Question #1: Do municipalities (and therefore taxpayers) subsidize development and if so, how does that work?
Local governments across the Province subsidize development through a Development Cost Charge ‘assist factor’ that is levied for new development. The assist is stipulated at 1% by Provincial Government statute but local government policy determines the actual assist provided in that particular jurisdiction (in this case The City of Kelowna) and it reflects, generally, the degree to which that jurisdiction wishes to support/encourage growth. In Kelowna, developers pay 90-100% of the capital costs of new infrastructure related to new development.
Question #2: What do Development Cost Charges (DCCs) collected from developers by municipalities pay for?
Development Cost Charges are intended (by law) to pay for major infrastructure that benefits multiple developments within a given area, reflecting the impacts of the increased demand that will accompany the new development. By legislation, DCC’s can only be used for certain types of new infrastructure. Replacement costs and operating and maintenance of infrastructure cannot be paid for through DCC’s and is paid for through general taxation.
Question #3: How much development can the Okanagan Region sustain?
Provincial, regional and local government policy (Growth Management Strategy) dictates growth targets based on a range of factors including projected demand, resource availability and sustainability factors/objectives. Developers do not create product for a market that does not exist. Population growth without sufficient new development to accommodate that growth negatively impacts affordability across the spectrum.
Question #4: Could developers solve housing affordability challenges by choosing to charge less for the lots and houses they create?
Unless a project is subsidized by government or otherwise, profit is a business requirement. The required profit margin is determined by financing and is based on a business case analysis. While some projects can earn high profits, like in any industry, many do not. Development is a high risk undertaking with significant upfront capital outlays and uncertainty regarding input costs and end-market dynamics. Financial modeling (the bank) determines what margins are necessary to mitigate the risk.
Question #5: Why do developers often seek variances to zoning bylaws?
Zoning regulations are a blunt, one-size-fits-all tool for dealing with land use options. Every development scenario offers a different set of local circumstances, opportunities and constraints. Variances enable consideration of ‘real-world’ site and area-specific conditions (including neighbourhood preferences) to be factored into the evaluation of a project.
Question #6: What is the Official Community Plan (OCP) and why do developers sometimes deviate from this?
The OCP is a big-picture planning tool with a 20-year time horizon. Although it is updated regularly, it is still a general guideline for managing development patterns and it is unable to account for area and site-specific opportunities/constraints and changes to outside market conditions that will occur over the life of the plan. The ability to amend the OCP, with sufficient technical justification, enables the community to contend with real-life circumstances.
Question #7: How can transportation infrastructure accommodate more growth in a way that does not cause too much congestion?
Developers work within the policies established by local municipalities as they relate to regional infrastructure planning. Municipalities must weigh the costs, benefits and timing of investing in transportation infrastructure in its various forms (ie. roads and/or transit infrastructure). In the case of improvements to transit, population and density thresholds are a pre-condition to viability.
Question #8: How does the development industry contribute to the community in a positive way?
The development industry is responsible for investing in the needed community infrastructure and building the housing and commercial spaces that we all live and work in. The real estate development industry is a key driver of BC’s economy. The industry generates a diverse range of jobs to support each stage of the development process from financing, to construction, to sales, and property management. Development revenues collected by municipalities are reinvested in local communities in the form of new public services and amenities. The economic impact of BC’s real estate development industry is $17 billion in GDP with 107,000 jobs created and taxation impacts of $4 billion in government revenues generated from development.
As a partner in community building, the Urban Development Institute is committed to working with communities and governments to create and achieve the vision of balanced, well-planned and sustainable communities.