The Canadian Mortgage and Housing Corporation (CMHC) has released a report that challenges the notion that slashing development fees is a panacea for housing affordability. While the federal government is investing billions to encourage municipalities to halve development fees, the CMHC's chief economist, Mathieu Laberge, argues that this approach alone is insufficient to address Canada's housing crisis.
Development charges, which cities levy on developers to fund infrastructure, play a role in housing supply but are not the primary driver of affordability. Laberge's analysis reveals that reducing or eliminating these fees can boost the number of viable projects, but the impact varies significantly by city. For instance, Toronto could see a substantial 10% increase in viable projects with a 90-100% reduction in development charges, but this figure drops to around 5% with a more modest 50-60% reduction.
Burnaby, British Columbia, stands to benefit the most, with a projected 14% increase in viable projects following near-elimination of development charges. In contrast, Ottawa would experience only a 3% increase under the same scenario. Laberge emphasizes that development fees serve a purpose in some cities' fiscal plans, despite their limited influence on housing supply.
The report underscores the complexity of the housing affordability crisis. While reducing development fees can stimulate supply, it is not a comprehensive solution. The CMHC's findings highlight the need for a multifaceted approach, addressing various factors contributing to housing unaffordability. This includes considering other costs, such as land acquisition and construction expenses, and exploring innovative solutions like modular construction and density bonuses.
In my opinion, this report serves as a wake-up call, urging policymakers to move beyond a singular focus on development fees. It underscores the importance of a holistic strategy that tackles the multifaceted nature of housing affordability. While slashing fees can provide a temporary boost, a more comprehensive approach is necessary to ensure long-term housing stability and accessibility across Canada.
