In the February 17 column, we can read that development royalties “make developers scream, but […] should delight citizens, environmentalists, urban planners and taxpayers”.
As part of all these categories, we would like to point out our strong disagreement with the preconceived ideas that circulate about development royalties. It should be remembered that an unprecedented housing crisis is currently raging and that this is generating poverty, distress and negative externalities for society.
When we read: […] making growth pay for growth, agreeing to pay the real costs of urban development, that’s what we should have done a long time ago”, we answer: unfortunately, yes!
For 60 years, growth was not self-financing. Real estate developments subsidize aging infrastructure that has benefited residents of the previous generation of previous real estate developments. Over decades, municipal budgets then turn red. This widespread mechanism in North America is rightly compared to a Ponzi scheme by some thinkers, including those at the think tank Strong Towns.
The suburbs of Quebec have developed with monofunctional bungalow neighborhoods with streets wide enough for three fire trucks without ever calculating the cost of these assets over their life cycle. The municipal fiscal imbalance has been the subject of discussions between the cities and the province for decades. It becomes easy to grant cities the power to demand a development fee. It’s called shoveling the problem into the neighbor’s yard.
For new households, today, interest rates are at their ceiling, the Canada Mortgage and Housing Corporation (CMHC) is constantly tightening the rules, purchasing power is falling, all budget items are suffering inflation, the social safety net has crumbled, all in a context of an aging population. Now, we are making housing unaffordable, both for rent and for purchase. However, housing is a basic need, a fundamental good.
We remember that according to the CMHC, we should build 620,000 additional housing units in Quebec by 2030. To achieve this, we would have to double the pace of construction, we were told in 2022. Hell is paved with good intentions, the saying goes.
And if we want to put the promoters on trial, it should be mentioned that they are not all equal and that all projects are not profitable at the same level. This job comes with taking risks and responsibilities that few individuals could tolerate. As proof, if it were a cakewalk, the public sector would have built the long-awaited social housing long ago. The goal is not to cry over the fate of developers, but to be aware that by requiring a REM contribution, a fee, an assignment for the purpose of parks or parking, the construction of infrastructure while requiring architectural quality , zero emissions, etc., it is logical and expected that all of these costs influence ultimately the affordability of new housing units.
Also, density is taxed while the corpus of good practices in urban planning indicates ease. As a reminder, building dense and compact is already an environmental gesture even if the building is not certified green organic gluten-free herbal tea.
Another element to keep in mind is that the addition of financial constraints favors large promoters with large capital. Very quickly, we could see the emergence of a real estate oligopoly. What is generally not profitable for the citizen reduced to the role of consumer.
Previous generations sailed by sight of the nose and with empty talk about climate change that current generations inherit against their will. For the question of housing, it’s the same thing, the future impacts will also be very real.