Ontario starts process of auditing municipalities’ finances
The Ontario government has kicked off the process by which it aims to help municipalities find the funding they need to meet the province’s new-home construction goals.
The province announced on July 26 that it has selected Ernst & Young LLP to examine the finances of the City of Toronto, Peel Region, Mississauga, Caledon, Brampton, and Newmarket. The company was awarded the contract to perform the audits via a competitive procurement process. The first phase of the audits is expected to conclude around the end of 2023.
The province says the audits will help provide a clear and shared understanding of the impacts of changes to development-related fees and charges included in the More Homes Built Faster Act.
In an effort to make homes more affordable, the province plans to eliminate development-related charges on affordable housing units and also eliminated charges on non-profit housing units. It has also reduced development charges for family-friendly purpose-built rentals by up to 25 per cent, in order to spur the construction of this much-needed type of housing.
Development charges can continue to be levied on most market housing. The impacts of these changes will be a central area of focus for the audits.
Those changes are a sticking point for municipalities, which depend on revenues from development charges to fund additional construction works, such as roads, water and wastewater facilities, and other infrastructure.
The province’s Housing Affordability Task Force found these charges, which have increased in some municipalities by as much as 900 per cent in less than 20 years, are a significant part of the reason housing costs have increased in many parts of the province and concluded they could create “a disincentive to build housing that is more affordable.”
For example, a September 2022 study by the Altus Group found municipal fees added $116,900 to the cost of an average single-family home in the Greater Toronto Area in 2022, and around $100,000 to the cost of an average condo in the City of Toronto.
Province-wide, municipalities have reported development charge reserves of nearly $9 billion at the end of 2021.
The province’s changes leave development-related charges in place for most types of housing while prioritizing their reduction or elimination for affordable, non-profit and family-friendly purpose-built rental housing.
“This next step in the audit process is a critical part of our work to rein in the soaring cost of housing across Ontario, particularly when it comes to affordable, non-profit and family-friendly purpose-built rental housing,” said Municipal Affairs and Housing Minister Steve Clark. “We want to ensure development-related charges and fees are being used in a manner that supports increased housing supply and critical housing-related infrastructure, but which does not unduly raise the cost of finding a home for hardworking Ontarians.”
The province says the lessons it learns from these audits will inform future provincial policies and programs supporting long-term municipal financial sustainability and housing-related infrastructure investments.