Golden goose is dying

2010 saw the lowest new home starts in 10 years

We were warned this could happen.

Last year the building industry warned County council not to “kill the goose.” Local builders and developers cautioned against imposing development and connection charges higher than the surrounding municipalities—fees that would put Prince Edward County out of the market for new homes. Council ignored the advice and adopted an array of new charges that in an instant transformed the County from one of the most attractive places to build, to one of the most expensive.

Today the County, with combined development and connection charges of $14,512 for a typical home, is a far more expensive place to build than any other neighbouring municipality. New home construction the backbone of economic growth in the County over the past 10 years. is grinding to a standstill. The golden goose, it would seem is dying.

This fact is sorely evident in the building data released last week by the County’s chief building officer. Fewer new homes were built in the County in 2010 than in any year since County-wide records were kept. Just 78 new homes were built in 2010—down from 83 in 2009 and about half the new homes built in boom years of 2007 and 2004.

It is not just new home construction that is declining. Fewer renovations, additions and farm buildings were built in the County in 2010 than the year before.

New home builders have largely deserted the County in favour of greener pastures on the other of side the bridges.

Last summer Eric denOuden of Hilden Homes explained to the Times that he doesn’t look for opportunities in the County any longer.

“If it is our choice—we are putting our capital to work in Quinte West and Belleville,” said denOuden. “They are bigger markets and connection charges don’t exist. If I don’t have $15,000 in connection charges it is much easier for me to sell a young couple a home in Belleville and Quinte West than the County.”

The County in 2011 will levy development charges of $7,382 for a new home plus $4,166 for water connection and $2,964 for a sewer connection—a total of $14,512. This is more than three times the fees charged by Quinte West and Napanee, and double those Belleville charges its builders.

Quinte West underwent an extensive study of its rates and charges last summer, using the same consultancy the County employed to calculate at its development charges and connection fees. Quinte West, however, elected not to implement new higher charges recommended by their advisors until it had consulted with the building sector.

“The County is pricing itself out of the market and turns off developers from building in that community,” said denOuden. “If they want to kill industry and if they don’t want locals to live in their own municipality they are on the right track. But if they want to have housing stock for the community who work in their municipality they need to look at additional ways to fix their financial problems.”

Sandbank Homes built almost all the homes in Picton and Wellington last year. Yet they would join their competitors in building in Quinte West and Belleville if their capital wasn’t tied up in the land they own in the County.

“We bought all this land,” said Graham Shannon, a principal in Sandbank Homes. “We have an operating business. We have taken a hit but what can we do.”

Shannon says the prospects for this year aren’t any better than last—if anything they’ve deteriorated further.

“Put it this way—I will be happy if we build the same number of homes as we did in 2010. Our market indicators just aren’t showing this now.”

Shannon says it is simply too expensive and too difficult to build in the County—that buyers are choosing to purchase new homes in Quinte West, Belleville and Napanee.

BARRIERS TO GROWTH

He says the County once had a cost advantage but that council overshot the mark when it introduced development charges and connection charges. He says there is another problem unique to the County.

“There are too many barriers here,” said Shannon. “Why aren’t other builders doing subdivisions in the County? I think they will tell you that there are too many barriers in the County, that it is a grind to get projects approved—it is too hard compared to other municipalities.”

He offered as example a townhome project that has languished in the County’s Planning Department since February 2007.

“Why has it taken four years to get a subdivision agreement,” asked Shannon. “This is land is zoned residential, we aren’t proposing to build these on farmland, or a water course of environmentally sensitive land. I am essentially building within an area where they want building. Yet it takes four years of lawyer, engineering and consulting fees to get to an agreement.”

Shannon says years of delays erode his profit margins, move jobs for trades and suppliers out of the community and rob County residents of affordable homes options. “The one builder that is building 90 per cent of the homes in Wellington and Picton is saying, ‘Our company finds it very difficult to develop property here’.”

BAD ASSUMPTIONS

There is yet another serious problem created by the sharp decline in new home construction in serviced areas such as Picton and Wellington. Rates for water and sewer are set to soar over the next few years as the County grapples with the rising costs of replacing Picton’s waterworks infrastructure. These rate increases are based upon assumptions of 60 new homes built each year in the municipally serviced areas. These projected new homes would generate connection charges and ease the pressure on rates, or so it was assumed. But just 15 new homes were built in Wellington and Picton last year according to the Chief Building Officer’s report— so expected connection charges weren’t collected and the expected additional users won’t be sharing the rate costs.

Shannon was a member of the committee that spent much of last winter and spring reviewing the County’s waterworks to help it determine rates and charges.

“We are not even close,” said Shannon. “We need 60 to 75 new homes each year in order for water and sewer rates not to go crazy—and we aren’t close.”

Some greet the news of a decline in new construction as a positive development—but Shannon cautions these folks to be careful of what they hope for.

“We have fixed costs. If you have 10 people sharing a fixed cost you divide by 10. If 100 people share that cost you divide by 100. The point is that exclusivity has a price. If you don’t want anyone else to come and live here be prepared to pay the cost of this exclusivity.”