Tories discover it’s hard to keep both cities and developers happy

ANALYSIS: The government promised major changes to how cities force developers to pay for community benefits. Now it wants more time
By John Michael McGrath - Published on Mar 02, 2020
Premier Doug Ford (left) and Steve Clark, minister of municipal affairs and housing, attend a press conference in September 2018. (Fred Lum/CP)

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This is the first in a series of articles accompanying TVO's documentary series The Housing Gap.

The government made two major housing-policy announcements on Friday. The details of what, exactly, the government is doing and proposing to do are important, and we’ll get to those in a minute. But sometimes the most notable thing a government does is kick the can down the road: that may not tell us much about which policy elected officials will actually implement, but it will give us a sense of how they’re approaching the politics of tough files.

Well, the Tories have kicked (one) can (a little) down the road, and it’s a pretty important one. Last year, the government’s major housing bill, the More Homes, More Choice Act, removed Section 37 from the Planning Act — a bit of legalese that municipalities have long used to negotiate such community benefits as parks and public art, or simply cash from developers who are seeking permission for more and taller buildings. Toronto alone has collected hundreds of millions of dollars over the last decade in Section 37 money, overwhelmingly in the fast-growing downtown core.

Queen’s Park now wants municipalities to transition to a new system it’s calling a community-benefits charge. Instead of being negotiated on a project-by-project basis, as Section 37 agreements are, a charge would be calculated based on a standard formula for a certain percentage of the land value of a new development. Builders want the clarity and speed of a formula, but the government promised that municipalities would be kept “revenue neutral” — that is, they wouldn’t lose out.

Fast-forward to last week, and it turns out that it’s actually pretty difficult to keep both municipalities and developers happy. So difficult, in fact, that the government is asking for more time. When it first proposed to switch municipalities over to the new CBC system, the deadline was going to be January 1, 2021. The new deadline, posted on Friday, is vaguer: the new regime will come into effect one year after the regulations are finalized. So it won’t be immediate — because the other thing the government did Friday was make substantial changes to what municipalities would, and would not, be allowed to pay for with community-benefits charges.

One of the basic objections that municipalities raised to the new community-benefits-charge system was that, while it makes sense to make land values pay for some amenities — most notably, the land costs for parks — other community services aren’t as affected by land values. Things like arenas and libraries don’t get much cheaper to build once you get beyond the stratospheric land costs of downtown, but they’d get less money under a community-benefit-charge regime. So the government is going to let municipalities pay for those with conventional development charges — which aren’t tied to land values and which municipalities can revise on a five-year schedule.

To summarize: the government made a proposal; municipalities made reasoned, substantial recommendations for changes; and the government seems mostly to be listening and is giving municipalities time to digest the newest version. It’s actually a decent case study in how government is supposed to work — and Minister of Municipal Affairs and Housing Steve Clark continues to be a low-drama cabinet minister (something you can’t say about everyone currently holding a portfolio in Doug Ford’s government).

Which isn’t to say that there won’t be speed bumps. Much depends on what “revenue neutral” ends up meaning when the final rules are in place. Most Ontario municipalities haven’t had the same Section 37 windfall that Toronto has; the new rules could be revenue neutral for them but leave Toronto short. The opposite scenario would see Toronto kept whole while homebuilding gets more expensive throughout the province — the opposite of what the government wants.

So it’s complicated. It was always going to be complicated. And it’s entirely possible that the new system won’t be in place for much more than a year before the next set of provincial and municipal elections make it a political hot potato, like so much of the government’s agenda.

Here, at least, the Tories have something going for them: if they’re honest, plenty of provincial and municipal politicians who aren’t Progressive Conservatives also had no love for the old Section 37 system, and they haven’t shed a tear over its demise. The Tories may not get any thank-you cards for winding it down, but it’s unlikely that anyone will try to bring it back, either.

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