SUPPORTING HOUSING AND POPULATION GROWTH WITH CONSISTENT, STRUCTURED INFRASTRUCTURE FUNDING FOR MUNICIPALITIES (2024)

Issue

In light of the recent housing legislation enacted by the Provincial Government, municipalities across BC are facing increased density and greater populations in many of their neighbourhoods. This comes as many municipalities are already challenged to handle the infrastructure needs of their growing communities amid a chronic infrastructure deficit. As a result, communities are struggling with a lack of infrastructure, which undermines the economy's efficiency, and municipalities are forced to rely on higher property taxes to fund infrastructure, which already represents a heavy burden on businesses to pay. Ongoing, consistent, and structured infrastructure funding from the province is needed.

Background

The Existing Infrastructure Deficit

Many organizations have tried to estimate the current state of the infrastructure deficit in Canada, and the amount of investment that would be needed to repair or replace the country’s various infrastructure pieces, all soaring into the tens and hundreds of billions.

At the municipal level, according to the Federal of Canadian Municipalities, about 14% of waste, water, and transportation infrastructure is in poor condition, and the cost of repairing, fixing, or replacing those municipal assets would be over $176 billion.[1] From crumbling roads and overpasses to leaking pipes and aged wastewater treatment facilities, existing infrastructure needs support.

A significant challenge to addressing this existing infrastructure deficit is that while approximately 60% of the infrastructure is under the responsibility of local governments, they have the least amount of funding available. Senior levels of government at the federal and provincial levels control significantly more tax room and thus generate much greater revenue—with only about 10-12% of taxes going to the local level. Of that tax revenue, most is directed to municipal operations as opposed to capital investments.

As a result, municipalities are increasingly relying on property taxes – their primary revenue source – to fund necessary infrastructure, which is putting significant upward pressure on those taxes, paid predominantly by businesses. As municipalities across BC charge greater property taxes to business properties than residential ones, and as businesses as a property class pay a disproportionately high share of the overall property tax burden, any tax increase falls heaviest on our business community.

Without an ongoing, structured investment plan from senior governments, municipalities will have no choice but to lean on property taxes even more, and in turn, small businesses and commercial operators, to fund their existing and future infrastructure needs. This will strain those businesses, reduce profitability, and threaten their competitiveness.

While municipalities do have access to other revenue streams to fund growth, such as Development Cost Charges (DCCs), Community Amenity Contributions (CACs), Density Bonusing and the new Amenity Cost Charges (ACCs), they alone cannot make up this infrastructure funding gap.

While tools like DCCs help contribute to the cost of net increases in infrastructure due to new development, they often do not cover the full amount of new or upgraded infrastructure, as existing users who will benefit must also pay. Further, regardless of the development funding tool, none are used to provide funding for things outside of the municipality’s remit but are still required due to population growth, such as schools and healthcare facilities.[2]

Our Growing Infrastructure Needs

BC is a fast-growing province. As of October 1, 2023, the population reached 5,581,127, with an annual population growth rate of 3.3%, the highest since 1972.[3]

This growth alone would translate into a growing need for community-level infrastructure, but recent provincial housing legislation could accelerate this need in communities across BC.

In late 2023, the Provincial Government enacted two pieces of legislation: Bill 44, the Housing Statutes (Residential Development) Amendment Act, and Bill 47, the Housing Statutes (Transit-Oriented Development) Amendment Act, to help address the housing affordability challenge by expanding and accelerating density across BC communities.

Bill 44 facilitates the creation of additional residential units in single-family zones, thereby increasing housing density and availability. The legislation requires municipalities to change zoning to allow for three to four units of small-scale, multi-unit housing must be permitted on each parcel of land if zoned exclusively for single-family or duplex residential, and up to six units if that parcel of land is near frequent transit.

Bill 47 identifies 104 transit hubs and stations in 31 different municipalities across the province for transit-oriented development, and requires those municipalities to allow minimum levels of increased density and building size in those areas to increase housing supply. The Bill requires greater housing density to be permitted in these areas, with buildings of a minimum height of 4 to 20 stories near selected bus exchanges and rapid transit stations throughout the province.

These Bills have the potential to add significant density and population in neighbourhoods throughout BC communities. For example, in the Township of Langley, the municipality has estimated that in the predominantly single-family neighbourhoods of Booth, Rinn and Fernridge, Bill 44 would allow the population to grow from 47,0000 under new community plans to 115,000 should all single-family and duplex lots move to three, four or six units. Similarly, in the neighbouring City of Langley, thanks to these bills and incoming SkyTrain, the City expects the municipality's total housing units to increase by 241% over a decade.

While these bills would increase the supply of housing available and aim to provide needed relief on housing affordability, the potential population increase will exert pressure on transportation systems, utilities, roads, social amenities, and other community infrastructure. This situation is compounded by the facts noted above, which state that municipalities are already facing infrastructure deficits and are limited by budgetary constraints.

The Federation of Canadian Municipalities argued that “we simply cannot build new housing without first expanding or upgrading the municipal water, transportation and community infrastructure those housing units require.”[4]

Provincial Infrastructure Funding

The long-term, existing infrastructure deficit in our communities, coupled with the potential for significant growth in housing and the necessary supporting infrastructure, means a consistent, structured funding plan is needed.

The province has recognized this. In her 2024 mandate letter, the Minister of Municipal Affairs was tasked by the Premier to “explore options to support fast-growing municipalities with funding for infrastructure and community amenities.” Given this recognition, our booming population, and the province’s own housing legislation, there is an impetus to act.

In 2023, the BC government launched the Growing Communities Fund, a one-time step towards supporting local infrastructure projects. This Fund provided a grant to all 188 of BC’s municipalities and regional districts to use for community infrastructure. The Fund used a formula-based model to allocate funding primarily based on population, allowing for clarity on how much each municipality would receive. The Fund allowed the money to be used for public infrastructure projects such as drinking water facilities, wastewater and stormwater management, solid waste management, sidewalks, local roads, and more.

Municipalities need this kind of program as a permanent vehicle to provide consistent, structured infrastructure funding. To ensure fairness based on both population and growth, such a permanent fund should have a funding stream where per-municipality funding is determined by population and a separate stream dedicated to fast-growing municipalities and those with identified transit-oriented development areas to help accommodate and support the accelerated growth.

By creating such a permanent funding model, municipalities could plan on consistent funding, easing the reliance on property taxes and helping advance the much-needed infrastructure to make our local communities and economies more livable, functional, and successful.

THE CHAMBER RECOMMENDS

That the Provincial Government:

1. Develop a long-term, consistent and structured funding program for municipalities, possibly inspired by the 2023 Growing Communities Fund, that addresses the infrastructure needs of our growing population and the related impacts of the new provincial housing density legislation, and provides funding to municipalities to address this without relying solely on property taxes and development fees, with per-municipality funding allocated based on overall population, municipal growth rates, and the location of provincially-designated transit-orientated-development areas.
2. Expedite and expand provincial infrastructure investments into growing communities for assets which fall outside of municipal jurisdiction, such as schools and hospitals.