Please find attached a…

Please find attached a letter from Halton Region and endorsed Staff Report regarding the proposed Bill 134.

Halton Region has a shared objective with the Province and its Local Municipalities to
advance housing supply and support the Local Municipalities in meeting their housing
pledges by proactively planning for, financing and delivering infrastructure. Regional
Council has committed to support the planned growth, while protecting its taxpayers from
the financial impact of growth.

Regional staff do not believe that discounting or reducing DCs is an appropriate
incentive to encourage affordable housing ownership/rental particularly in a high growth
municipality. These restrictions on DC collections could result in higher property taxes
and/or the delay of key infrastructure thereby potentially impacting existing property
owners’ affordability and delivery of new housing required to achieve the housing
targets.

With no alternate funding sources provided by the Province, the proposed changes will
result in significant financial impacts to the Region. Providing financial assistance to
promote affordability is better suited to be administered through grant/incentive/rebate
programs as it would allow the Province with greater flexibility to alter terms and
conditions, gives the opportunity to monitor progress and ensure the incentives are
targeted to the residents based on their economic circumstances.

On October 18, 2023, Regional Council endorsed Report No. FN-42-23/CA-12-23. A
summary of the report and the Region’s submission to ERO #019-7669 are outlined below.

Bill 134 – Regional Municipality of Halton Submission (ERO# 019-7669)

Bill 134 proposes to amend the definitions for “affordable” (for both rental and ownership)
and “Affordable Residential Units Bulletin” for the purposes of exemptions from
development charges (DCs) under the subsection 4.1 of the Development Charges Act,
1997 (DCA). The Bulletin is not yet available. Without understanding what is in the
Affordable Residential Unit Bulletin it is not clear what the ultimate financial impacts could
be resulting from Bill 134 as it is unclear what methodology (e.g. data source and timing)
will be used for the Bulletin that will be released by the Minister, thus making it extremely
difficult to provide an informed submission. However, potential impacts were prepared
based on 2022 new residential unit sales in Halton and could result in approximately 40%
of all new units (made up of primarily apartment units) being exempt from DCs. The
estimated loss in revenue would amount to more than $1 billion, over a 10-year period,
based on Halton’s 2022 DC Update.

Significant considerations include but are not be limited to:

- This proposed legislation does not ensure that the “affordable housing” created is
being occupied or purchased by the residents that actually have the need for
affordable housing.

- The “Affordable” definition changed from 80% to 90% of the average purchase price;
however, it is not clear how this increase is justified.

- It is unclear what factors will be used by the Minister to calculate housing
accommodation costs (i.e. mortgage rates, interest rates, inflationary increase,
amortization periods, down payments, taxes, utilities) and how that relates to the
Minister setting the purchase price or rent.

- It is not clear what data source the Affordable Residential Unit Bulletin will utilize to
justify the affordability variables; however, it is important that the sample size and
integrity of the data be statistically reliable to avoid data anomalies from unjustly
skewing financial incentives.

- It is unknown if the Bulletin will consider categorizing unit types and sizes. In the
absence of unit categories, there is potential that the majority of smaller units could
be exempt and affordability across the spectrum is not achieved. Bill 134
Affordability Approach may be focused on increasing the supply of the least
expensive types of units such as smaller studio or one-bedroom apartment units
rather than incentivizing the Development Community to build a range of unit types
that can accommodate for the “missing middle”.

- Unit costs generally vary based on neighborhoods not necessarily at the local
municipal level or Regional level. As such the geographical location will be an
important consideration for the Province to understand each time the Bulletin is
updated.

- Further, the frequency of Bulletin updates is important as it needs to be reactive to
changes in market conditions. An outdated Bulletin with appealing values could
attract lots of development which could have unforeseen impact on development
financing.

 Market conditions can vary widely, which could impact both the market-based
and income-based approach to calculating the purchase price. For example,
for every decrease or increase in the interest rate, it can have a potential
impact on the purchasing power of ownership homes by about + or - 2.8 per
cent, respectively. If the market conditions change more frequently than the
Bulletin, the purchase price thresholds may not reflect the most current
conditions.

- The Development Community will be incentivized to reduce the purchase price of
their units, which they may recoup through other means. For example, there could
be a significant increase in the amount and cost of “upgrades” like kitchen, fixtures,
finishes and flooring outside the purchase and sale agreements.

- Legislation requires Developers to confirm that their intent is to build affordable
housing. However, given the affordable housing criteria focuses on the purchase
price/rental price it will not be possible for the Developer to demonstrate that they
are in fact affordable housing units until the end of the Development Process. What
happens if the Bulletin changes from the time of intent, timing of DC charges and
purchase/rental?

- Housing prices are largely market driven with an incentive for the industry to maximize
profits and given the exemption mandated by the DCA, which will be recouped directly
by Developers it is not clear if the savings granted will ultimately be passed onto future
homeowners. This is especially important when the affordability requirements are tied
to future sales. The owners need to realize the saving as they are the ones that are
at risk of paying back DCs if in default in the future.

- The DCA notes that a development must continue to meet the definition of “affordable”
for 25 years for the exemption to apply. A local municipality may enter into
agreements to ensure compliance.

 -This would necessitate the need to register on title to ensure future buyers are
aware of the financial terms and conditions. In the event that affordability is no
longer met the new owner would be required to reimburse the municipality for lost DCs. This could
become an enormous administrative challenge for both the Municipalities and Land Registry Office.

 -The affordable rental units would be required to submit rental agreements and
yearly rental rates for every unit to ensure that the Bulletin threshold is met.

Bill 134 does not connect the benefit to residents in need of affordable housing and
therefore is not meeting the objective of affordability. Even if it was successful in
incentivizing housing, the type of unit may not be desirable in a specific municipality and
will not likely incentivize the missing middle.

As part of Bill 23 (More Homes Built Faster Act, 2022), Social Housing was removed as
an eligible DC service, which already impacts the funding available to support the
Region’s most vulnerable. This new legislation, Bill 134, if approved, would further
reduce the DCs generated and will result in significant shortfalls. Absent of support
from senior government levels, municipal taxpayers, including the most vulnerable,
should expect to assume this funding shortfall through municipal tax increases and user
rate increases in order to pay the necessary infrastructure to support growth. Higher
property taxes in turn would affect housing and business affordability, which would be
counter-intuitive to the goal of creating more affordable housing options.

Halton recommends that subsection 4.1 be removed from the DCA and that the
Province provide financial assistance to promote affordability through
grant/incentive/rebate programs that be administered by the municipalities. A grant
program also provides flexibility to alter terms and conditions if objectives are not being
met, financial capacity is too burdensome or resident’s economic circumstances
change.

Should the Province proceeds with the Bill 134 changes, it is requested that
consideration be given to:

1. Precluding the impact to water and wastewater DC’s, which are strictly tied to
capacity and infrastructure delivery and therefore should not be included in the
exemption.

2. Providing exemptions only to Affordable Rental units and not Home Ownership
units, which is consistent with the Federal Government GST rental rebate.

3. A guarantee on a yearly repayment from the Province to municipalities for the full
shortfall in DCs the new legislation would generate.

The DCA is an important tool for Halton to recover growth-related costs in order to provide
infrastructure in a timely way to support growth and more importantly support the
Provincial Growth Plan.

If you have any questions or concerns regarding our submission or the DCA, Halton Region
would be pleased to meet to review and discuss.

Halton Region
Commissioner of Finance and Regional Treasurer