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For the first time since Winnipeg’s controversial growth fee was introduced, it has actually decreased.
On Jan. 1, the so-called impact fee charged on homes in some new neighbourhoods fell to $56.51 per square metre, which works out to $5,249.96 per thousand square feet.
That’s about five per cent lower than the 2019 charge of $5,524.83 per thousand square feet.
"The city’s economic research division calculated… the construction costs experienced by the city from 2018 to 2019 to be negative, or deflationary. Given that prices had shown a reduction, the city economist recommended a reduction in the impact fee," city spokesperson Kalen Qually wrote in an emailed statement.
Winnipeg’s growth fee can rise up to five per cent each year to cover a municipally calculated construction inflation rate, or drop by up to the same amount to reflect deflation.
Impact fees first took effect in 2017 at a rate of $5,084 per 1,000 square feet, then rose five per cent on Jan. 1, 2018 and another 3.5 per cent on Jan. 1, 2019.
Coun. Brian Mayes, who chairs council’s property and development committee, believes the drop in fees this year was fair.
"I don’t think it will make a huge difference in people’s purchasing decisions, but it’s a fair thing to do… We’re still collecting (the fee), it’s just slightly less of an impact fee for the average homebuyer," said Mayes (St. Vital).
The city raised a total of $29.7 million from impact fees by Dec. 31, 2019, though it’s decided not to spend any of that revenue until a legal battle against the fee winds up.
That court challenge from the Manitoba Home Builders’ Association (MHBA) and the Urban Development Institute alleges the city lacks the power to impose the fee.
And while city supporters argue growth fees are needed to ensure new development pays for its demands on city infrastructure and services, the developers argue new builds already cover those costs.
Lanny McInnes, MHBA’s president, said he’s glad to see the impact fee reduced this year.
"That was a bit unexpected… but we’re certainly pleased that they’ve done that," said McInnes.
However, he stressed the MHBA remains convinced impact fees have hindered the Winnipeg housing market and should be eliminated entirely.
McInnes said the number of single-family detached housing starts in Winnipeg fell from 1,832 in 2017 to 1,449 in 2018 and 1,260 in 2019, while the starts in nearby municipalities fell from 440 in 2017 to 425 in 2018 and 401 in 2019.
"You can see the City of Winnipeg has had a sharper slowdown, in terms of housing starts… than some of their surrounding communities," said McInnes.
Though he expects stricter mortgage requirements and reduced migration into Manitoba also hampered housing starts, Winnipeg’s decline has proven especially steep since its growth fee took effect, McInnes said.
"It’s a decline that’s more than double than we’re seeing in the surrounding municipalities, so that does lead us to believe that’s had an impact," he said.
The legal battle against growth fees is expected to move forward later this month.
Born and raised in Winnipeg, Joyanne loves to tell the stories of this city, especially when politics is involved. Joyanne became the city hall reporter for the Winnipeg Free Press in early 2020.
Updated on Thursday, February 6, 2020 at 5:42 AM CST: Adds missing word