Fumbled

Building permits issued: Comparing the trend in the development of new homes in the County, Quinte West and Belleville. New home building has been lumpy but steady in both neighbouring markets. But in Prince Edward County the trend has been steadily downward.

The County’s troubled experience with development charges

For a decade the County avoided development charges while other jurisdictions were busy collecting money from this bustling sector to pay for future infrastructure needs. But then, just as a deep recession began to grip the globe, the County hurriedly adopted some of the steepest charges in the province. The local residential building market collapsed.

This was bad, because about 95 per cent of the taxes paid in the County are funded by homeowners. Not industry. Not business. For a decade, new homes meant an increasing tax base and a greater number of residents to share the growing infrastructure bills.

But with fewer new homes being built each year since 2008, the burden on existing ratepayers is growing.

One example.

Picton needs to see at least 20 new homes built each year just to keep up with the assumptions built into its waterworks rates. Last year just three new homes were built in Picton. Meanwhile waterworks costs— and a vast assortment of other costs— continue to rise. This means we all must pay more.

The assumptions and calculations used to arrive at a set of waterworks rates aren’t artifacts of rosier era. They were established less than three years ago. But the market for new homes across the County has collapsed since then. Sadly, the decline was already well under way—more disturbing, it was predicted.

In 2008, worldwide credit markets froze in panic as global financial institutions crumbled. The ensuing damage resulted in a deep and broad-based recession. Many economies continue to struggle five years later to regain their footing.

In a case of really poor timing, Prince Edward County chose this moment in time to adopt development charges. Put off for a decade, the County ham-handedly imposed some of the highest development charges in the province. Overnight.

The local building industry howled in protest. They warned the County it was a mistake. The County was putting a critical sector at risk at a time when the industry was weak and unable to sustain such an increase.

Builders warned that not only would construction jobs evaporate—the accompanying growth in the residential tax base would also dry up. The costs of municipal services would increasingly be borne by the existing ratepayers, they cautioned.

Council refused to heed the advice—which they viewed as self-interested griping by builders seeking to avoid paying more in fees. Councillors argued that $7,000 development charges wouldn’t disrupt the sale of a $300,000 home.

Two years later, with the recession now at its deepest, Council went even further—imposing hefty water and sewer connection fees on the building industry—$10,695 in 2013 rising to $14,260 in 2015—for every new home on water and sewer service.

In just under two years the County had become one of the most expensive places to build in this part of Ontario. Amidst a profound recession.

Moreover, builders were already grumbling that it took too long to navigate the approvals process in the County. They said other communities were more welcoming and helpful. For many, a steep increase in fees was the last straw.

One of the region’s larger and influential builders, Hilden Homes, has stopped looking for opportunities in the County. As president Eric Den Ouden explained in 2011, “We are putting our capital to work in Quinte West and Belleville. 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 in the County.”

But neither the message nor the numbers appear to be reaching County council and its advisors. Council listened last week to a report from consulting economist Andrew Grunda in which he proposes pushing development charges even higher. So high, in fact, that in two years the County would become the most expensive municipality in terms of development and connection charges of 19 surveyed in his study.

SHRINKING SECTOR
Unlike 2008, when a large cast of builders came to Shire Hall to voice their worries, just two were present last week. One of these—Graham Shannon of Sandbank Homes—represents one of the last developers still building homes in the County.

For the bulk of the homes he builds, the proposed increase means a 52 per cent hike in the devolopment charges he pays—a move he says ignores the depressed reality of the County housing market.

Shannon explains that the County competes for building jobs and the tax base with neighbouring jurisdictions that he says have three important advantages.

“The fees are lower and predictable; they offer a smoother and more predictable development process; and they appreciate the contribution this industry brings to the community.”

Shannon illustrated for council that while County new home starts were in freefall for the last five years, Quinte West and Belleville have maintained a steady market for new homes.

“Prince Edward County fumbled the ball,” explained Shannon. “We are lagging and falling further behind.”

Shannon presented correspondence from other prospective builders that cast a doubt about any prospect for a return to growth. Kelvin Whalen of Kaitlin Homes wrote that “the increase in soft cost gives us pause.” Kaitlin has proposed building as many as 370 new homes in the County but now isn’t so sure. “There isn’t enough comfort right now for us to move forward,” wrote Whalen.

Picton Councillor Brian Marisett wasn’t buying the concerns. He says other factors are hurting the building industry, not just development and connection charges. His comments were parroted by Athol Councillor Jamie Forrester, who argued that rising land prices were contributing to the decline in the building market.

Shannon acknowledged that there isn’t just one single factor repelling builders from the County market, but rather a combination of factors including the region’s highest fees; a cumbersome, unpredictable approvals process; and a less than welcoming attitude at Shire Hall.

“We need confidence and stability,” said Shannon. “Otherwise builders will stay away.”

But it is not clear council is ready, despite five years of decline, to hear these messages. Shannon is pessimistic about whether his message will be heard any better in 2013 than it was in 2008.

“How do you expect a different outcome after you raise charges by more than 50 per cent,” asked Shannon.