Developers asked to pay 25 per cent more to build in Vancouver
The increase will only apply to residential development, but will be double the normal annual increase.
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The City of Vancouver will be asking developers to pay a big increase in development cost charges in order to help cover the extra infrastructure that will be needed to serve a growing population.
In particular, the city hopes to funnel more of those revenues towards affordable housing projects and childcare, as well as starting to fund water, sewer and drainage infrastructure through development charge levies (DCLs).
The skyrocketing cost of land in Vancouver is another factor in this year’s proposed steep increase.
“That affects development, but it also affects the city,” said Randy Pecarski, deputy director of planning. “When the city goes to build a new facility or to buy land, we’re in the same market as the developer. We have to buy the land at market rates and we have to build those buildings based on current construction costs.”
Normally DCLs increase by around 12 per cent every year, which the city calculates using an index that takes into account property values and construction cost. The proposed 25 per cent increase would set the new rate at $15.62 per square foot for high-density buildings and $3.23 for low-density residential buildings.
DCL charges are different than Community Amenity Contributions, which the city negotiates with developers who have applied to build higher density than current zoning allows. CACs are payable on only the added density, while DCLs must be paid on all the square footage.
City staff are also recommending changing the way the money is allocated: giving more DCL funds towards housing and childcare, and less to parks, which is sitting on a $110 million DCL reserve. The housing allocation will rise from 32 to 36 per cent, childcare will go from five to 13 per cent, while parks will drop from 41 to 18 per cent.
As several large-scale developments have been approved, such as Oakridge and Northeast False Creek, landowners have dedicated tracts of land to the park board to the used as parks, and so the parks board has not had to use as much of their DCL reserve to purchase land, Pecarski said.
Because of the rate increase, the park board will still receive around the same dollar amount from DCLs.
As part of its new plan to address the very high cost of housing in Vancouver, the city wants to make more city-owned land available to non-provide housing providers to build and operate housing. The new buildings will be a mix of subsidized low-income apartments as well as units rented at close to market rates.
The proposed DCL increase goes before council next week. While an economic analysis showed the increase won’t negatively effect development of residential buildings, it did find the increase would dampen commercial and industrial development — so city staff are only recommending an increase for residential development.
Staff are proposing the residential increase be phased in over one year, so existing projects in the permitting process do not have to pay the unexpected cost of the larger than normal increase.