ms. Simpson stressed. "If we don't charge those amounts, we will have to recover the cost of growth through taxes or through the water and sewer bills. We don't have another option."