Slippery slope

No bottom in sight for new home construction in the County

Fewer new homes are being built in Prince Edward County now, than since records were established back in 1999. In the first six months of the year just 33 permits for new homes have been issued, putting the County on track to build just 66 new homes in 2011.

This is sharp pullback from a decade in which the County saw on average more than 120 new homes constructed every year. Since 2007 the bloom has wilted steadily— from 155 new homes built in 2007 to just 78 last year and even fewer projected to be built in 2011. In fact, the data signals the decline may be accelerating. By this point last year 57 new home permits had been issued— in the first six months of this year just 33 permits for new homes have been issued.

But the building collapse in the County goes beyond new homes—home additions are also down sharply, as is new farm construction—just two permits were issued for farm buildings in the first six months of this year.

Perhaps the only glimmer of life in the numbers released by the chief building official’s office this week is that cottages and renovations continue to keep local trades with some work.

Renovation permit numbers are holding steady suggesting folks is choosing to remodel rather than build new. Seasonal dwelling building permits are also up in 2011 likely due to the build out of a large cottage development on East Lake.

According to builders, realtors and tradespeople a combination of factors are contributing to the steep decline. The recession that led to the pullback in the province and more generally across North America likely played a role but does not adequately answer the question. Mortgage rates remain at record low levels and regional builders remain busy in Quinte West and the Kawarthas and the Durham region.

So what has happened in Prince Edward County?

In 2009 the municipality introduced development charges, which in 2011 means an additional $7,382 charge to the building permit of a new single detached home. Last year the municipality standardized connection charges for homes that receive municipal water and sewer services.These can add another $7,100 to the building fee depending on services available. Taken together the new fees rank the municipality higher in the general ballpark with the fees charged in many parts of Ontario—but they are well above comparable rates charged in this region—including Quinte West, Napanee and Belleville.

In January the County’s Planning department hiked fees in some cases doubling the charge for services. A severance or consent application increased fro 800 to 1,500. A site plan agreement application has risen from 1,000 to $1,500. An official plan amendment application has jumped from $1600 to $$4,000.

Sandbank Homes is virtually the last builder of scale still building new homes in the County. Graham Shannon, a principal in the firm, says the increase in fees has had a clear impact on his business.

“I think the cumulative effect of all these cost increases does impact decisions by developers on where to invest and risk their capital as it makes new homes more expensive and less attractive to buyers,” said Shannon. “I think it is one of the contributing elements to the reduction in activity.”

He says Sandbank Homes has reduced the number of lots released in the latest phase of the Welbanks subdivision in Picton.

“It is just not feasible to service too many lots and risk carrying them” said Shannon. Other builders have all largely abandoned the County for those greener pastures since the introduction of these new charges.

FEES ARE SACRED
Municipal officials have cautioned council as recently as this spring not to tinker with these charges—that it is a much needed revenue source and arguing that prospective buyers weren’t likely to balk at an additional $14,500. That prediction has proved to be hollow as each year sees fewer homes built than the year before.

The single-minded focus on these one-time fees may be clouding the bigger picture. If building had remained flat since 2007 about 100 more new homes would have been constructed in the County than were actually built. Assuming each paid a property tax bill of about $2,000—the implication is that the County must do without $200,000 in annual property taxes it might have otherwise received— or put another way about one per cent of the annual tax levy.

Meanwhile the municipality is taking in much less development and connection fees than it had anticipated which adds to the burden of the general taxpayer.

UNCERTAINTY ON THE HORIZON
Others attribute at least part of the collapse of the new home market and the decline of the home resale market to the imminent arrival of industrial wind turbines in the County.

Realtor Elizabeth Crombie addressed council last week saying that she and her fellow colleagues are losing sales once prospective buyers learn that dozens of developers have plans for hundreds of massive 40 storey industrial wind turbines across the County.

“The beautiful nature of this place has been attracting many people from both way and bringing back family members,” Crombie explained to the committee of council. “They like this special feeling of family and home. But lately people are expressing to us loud and clear that what we have we should preserve—and if we don’t—they won’t be coming back.”

FIRST, STOP THE BLEEDING
So what is to be done?

The municipality has no power over industrial wind factories being erected in the County. Perhaps a provincial election this fall will provide more certainty. Local government can, however, take steps to ensure the County’s cost structure is in line with surrounding communities.

“A reasonable relationship of costs to revenues needs to take place to ensure development costs and the tax burden to community residents is as low as possible to ensure competitiveness,” says Graham Shannon. “I think the current Mayor has a better appreciation of this.

“Going forward I think we all benefit from additional volume of new home sales. I think directing a portion of our economic development resources toward marketing our area as a great retirement destination would have a positive impact in this area.”

FAR REACHING IMPACT
The collapse in new home construction doesn’t just have an impact on builders and trades. Many County businesses rely on new arrivals to buy their goods and services

Furthermore County’s demographic is fragile. As an older community it relies on new arrivals to replace those who pass on or move away to be closer to family or health care services. Some folks worry that with 66 new homes the County may not be fully replacing all those it loses.

If indeed the County the decline will be felt even more widely.