B.C. Housing Minister Ravi Kahlon on Wednesday announced a change to provincial policy that will give developers more time and flexibility to pay developer fees to municipalities.
In an effort to boost housing starts, the provincial government will amend developer fee regulations so that starting in January developers can use “on-demand surety bonds” as financial guarantees, said a July 2 media release.
These bonds, already in use in Vancouver, Burnaby and Surrey, do not restrict developers’ access to capital, unlike “irrevocable letters of credit” that are currently used in other B.C. communities, said the release.
By expanding surety bonds provincewide, and by giving developers four years to pay the charges instead of two, Kahlon said the measures will “get shovels in the ground faster.”
“This will improve the viability of housing projects as homebuilders can invest in new housing projects sooner,” said the ministry’s release.
“Lower carrying costs will also help unlock more housing developments that need additional capital.”
One developer reacted positively to the ministry’s announcement.
Terry Hui, CEO of Concord Pacific Developments Corp., said the industry is under pressure from multiple directions, including rising costs due to tariffs, weak presale activity, lower immigration, a lack of rental investors, high interest rates and tightening credit.
“This is a good initiative from the minister of housing to support new housing starts,” Hui said in a Wednesday statement.
According to the ministry, developers must currently pay a minimum of one-third of the total charge when the subdivision or building permit is approved, and the full amount within two years.
Under the new system, they will be able to pay 25 per cent at permit approval and the remaining 75 per cent at occupancy or within four years, whichever comes first.
“This policy will help, especially as financing becomes harder to secure. It’s particularly important for smaller developers who don’t have good access to capital,” Hui said.
Anne McMullin, president of the Urban Development Institute, says the requirement to pay development fees upfront has become increasingly onerous for builders, especially as fees rise and access to capital tightens.
"By shifting payment to occupancy, the provincial government is enabling more projects to move forward," she told a news conference on Wednesday.
In June, Vancouver-based Wesgroup Properties president Beau Jarvis said in a post on social media that the company had to lay off employees in what was a reflection of the broader realities facing the industry, with housing projects across the country being cancelled or delayed because they are no longer viable.
Jarvis said they were also delivering homes that people couldn't afford to purchase.
"I will say it again — This is a cost-of-delivery crisis," he said on LinkedIn.
—With files from The Canadian Press
