The development cost charge is meant to pay for about 35 percent of nearly $2 billion in infrastructure spending to address the effects of climate change and population growth on the water supply.
By: Michael John Lo
Greater Victoria’s regional water commission is proposing that developers pay for nearly all of the cost of new water infrastructure for future growth in the region.
But critics say a development cost charge for water infrastructure proposed by the Capital Regional District for new developments would add thousands of dollars in costs to every home built, further hampering construction during a slowdown in the building industry.
Mark Holland, a planning professor at Vancouver Island University who is also a consultant for developers, said new projects are already being stalled by rising interest rates, high construction costs and charges levied by municipalities on new buildings, not to mention supply-chain issues.
“Housing projects today basically do not financially work,” Holland said. “The salad days of cities being able to ask developers for whatever they want are long, long gone.”
Gord Baird, chair of the regional water supply commission, said the CRD’s plan to charge a water development cost charge (DCC) for new developments is a “growth-pays-for-growth” policy for housing supply that would avoid further increasing water rates for existing residents and businesses.
Water rates in the CRD are already expected to see double-digit percentage increases starting in 2028.
The increase in water rates — which remain some of the lowest in the country and globally — is meant to pay for nearly $2 billion in infrastructure spending needed to address the effects of climate change and population growth on the water supply.
The proposed fee for new homes, offices and other buildings for the CRD regional water supply would start at $5,087 per apartment unit, $7,914 per houseplex unit or townhome, and $9,044 for single-family homes.
There would also be separate rates for industrial, commercial and institutional buildings such as hospitals and schools.
Depending on building type, the costs would be between $16.96 and $73.48 per square metre.
The fees would be levied starting in April 2027 and would cover 99 per cent of expected growth-related costs for the water supply. One per cent of growth-related costs would be covered by existing CRD taxpayers.
The fee proposal, which had been in the works since 2020, passed with majority support among the 22-member commission, with seven votes against.
A bylaw will be brought forward to the CRD board for consideration in the spring.
The commissioners who voted against included Baird, Victoria Coun. Chris Coleman, Oak Bay Coun. Cairine Green, Langford Coun. Kimberly Guiry, Saanich Coun. Zac De Vries, Sooke Coun. Kevin Pearson and Colwood Coun. Kim Jordison.
Baird said while he supports the new fee in general, he opposed immediately putting 99 per cent of growth-related costs on developers, arguing for a slower phase-in, as recommended by CRD staff.
The CRD is following a similar move by Metro Vancouver, though the charges proposed in the capital region are far lower, he said.
Backlash for Metro Vancouver water hookup fees
In Metro Vancouver, the charge for hooking up new developments to water will rise to $12,223 for apartments and $19,714 for single-family homes in 2027 — much higher than the rate being proposed in the CRD.
The charges were fiercely opposed by Metro Vancouver developers, who argued that they would make housing more unaffordable.
The changes in Metro Vancouver also prompted a rare rebuke from then-federal infrastructure minister Sean Fraser, who delayed awarding more than $140 million in a housing accelerator fund to Surrey and Burnaby for months, citing concerns over the fee increases.
Since then, some of those fees have been waived or subsidized by provincial and federal governments amid uncertainty in the homebuilding industry.
(Housing owned by non-profits, B.C. Housing and similar entities have had a fee waiver in Metro Vancouver since 2010. The CRD said it is investigating possible waivers or discounts for some projects, but has not provided specifics.)
Since the 1970s, Island municipalities have been able to levy so-called development cost charges on builders to pay for costs associated with roads, sewer and water infrastructure, parks and emergency services.
Some municipalities in the capital region, like Esquimalt and Langford, have historically avoided or kept development cost charges low to encourage growth.
The highest development cost charges in the capital region are in Colwood, Oak Bay and Victoria, all of which charge an average of more than $10,000 per unit in various development fees.
Holland said the economics of building apartments have been so tough, the only reason new developments are still going ahead is because Canada Mortgage and Housing Corp. is underwriting bank loans, giving lenders the confidence to issue loans with up to 50-year repayment terms.
CMHC’s influence on the market is so great that after the national housing agency rejigged its funding terms to prioritize rental housing about a decade ago, the development of new condos all but stopped, he said.
“They don’t financially work. So we’re at a time when we need more housing than ever, and the financials on everything have essentially stopped working.”
Construction down in the West Shore
A CRD report said the number of developments applying for hookup to the regional water system in the West Shore — where a DCC for water infrastructure has been in place since 2002 — has sharply decreased, from 110 in 2024 to 66 as of October of this year.
Development cost charges in the capital region typically take off one to three per cent of profit margin for developers, the report said.
The proposed water DCC across the capital region would slightly lower returns, “but not significantly affect overall viability,” it said.
DCC rates for new developments in the West Shore range from $1,573 for apartment units to $2,796 for single-family homes or duplexes.
The rate for offices and institutional buildings like hospitals and schools is $10.48 per square metre of floor area, while the industrial rate is half that.
Leo Spalteholz, a director at the Victoria-based housing advocacy group Homes For Living, said everyone benefits from better infrastructure, and the “growth-pays-for-growth” mindset at the CRD is unfair to people who are moving into new buildings.
If developers slow building in response to the fees, or load the costs onto future homeowners and renters, the costs of shelter would rise, he said.
“Either way, people [will] pay for that. There is no magical cow that pays for infrastructure,” he said.
mjlo@timescolonist.com
