Researching this blog I discovered most developer subsidies are hidden through a blanket developer charge that neither reflects the city’s actual costs nor does it achieve any of the city’s stated policy goals. As the development charges are currently structured it is costing London and other Ontario cities more than they bring in as revenue.
The current system is unsustainable economically and environmentally; it encourages negative, low density growth patterns, consumes more of the city’s scarce resources every year, increases pollution, increases public debt, increases traffic, increases healthcare costs and reduces the city’s flexibility within its budget. While all the negative aspects of development subsidies increase negative and undesired things it also makes the desired developments more expensive and less likely to be achieved. To be a sustainable city every development should be charged full costs, including replacement and maintenance costs on a per square meter basis. Making greenfield sprawl unattractively expensive.
Part of why the current system is unsustainable is the opportunity costs that result from developer subsidies. London’s economy is stagnated because these subsidies hold the city to a single, increasingly inefficient economic model. Low density is high infrastructure which eats away at the city’s ability to innovate, experiment and protect itself from disasters or emergencies. The city’s transit and living options become skewed to a lifestyle that is increasingly expensive and undesirable.
By subsidizing the lowest density that is the furthest away from city services and affordable areas is highly unfair. Established areas having to cover the costs of new areas in property taxes or water bills hits the most vulnerable in their rent leaving little left for food. Homeowners in established areas end up paying for new road surfaces while their street is neglected and crumbling, which reflect in the lower sale price of the house. Instead of the cost of the new neighbourhoods infrastructure being in the original purchase price it gets hidden and passed onto subsequent owners in their higher tax/water bills. Like most subsidies developer subsidies get passed through regular people onto those who don’t need it.
When such subsidies get entrenched, as these have, removing them becomes difficult, the few who benefit will use every means available to prevent change. Developers who would come and invest without subsidies are kept away by the unlevel playing field, leading to a city being held hostage to a developer oligarchy. A “pro-jobs” cabal could form to run council to protect developers’ narrow interests from market forces. London having such a massive infrastructure burden exposes it to the corruption seen currently in the Charbonneau Commission’s hearings, follow Monique Muise on twitter for updates. Smugly and arrogantly thinking it can’t happen in Ontario helps those who want to commit such acts.
A switch to a full cost per square meter development charges, combined with zoning for mixed used sustainable density and a BRT that can become LRT as population warrants will be a more positive move for London. Ending the developer subsidy this way would free city resources up to have bigger emergency reserves, disaster mitigation funds, hire enough civil servants to serve the public, reduce the amount of infrastructure the city needs to maintain, renew old neighbourhoods, reduce potential budget shortfalls, and prove to the world London isn’t a lethargic 20th Century city.
The current subsidies to developers is holding London back. The quick research I did shows only direct income subsidies ever achieve the desired goals. A few locals have been putting together a pilot proposal for one. Yesterday’s post has some links for further reading about subsidies, here are a few more:
- Economic Cost of Fuel Subsidies
- Why Development Fees Matter
- Development Charges Across Canada: An Underutilized Growth management Tool
- “Re-Tooling” Development Charges into a sharp effective, revenue tool
- The Opportunity to Manage Growth Sustainably