Community Benefits Charges: Existing Rates and Upcoming Changes in the More Homes Built Faster Act, 2022

November 9, 2022 | Thomas Sanderson, Justin McLarty, Jesse White, Safa Bajwa

Miller Thomson’s article of November 2, 2022 addressed the nature of Community Benefits Charges (“CBCs”) and their relationship with the updated development charges and parkland dedication regimes. This article will discuss the calculation methods adopted by municipalities with CBC by-laws, and the changes anticipated in the More Homes Built Faster Act, 2022 (Ontario).

Maximum amounts and incoming changes

In their CBC strategy documents, certain municipalities have anticipated that the cap in the new section 37 regime will lower municipal revenues for development-related costs overall, requiring municipalities to make up capital costs elsewhere.

Most CBC by-laws enacted to date impose the Planning Act maximum, which is presently 4 percent of “the value of the land.” The recently announced Bill 23 (More Homes Built Faster Act, 2022) will impose a more specific and restrictive CBC maximum, which will not apply to the entire property, but instead in proportion to the floor area being developed. The planned wording is as follows:

37(32) The amount of a community benefits charge payable in any particular case shall not exceed an amount equal to the prescribed percentage of the value of the land, as of the valuation date, multiplied by the ratio of “A” to “B” where,

    • “A” is the floor area of any part of a building or structure, which part is proposed to be erected or located as part of the development or redevelopment, and
    • “B” is the floor area of all buildings and structures that will be on the land after the development or redevelopment.

The “prescribed percentage” is set out in regulations. The present amount of 4 percent will be subject to change by the Province.

Alternative calculation: Unit rate

The City of Burlington’s CBC by-law foregoes the maximum rate and instead imposes a rate per dwelling unit: $488 for apartment units with two or more bedrooms, and $362 for bachelor and one-bedroom units. At its rates, Burlington’s total CBC amount on any given development is likely to stay well below the statutory cap. (By contrast, Toronto’s maximum rate has been estimated to impose a city-wide average of $5,704 per unit.)

Municipalities that follow Burlington and impose CBC rates on a per-unit basis will need to consider the non-residential capital costs of mixed-use developments. Where a high per-unit rate appears to exceed the provincial maximum for a particular development, the developer will retain the right to make payment under protest and commence an exchange of appraisals under ss. 37(33)-(40) of the Planning Act.

CBCs for multi-phase projects

Municipalities and developers should also carefully consider how CBCs will apply to projects involving multiple phases. The existing CBC by-laws have opted to apply the CBC to each phase of a project, but varying calculation methods have emerged already:

  • Most of the by-laws calculate each phase’s CBC based on the appraised value of the specific area used for the phase.
  • The St. Catharines by-law indicates that on projects with multiple buildings “that will not be constructed concurrently and are anticipated to be completed at different times”, a separate CBC is payable for each “phase”, calculated not merely from the phase area, but based on the value of the full “Parcel or Parcels.”
  • Hamilton’s by-law provides that for projects with non-concurrent construction of multiple buildings, the CBC applying to the first building is based on the value of the full conveyable parcel, with later buildings attracting a CBC reflecting the full parcel’s value “minus the [CBCs] payable for the first above grade Building.” (The by-law does not expressly deduct a second-building CBC when paying a third-building CBC, etc.)

The above differences in approach can substantially change the CBC amount for otherwise similar projects. In Hamilton and St. Catharines, some developers may object to paying multiple phase-specific CBCs if each charge is calculated based on lands exceeding the phase area. The exchange of appraisals under section 37 will not settle whether the prescribed percentage of “the value the land” applies to the full parcel in that context, or merely to the phase area. That issue may also persist after Bill 23 imposes a ratio involving developed floor area, since municipalities and developers will need to know what number is to be multiplied by that ratio.

Appeals of new by-laws to the Ontario Land Tribunal may follow in order to clarify the statutory language. The Tribunal’s evolving role in assessing development-related charges is addressed in the next article in this series.

Miller Thomson LLP’s Municipal, Planning & Land Development group is actively monitoring the above developments and are available to discuss any questions or concerns that you encounter navigating the new CBC structure. An upcoming article will address the application of new CBC by-laws to multi-phase projects, and the latest development of the “growth pays for growth” principle, in anticipation of the Ontario Land Tribunal appeals that will need to further clarify the CBC regime.

Disclaimer

This publication is provided as an information service and may include items reported from other sources. We do not warrant its accuracy. This information is not meant as legal opinion or advice.

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