Guide to Changes to the Development Charges Act, 1997
This summary highlights some of the key changes to the Development Charges Act, 1997 as outlined in Schedule 3 of Bill 108. A stated goal of the Provincial Government in introducing these proposed changes is to make housing more affordable and increase the housing supply by lowering and providing certainty about municipal costs and development charges imposed on construction. There is also consideration to providing developers of cost sensitive projects, such as rental and non-profit housing, with an increased certainty of costs and relief with respect to timing of payment of development charges.
Three of the central proposed changes revolve around
- The types of services to be included in development charges
- The timing for payment of development charges for certain types of development, and
- The timing for when the amount of a development charge is determined.
Selected Key Changes
Eligible Service
- A significant change proposed is the repeal of subsection 2(4) of the Act which specified, through regulation, services which were ineligible for development charges. If a service was not enumerated, a municipality could impose a development charge.
- A new subsection 2(4) is proposed which instead specifically enumerates those services for which a development charge can be imposed. If a service is not in this list, no development charge can be charged for it. Soft services for which development charges were traditionally imposed by municipalities, like recreation, library, paramedics and general government, are not enumerated, and therefore, unless prescribed under regulation, will no longer be subject to development charges. However, these services may ultimately be included in the new Community Benefit By-law contemplated under the Planning Act
Elimination of 10% Reduction
- The Bill proposes the elimination of the 10% reduction generally applied to the capital costs of soft services. This 10% reduction is no longer available for waste diversion services for which development charges continue to be exigible.
When a development charge is payable
- The Bill introduces a scheme to defer the payment of development charges for rental housing development, institutional development, industrial development, commercial development, and non-profit housing development until the earlier of the date of the issuance of a permit under the Building Code Act, 1992 authorizing occupation of the building, and the date the building is first occupied where no occupancy permit is required.
- The charge would be payable in six equal annual instalments. Interest may be payable in respect of these payments at a prescribed rate.
- A related amendment is made to Section 52 of the Act applicable to the forgoing types of development which provides that the obligations for payment by a non-party of development charges pursuant to a front-ending agreement are subject to the same rules regarding timing of payment and other obligation in section 26.1.
When the amount of a development charge is determined
- Another key change relates to when a development charge is determined if an early or late payment agreement is not entered into.
- The new proposed section provides for development charge rates to be frozen at an earlier point in time (subject to the payment of interest) including, for example, when an application is made for site plan approval under section 41 of the Planning Act.
- If site plan control does not apply to an application, the relevant date for freezing of the rate payable is the date of an application for an amendment to a zoning by-law under section 34 of the Planning Act.
- If both applications are made for a development, the relevant date is the later of the two applications.
- These sections apply only to applications made after Bill 108 is enacted.
Second Units
- In an effort to encourage the development of additional units in existing structures, new provisions are introduced which would exempt development charges for additional units in certain prescribed existing residential buildings or ancillary structures to existing homes, in the creation of a second dwelling unit in certain new buildings and ancillary structures and the conversion of communal areas to residential units in rental buildings.
- The classification of residential buildings and structures, along with relevant restrictions to this application, will be prescribed in regulation.
Transitional Matters for Development Charges for Soft Services
- A development charge by-law that would expire on or after May 2, 2019 but before a date to be prescribed in regulations will remain in force in relation to soft services generally (all services not set out in section 5(5) as is currently in force) until the earlier of:
- the day the by-law is repealed,
- the day a Community Benefits By-law is enacted, and
- a prescribed date.
- For by-laws which are currently in effect governing soft services, the Act contains provisions requiring that the by-law will be deemed expired in relation to the soft services, on the earlier of the passage of a Community Benefits By-law, and a prescribed date.
- Until such time, the existing development charge by-law continues to apply to development charges which will no longer permitted to be charged under the new legislation.
The changes proposed to the Development Charges Act, 1997 must be reviewed alongside the changes to the Planning Act introduced in Bill 108, and in particular, those provisions relating to the proposed new community benefits authority and the treatment of development charges for discounted soft services. These are described more fully in our guide the changes to the Planning Act.
It is noted that the Province is accommodating further consultation on the proposed changes to the Development Charges Act, 1997, and feedback may be submitted through the Environmental Registry of Ontario, between May 2nd 2019 and June 1st 2019.
A more detailed summary of the key changes is found below:
| SECTION | NOTE |
| Definitions | |
| 1 | Definition added for “waste diversion services” being services related to waste management but not including landfill sites and services, and facilities and services for the incineration of waste. |
| Exemption of additional dwelling units | |
| 2(3) | A development charge may not be imposed if the only effect of an action is to permit the enlargement of an existing dwelling unit or permit the creation of additional units as prescribed, subject to prescribed restrictions, in prescribed classes of existing residential buildings or prescribed structures ancillary to existing residential buildings. |
| 2(3.1) | The creation of one second dwelling unit in prescribed classes of proposed new residential buildings, including ancillary structures, would be exempt from development charges, subject to restrictions that are to be prescribed in regulation. |
| What services can be charged for | |
| 2(4) | Introduces enumerated listing of the only services in respect of which a development charge by-law may be imposed to pay for increased capital costs required because of increased needs from growth. These are water supply services (including distribution and treatment services); waste water services (including sewers and treatment services); storm water drainage and control services; services related to a highway as defined in relevant legislation; electrical power services; policing services; fire protection services; Toronto-York subway extension; transit services other than the Toronto-York subway extension; waste diversion services; and other services as prescribed.
|
| Determination of development charges | |
| 5(1) | Amends paragraph 4 of this section relating to the determination of development charges. In calculating an increase in the need for service attributable the anticipated development for a service, an estimate is no longer restricted to exclude an increase in the need for service after the 10-year period following the preparation of the background study.
Paragraph 8, stating that certain capital costs must be reduced by 10 per cent, is repealed. |
| 5(3) | With the deletion of the ability to charge development charges for library services, the ability to include materials acquired by library boards as capital costs has been repealed. |
| 5(5) | With the repeal of the 10% reduction in section 5(1), the list of services to which this reduction does not apply is repealed. |
| 7(1) | This section relating to categories of services is repealed and amended to delete reference to categorization of services subject to the 10% reduction as it is no longer applicable. The section continues to permit services to be grouped into a category of services. |
| Transitional Provisions | |
| 9.1(1) | Adds new section to capture transitional matters for community benefits scheme under Planning Act. Despite the existing five-year expiry timeline in subsection 9(1), a development charge by-law that would expire on or after May 2, 2019 and before the prescribed date shall remain in force with respect to services which are no longer intended to be governed by the Act (essentially soft services) as set out in section 9.1(3) until the earlier of the day it is repealed; the day the municipality passes a community benefits by-law under the Planning Act, as proposed to be amended; or the prescribed date. |
| 9.1(2) | Unless it is repealed earlier, a development charge by-law that would expire on or after the prescribed date is deemed to have expired on the earlier of the day the municipality passes a by-law under subsection 37(2) of the Planning Act (community benefits charge by-law) and the prescribed date with respect to services set out in section 9.1(3). |
| 9.1(3) | Identifies the services referred to in subsections 9.1(1) and 9.1(2) as all services other than the services set out in subsection 5(5) as that subsection read immediately before the proposed Act receives Royal Assent (i.e. all services other than water supply services(including distribution and treatment services); waste water services (including sewers and treatment services); storm water drainage and control services; services related to a highway as defined in relevant legislation; electrical power services; policing services; fire protection services; Toronto-York subway extension; transit services other than the Toronto-York subway extension and waste diversion services). Note that the new listing of services to which Development Charges are applicable is located in section 2(4). |
| 9.1(4) | While the by-law referenced in 9.1(2) is in force, it will apply to services identified in subsection 9.3(3) i.e. services other than those currently listed in section 5(5) and waste diversion services. |
| Collection of Development Charges – Certain types of development, when charge is payable | |
| 26.1 | Adds new section pertaining to when a development charge is payable for certain types of development. |
| 26.1(2) | Itemizes these types of development to which this section applies as follows: rental housing development; institutional development; industrial development; commercial development; non-profit housing development. |
| 26.1(3) | Outlines that development charges for the types of development identified in section 26.1(2) shall be paid in six equal annual instalments beginning on the earlier of the date of issuance of a building permit authorizing occupation and the date the building is first occupied, and continuing on the following five anniversaries of that date. |
| 26.1(4) | The amount of a development charge is determined in accordance with section 26.2, which addresses when an amount of a development charge applicable to a development is determined, even if the relevant by-law is no longer in effect on the date an instalment is payable. |
| 26.1(5), (6) | Adds a requirement for a person required to pay a development charge for a development type referred to in section 26.1(2) to notify the municipality within five business days of the building first being occupied where an occupancy permit is not required. If a person fails to provide notice, the total development charge, including any interest payable, is payable immediately. |
| 26.1(7) | Allows a municipality to charge interest on the six equal annual instalment payments required by 26.1(3) from the date the development charge would have been payable in accordance with section 26 to the date the instalment is paid, at a rate not exceeding the prescribed maximum interest rate. |
| 26.1(8) | Confirms that section 32 of the Act applies to the section 26.1(3) instalments and that any unpaid amounts shall be added to the tax roll. |
| 26.1(9) | In the event that any part of a development is changed so that it no longer consists of a type set out in 26.1(2), the development charge and any interest payable but not including any instalments already paid as required by 26.1(3) becomes payable immediately. |
| 26.1(10) | Confirms that this section does not apply to a development charge that becomes payable before the day that the applicable provisions in the More Homes, More Choice Act, 2019 come into force. |
| 26.1(11) | Provides that section 26.1 shall not apply in cases where there is an agreement for early or late payment under section 27.
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| Collection of Development Charges – when amount of development charge is determined | |
| 26.2 (1)(a) | The total amount of a development charge is the amount that would be determined on the day an application for site plan approval was made. |
| 26.2(1)(b) | If the development is not subject to site plan control, the total amount of a development charge payable is the development charge determined on the day an application for a zoning by-law amendment is made. |
| 26.2(1)(c) | If neither an application for site plan approval or zoning by-law amendment were made, in the case of a development charge relating to a type of development to which section 26.1 applies, the amount of the development charge is determined as of the day the development charge would be payable determined in accordance with section 26.
In the case of a development charge in respect of a development to which section 26.1 does not apply, the amount of the development charge is determined as of the day the development charge is payable in accordance with section 26 (i.e. upon issuance of a building permit). |
| 26.2(2) | States that subsection 1 applies regardless of whether the by-law under which the amount of the development charge would be determined is no longer in effect on the date the development charge is payable. |
| 26.2(3) | A municipality may charge interest on the development charge at a rate not exceeding the prescribed maximum interest rate from the date of the application to the date the development charge is payable. |
| 26.2(4) | If a development is subject to more than one application referred to in clause 26.2(a) or (b), the later one is deemed to be the applicable application for the purpose of determining a development charge. |
| 26.2(5) | Clauses 1(a) and 1(b) would not apply in respect of any part of a development to which section 26.1 applies if, on the date the first building permit is issued for the development, more than the prescribed amount of time has elapsed since the application referred to in clause 1(a) or 1(b) was approved. For any part of a development to which section 26.1 does not apply, clauses 1(a) and 1(b) would not apply if on the date the development charge is payable, more than the prescribed amount of time has elapsed since the application referred to in clause 1(a) or (b) was approved. |
| 26.2(6) | Clauses 1(a) and 1(b) would not apply in the case of an application made before the day sections 26.1 and 26.2 come into force. |
| 26.2(6.1) | Section 26.2 does not apply to development charges that are payable under a development charge by-law that applies in accordance with the transitional provisions introduced in the Planning Act and found in paragraph 3 of subsection 37.1 and paragraph 5 of subsection 51.1(7). |
| 26.2(6.2) | The total amount of a development charge for the purposes of subsection 26.2(1) shall not include the amount of a development charge in respect of a service unless the service is set out in subsection 2(4) beginning on the earlier of the day a municipality passes a by-law under subsection 37(2) of the Planning Act (a community benefits charge by-law), or the date prescribed in the transitional provisions of section 9.1.
These changes to section 37 are described more fully in our guide to changes to the Planning Act. |
| 26.2(7) | Section 26.2 does not apply in cases where there is an agreement under section 27 for early or late payment of a development charge. |
| Interest applicable on amount unpaid | |
| 32(1) | If a development charge remains unpaid after it is payable, the amount unpaid together with any interest payable in respect of it in accordance with the Development Charges Act shall be added to the tax roll. |
| Front-ending agreements | |
| 44(2) | The services to which the work relates must be services that are set out in the new enumerated list contained in subsection 2(4) to which the development charge by-law relates. |
| 52 (3.1) | Adds that subsections 26.1(3), (5), (6), and (9) shall govern the payment of development charges involving the types of development listed in subsection 26.1(2) where a relevant front-ending agreement exists that binds non-parties. |
| 52 (3.2) | Subsection 3.1 does not apply to an amount that is payable in respect of a front-ending agreement entered into before the day these amendments to section 52 contained in Schedule 3 of the More Homes, More Choices Act, 2019 comes into force. |
| General | |
| 60(1)(b) | The power of the Lieutenant Governor in Council to make regulations is amended to provide for regulations relating to the maximum number of additional dwelling units for buildings in such classes and the prescribing of structures, which was previously not identified. The existing clause limited the number of additional dwelling units to not exceed two. |
| 60(1)(c) and (c.1) | The Lieutenant Governor in Council may make regulations clarifying or defining terms in subsection 2(4), being the new section listing services. |
| 60(1)(m.5) | Allows for prescribing a date for the purposes of transitional provisions in section 9.1. |
| 60(1)(s.1) | Allows for regulations to govern the types of development set out in subsection 26.1(2). |
| 60(1)(s.2) | Allows for regulations to prescribe the maximum rate of interest for the purposes of unpaid amounts. |
| 60(1)(s.3) | Allows for regulations to prescribe the amount of time for purposes of sections 26.2(5)(a) and (b). |
| 60.1 | Allows for regulations to set out transitional rules dealing with matters not specifically dealt with in the schedule to the Bill, and to clarify the transitional rules. |
| The definition of Waste Diversion Services, the addition of sections 9.1(1)(2) and (3) relating to transition and associated regulation relating to the prescription of a date, the replacement of “police services” with “policing”, the addition of section 60.1 with respect to transitional regulations and the repeal of Schedule 1 to the Promoting Affordable Housing Act 2016 will come into force when Bill 108 receives Royal Assent. The balance of the schedule will come into force on a date to be proclaimed. |
Please check our 2019 Planning Reform page and other blog posts for more details on Bill 108.
