What is the cost of new housing developments to the city? It’s an important question as serviced lots become scarcer and new subdivisions are announced to fulfill a growing demand, although they won’t be finished anytime soon.
St. Charles Councillor Peter De Smedt hopes the question of who pays for new developments will be answered by a $16,000 study.
“The city has to be sure whatever is done is sustainable,” the chair of the city’s property and development committee told members of the Winnipeg Real Estate Board’s Commercial Division at a breakfast meeting.
“What is equitable and what is fair? Who pays what share?”
What he is really asking is what portion of infrastructure and service costs for new subdivisions, such as sewer and water and roads, should be paid by the developer and what portion by the city. Should the city bear future costs of upgrading or repairing these services or should the developer?
Actually, those are questions that remain largely unanswered since they were first asked in 1873, the year the city of Winnipeg was incorporated.
The questions become particularly pertinent with the approval of the 13,000-home Waverley West subdivision in southwest Winnipeg and the approval of a new development in South St. Boniface on 800 acres of land which will see the building of 3,000 new homes over a 25-year period.
The question of who pays what is best exemplified by a disagreement between a developer and the city on who would pay to finish Concordia Avenue that dates back to 1983. Because no agreement could be reached, the development decided not to proceed with the second phase of the project and completed only half of a manmade lake.
Today, the strong demand for new housing has the developer wanting to again take up the project, but the original question of who pays for the road remains unanswered.
The developer has sweetened the pot by promising 10 acres of green space, keeping a three-acre forest and finishing the lake, but there is no indication of whether or not the city will consider these proposals enough to resolve the earlier question that had them at loggerhead.
Credits of development argue that new suburbs do not meet their true cost of servicing, becoming a burden upon taxpayers.
The critics argue that developers may pay the initial costs of roads and sewer and water, but they aren’t around a few years later when the roads need a new coat of asphalt or the waterlines rupture.
Actually, developers do pay a portion of future repairs because they are levied eight per cent of the development’s overall cost to be kept in reserve — something referred to as a dedication fee. They also pay other fees such as frontage fees. Developers also contribute fees toward things like transportation corridors in some areas of the city. Such a fee has existed in Charleswood for decades, although there still is no such animal as the “Charleswood Corridor.”
The city is now asking whether the existing fees are enough. It appears to be answering this question by contemplating upping the ante with something called a municipal home building fee of around $5,000.
But, who’ll pay if it happens? Be assured that the fee will be passed onto new home buyers by the developer because that’s simply the way the market works. The problem is that another $5,000 tacked onto the cost of a new home in an already tight market could push the price of a new home into the stratosphere.
De Smedt isn’t saying his committee will recommend the fee, he is merely indicating it’s one of many possibilities being considered.
“We don’t want it to be a tax grab ... we have to have a valid reason,” he added. “Anything we do has to be defensible and explainable.
“In fairness to ratepayers and investors, we have to look into payback. Our priority is a function of how much money we bring in.”
What the payback to the city is for a new development is also a matter of some disagreement and is best shown by Waverley West. A city study pegs the payback to around $74 million over the new subdivision’s 25-year development, but a Manitoba Home Builders’ Association study claims the payback is about $200 million more that the city’s figure.
Questions, questions, questions. There’s plenty of those. But, who has the answers.
What De Smedt has to consider when coming up with answers is that balance between promoting much-needed growth by helping developers and ensuring ratepayers aren’t getting the short end of the stick, something that demands the wisdom of Solomon.