City’s impact fee causes surge in new home starts

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This article was published 01/05/2017 (3110 days ago), so information in it may no longer be current.

If you’re planning to buy a new home in one of the city’s newest subdivisions, it’s going to cost you thousands of dollars more than it would have last week.

That’s because Monday was the day the City of Winnipeg’s controversial new impact fee on new residential developments in new and emerging neighbourhoods came into effect.

The fee is based on the size of the home, and is roughly $5 per square foot. So an 1,800-square-foot home, which industry officials say is the average size of a new home built in Winnipeg, now costs about $9,700 more than it did last week.

In the case of a 2,200 -square-foot home, the added cost is about $11,000.

Homebuilders and homebuyers have known since late last October that the new fee was coming on May 1. So the scramble has been on since early November to get building permit applications filed before the deadline. That has resulted in a surge in both building-permit numbers and housing starts.

The president of Parkhill Homes said Monday his firm had five clients in the last two weeks move their purchases ahead so they could beat the May 1 deadline and not have to pay the impact fee.

“We only build about 20 custom homes a year,” Derek Thorsteinson said. “So to have 20 per cent of your yearly volume suddenly walk in and say, ‘In the next two weeks we need the building permit submitted and everything,’ we had to work night and day… to get things done.”

He said he could understand why they were desperate to beat the deadline. He noted two of them were buying 2,200 square foot homes, so the savings was about $11,000.

“That’s a lot of money in a house purchase. That’s your hardwood floors and granite countertops, or even putting in a (screened-in) deck in back,” he said “You can put a lot of stuff in your house for $11,000 to $12,000, instead of giving it to the city.”

Thorsteinson said his employees weren’t the only ones scrambling to meet the impact-fee deadline. The structural engineer who has to approve their design plans before Parkhill can submit the building-permit application told him he been run off his feet doing last-minute work for Parkhill and a number of other homebuilders.

“I don’t think he slept for the last month,” Thorsteinson added.

It’s also been pedal-to-the-metal for staff at Qualico, the province’s largest homebuilder.

“We’ve been working hard on it (homes sales and building-permit applications) for the last couple of months,” said John Daniels, the firm’s senior vice-president for Manitoba and Saskatchewan. “We’ve got enough permits in now to last us for probably a good part of the year.”

Daniels said home-sales and building-permit activity began ramping up shortly after city council approved the new fee.

He said Qualico submitted at least twice as many permit applications as usual in the first four months of this year. The city has said homebuyers and homebuilders who got their permit applications in before May 1 have until Nov. 1 to begin construction, and Daniels said Qualico fully expects to meet that deadline, as well.

The new fee is designed to offset the cost of providing new infrastructure — things like regional roads, transit service and recreation and leisure facilities, in new residential subdivisions within the city. Local developers and homebuilding are strongly opposed to the new fee, and are challenging it in the courts on the grounds that the city didn’t have the authority to impose it.

Manitoba Home Builders Association president Mike Moore said the city’s decision to impose the new fee prompted some prospective buyers who were “sitting on the fence” to proceed with their purchase before the deadline.

“It did cause a fairly significant number of permits to be submitted,” he said. “As for whether somebody did not make it in time, I don’t know.”

He said the April building permits won’t be coming out for another couple of weeks. Building-permit data for the first three months of 2017 on the city’s website shows how many permits were issued, but not how many applications were filed. It shows an 11 per cent increase in the number of permits issued, and an 86 per cent increase in the value of residential permits issued.

Moore noted that in his April 11 budget, Manitoba Finance Minister Cameron Friesen said building-permit activity in Winnipeg was up 195 per cent in the first quarter of the year.

Canada Mortgage and Housing Corporation also released data last month showing a 131 per cent increase in the number of housing starts recorded in the Winnipeg Census Metropolitan Area (CMA) in the first three months of 2017. Industry officials attributed much of the increase to builders and buyers scrambling to beat the city’s May 1 deadline.

Moore said now that the deadline has passed, he expects to see a sharp decline in building-permit activity within the city, and a sharp increase in permit activity in communities outside the city, where the fee doesn’t apply. He said communities like Headingley, LaSalle, Oak Bluff, Lorette and Stonewall are all reporting an increase in building-permit and homebuilding activity. And that trend is expected to continue.

But he said there have already been enough building-permit applications filed to keep construction crews busy until later this year or early next year.

 

murray.mcneill@freepress.mb.ca