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Metro Vancouver approves construction fees despite political 'hostage taking'

Metro Vancouver has approved new development cost charges despite opposition from federal Housing Minister Sean Fraser, who is presently withholding money designed to increase permits and help house vulnerable people.
Port Coquitlam Mayor Brad West has to see if Liberal Housing Minister Sean Fraser will pull housing subsidies for vulnerable citizens in his community after he approved new water and sewer infrastructure fees at the regional level, on Oct. 27, 2023.

Metro Vancouver politicians have approved more than tripling construction fees for new housing units despite opposition from federal housing minister Sean Fraser and concern Fraser will withhold municipal subsidies.

On Friday, the Metro Vancouver board, comprising of municipal council members, unanimously approved the development cost charges (DCC) to pay for $11.5 billion of growth-related park, water and sewer infrastructure over the next three decades. Fees will vary slightly within the region; however, one townhouse unit in Vancouver, for example, will be charged $30,861 by 2027, up from $10,027 today.

Ahead of the vote, Fraser wrote to the board the fees were “at odds” with his so-called Housing Accelerator Fund as it could add to the final price of a new home. Fraser has already pulled $138 million to fund an acceleration of housing permits and new affordable housing projects in Surrey and Burnaby although his letter does not explicitly state that federal money will remain off the table now that the DCC rates have been approved.

Glacier Media has reached out to Fraser’s office to understand what his intention is now. The nascent $4-billion federal government fund (announced last year but only launched in September) is aimed at increasing housing supply by subsidizing cities to process more housing permits and to fund affordable housing projects on public land.

At the board meeting, largely attended remotely by politicians, Vancouver city councillor Lisa Dominato initially proposed a one-year delay to the fee implementation, but this was rejected by the board of 40 directors in a weighted vote of 82-58.

Dominato’s rationale was to acquiesce to one of Fraser’s requests. Fraser also suggested waiving fees for privately built purpose-built rentals and as well as non-market rental units that are delivered by the private sector.

Port Coquitlam Mayor Brad West led the most vocal charge against any changes to Metro Vancouver staff recommendations to proceed.

West called Fraser’s letter a political manoeuvre, “akin to a hostage taking.”

“This idea, that we should go down this policy path because we’re being coerced …this doesn’t send a good message to the public as to how business is done,” said West.

West said Fraser never even guaranteed the funding should the board delay or alter the fees.

“Do directors think this discussion will go away in a year? No, we’ll be back to square one. This is an attack on the validity of DCCs, period. It stems from a misunderstanding, perhaps deliberate, of what DCCs are,” said West.

Metro Vancouver heard from developers that the fees would contribute to added financial pressures on new developments.

West said Port Coquitlam has low municipal DCCs but housing prices are not any lower there than anywhere else in the region — an indication the market will set the price.

“Industry didn’t hesitate to sell for what the market could do,” said West.

“I don’t believe for one minute that delaying or scrapping this DCC will result in one iota of affordable housing being built,” said West.

Vancouver city councillor Sarah Kirby-Yung offered a different take on the situation in supporting Dominato’s proposed delay.

"We have a lot of projects being paused or shelved in the City of Vancouver due to the economic conditions,” said Kirby-Yung, asserting the delay would “buy us some good will” with the federal government.

Township of Langley Mayor Eric Woodward said Fraser was “undermining” the local government process.

“This feels a bit like politics to me,” said Woodward in opposition to any amendments to the recommended plan.

“There’s so many people terrified they’ll be out of government in 18 months,” he added.

Board chair George Harvie said he took “great exception” to Fraser’s letter but New Westminster Mayor Patrick Johnstone said delaying the new fees by one year would have little impact and argued it should be done if it means Fraser feels better positioned to lift his ban.

Metro Vancouver CAO Jerry Dobrovolny said a one-year delay would push back project financing by about $100 million but could be manageable.

Dobrovolny explained to directors that the new water and sewer facilities were needed for population growth and if they weren’t done critical services would become disrupted, from firefighters beleaguered by poor water pressure to residents faced with sediment and pollutants in their tap water.

“That growth is coming faster than perhaps what was anticipated,” said Dobrovolny, who also noted the regional government will be waiving an estimated $1 billion for non-market affordable housing projects.

He said the alternative to the new DCC rates is to charge all property owners for the new infrastructure, something he suggested would not be equitable.

Dobrovolny clarified that it is not necessarily new residents paying for the new infrastructure but those who buy newly constructed homes.

Richmond Mayor Malcolm Brodie spoke in favour of the DCCs.

“Every time you talk about a DCC we get the same input from industry; it’s all doom and gloom and you’re challenging affordability. I don’t think it has anything to do with affordability I think the market sets the rate. We are talking about development profits based on the market,” said Brodie.

Brodie is among the longest serving Metro Vancouver directors.

The new DCC rates were proposed in 2021 at a time Metro Vancouver hadn’t even been collecting fees for new water infrastructure.

In December 2021, Brodie said the lack of DCCs for new infrastructure wasn’t for lack of political will; instead, “​​it’s just one of those things.”

As such, a dearth of capital reserves at the regional level had been building for decades and even with the new construction fees existing taxpayers are set for a big hike in the coming years: regional taxes will increase by 12 per cent, 11 per cent in the next two years and a projected five per cent each of the following three years. The Metro Vancouver portion of an average household will rise from $623 this year to $854 by 2027 (lower than prior projections of $1,023). These new rates will pay for a $22.9-billion bill for upgrades by 2050.

Metro needs to build 90 kilometres of new water transmission mains, two new in-system reservoirs, two new pump stations and a new source water intake treatment facility. Ten new sewer facility projects are earmarked as well, according to the Oct. 5 staff report.

A presentation from Sonu Kailley, acting director of financial planning, shows the region needs to raise $11.5 billion for growth-related capital projects. Two years prior the bill was $8.1 billion. The report does not provide detailed breakdowns nor explain the $3.4-billion difference.