ACCELERATING DEVELOPMENT BY ALLOWING FOR OPTIMUM TIMING OF PAYMENT OF DEVELOPMENT COST CHARGES (2023)

Issue

In the Local Government Act under section 559 (4), local governments may, by bylaw, impose development cost charges (“DCC”) upon approval of subdivision, or a building permit. Specially the act states:

559 (1) A local government may, by bylaw, for the purpose described in subsection (2) or (3), impose development cost charges on every person who obtains approval of a subdivision, or a building permit authorizing the construction, alteration or extension of a building or structure. Development cost charges may be imposed under subsection (1) for the purpose of providing funds to assist the local government to pay the capital costs of providing, constructing, altering or expanding sewage, water, drainage and highway facilities, other than off-street parking facilities, and providing and improving park land to service, directly or indirectly, the development for which the charge is being imposed. Development cost charges may be imposed under subsection (1) in a resort region for the purpose of providing funds to assist the local government to pay the capital costs of providing, constructing, altering or expanding employee housing to service, directly or indirectly, the operation of resort activities in the resort region in which the charge is being imposed. Subject to subsection (5), a development cost charge that is payable under a bylaw under this section must be paid at the time of the approval of the subdivision or the issue of the building permit.

$15,000 and $30,000. The requirement for payment of the DCC at subdivision or building permit stage, well in advance of closing of the sale and occupancy, results in a significant demand on cash flow, particularly for smaller construction/development companies.

Background

Under the Local Government Act, local governments may, by bylaw, impose development cost charges (“DCC”) upon approval of subdivision, or a building permit authorizing the construction, alteration or extensions of a building or structure. The DCC is to assist the local government to pay the capital costs of providing, constructing, altering or expanding sewage, water, drainage and highway facilities, other than off-street parking facilities, sidewalk curb and gutter and providing and improving park land to service, directly or indirectly, the development for which the charge is being imposed.

Under section 559 (4) of the Local Government Act, the DCC must be paid at the time of the approval of the subdivision or the issue of the building permit. The time between the payment of the DCC and closing of the sale and occupancy can be many months, with the cost of carrying the early payment of the DCC being borne by the builder/developer.

In order to better align the timing and payment of the DCC with cash flow, amendments to the Act are sought requiring payment at a later stage in construction, for example at insulation inspection or issuance of an occupancy permit.

As most newly built homes are insured, requiring an occupancy permit for their insurance, the DCC payments could be tied to the occupancy permit. Another possible option would be to allow the payment through installments at certain points of inspection (i.e. at insulation).

Under 559 (5) of the Local Government Act, the Minister may authorize the payment of DCC in installments. Under current legislation, BC Reg. 166/84, a developer may elect to pay DCC in installments for amounts $50,000 or greater, and by local government bylaw on amounts less than $50,000. Payment must be not less than 1/3 of the DCC at the time of approval of the subdivision or granting of the permit, 1/2 of the balance within one year after approval and the remaining balance within 2 years after the date of approval.

THE CHAMBER RECOMMENDS

That the Provincial Government:

1. Consult with local government and builders/developers to explore the preferred and optimum timing of payment of DCC, such as at occupancy permit stage, in better alignment with the cash flow needs of industry;
2. Amend the Local Government Act to reflect agreed upon changes regarding the timing of payment of DCC; and
3. Consider the timing of payment as a potential incentive tool for affordable or rental housing.