City of Waterloo moves forward with plan that could reduce development fees

A new move meant to encourage home building in Waterloo could prompt a reduction in development fees if the city gets support from higher levels of government.

The City of Waterloo could be reducing development fees if they get support from higher levels of government.

On Monday, city council was presented with a report recommending the city apply for the Ontario and Canada Development Charge Reduction Program (DCRP). The program is mean to help municipalities reduce development charges, build important infrastructure and support new housing projects. To be eligible for funding through the program, municipalities must reduce development charges by 30 per cent to 50 per cent or more for at least three years. Development charges are one-time fees that developers pay when they are working on new builds. That money is used to pay for infrastructure, sure as sewer and water services, emergency services and can support other city-run initiatives.

The report recommended council direct staff to prepare an application for the DCRP in hopes of securing 90 per cent of the $11,500,000 cost for the Conservation Drive Sanitary Pumping Station project. When complete, the pumping station is expected to support 2,000 housing units.

Staff would also be asked to put together a DCRP application for a watermain expansion project along Erbsville Road from Ira Needles to Columbia Street. The city would also be seeking to cover 90 per cent of the $4,934,000 price tag.

The remaining 10 per cent for those projects, equaling $1.6 million, would come from the city’s capital reserves.

“We’re going to leverage that into an investment,” Brad Witzel, the city’s financial planning and asset management director, said. “So there’s no immediate impact on water sanitary sewer rates.”

If the applications were approved, the city would agree to reduce 30 percent of all residential development charges, retroactive to March 30, 2026.

However, councillors were warned lowering development charges does not guarantee builders will bring more work into the city.

“It is very difficult for us to say that this will, for sure, lead to the outcomes that the program is aiming to, which is more housing faster,” Witzel said.

Council agreed to move forward with the process and staff will begin working on the applications.

The applications come as developers in Waterloo Region continue to worry about their futures amid a looming water capacity constraint.

The issue stems from severe capacity limits at the Mannheim Water Treatment Centre, which first came to light late last year. While regional recently approved an interim risk management framework to slowly release some water capacity later this year, the local residential construction sector has been left in limbo.

• TIMELINE: Water capacity concerns in Waterloo Region

According to a survey by the Waterloo Region Home Builders’ Association (WRHBA), the ongoing water capacity freeze has stalled more than 5,000 approved homes, idled 1,500 tradespeople, and frozen over $500 million in private investment.

“If homes aren’t getting built there’s a lot of people that are underemployed or not employed because of that slowdown,” said Larry Masseo, policy advisor for the WRHBA.

Masseo said something has to give and is hopeful the charge relief will at least help some local builders.

“Is it enough to move the needle? I don’t know,” Masseo said. “It should in some instances, but it may not be enough for everybody. But certainly, the more we can reduce the price of a new home, the more the market will open up.”

The city has until Friday, June 19 to submit the final funding applications to the DCRP. Successful applicants are expected to be announced in August at the earliest.

Development charge decision reversed

The move represents a reversal of an earlier decision, where City of Waterloo councillors unanimously voted to increase development charges for new homes back in March. At the time, council was told the city’s development charge bylaw hadn’t been changed since December 2019. The change would have meant a developer needed to pay the city $25,201 in development charges to build a single or semi-detached home.

Days after city council made their decision, the federal and provincial government announced plans to spend $8.8 billion dollars to lower municipal development charges. The pledge was included in an agreement called the Canada-Ontario Partnership to Build.

“What’s happened now is the provincial and federal government have come to the table with a grant funding program that ultimately is offsetting that foregone collection to the amount of about 90 per cent,” Witzel told CTV News, the day after the council meeting. “And so that’s a very, very impactful change that wasn’t available to City of Waterloo in March.”