Legal Note Archives - Geoff Jarman Real Estate

City of Burnaby: the introduction of amenity cost charges responds to recent provincial legislation aimed at reforming development financing.

In November, the Province of British Columbia unveiled plans for a new development financing tool to streamline housing construction timelines. This tool, presented through Bill 46, the Housing Statutes (Development Financing) Amendment Act, includes the implementation of amenity cost charges (ACCs) and modifications to the existing development cost charges (DCCs) and community amenity contributions (CACs) framework.

Currently, municipal governments impose DCCs (referred to as development cost levies or DCLs in Vancouver) on all new development projects. These charges, typically paid early in the approval process, are earmarked for specific infrastructure needs like roads and sewers.

CACs, meanwhile, are levied on rezoning projects. Although cities often have established rates, the actual amounts are subject to negotiations between the city and developers. This negotiation process, which can include determining whether contributions will be provided as physical amenities or cash, may delay housing delivery. Like DCCs, CACs are restricted to funding purposes such as parks, childcare facilities, and community centers.

With the implementation of these new measures, the Province is broadening the scope of what DCCs can fund while reducing the influence of CACs. Additionally, it is introducing more streamlined ACCs to enable local governments to continue covering growth-related expenses.

Under the updated regulations, DCCs and DCLs can now also finance fire-protection, police, and solid-waste facilities, as well as provincial highway infrastructure projects. Conversely, the emphasis on CACs is indirectly lessened through recent provincial legislation that pre-zones large areas of land, resulting in fewer rezoning projects and consequently fewer opportunities for local governments to levy CACs.

The newly established ACCs will contribute to community amenities such as community and recreation centers, childcare facilities, and other public spaces. While similar in purpose to CACs, ACCs will be charged at fixed rates—eliminating negotiation processes—and collected upfront in the development phase, akin to DCCs.

Furthermore, although CACs can currently be imposed on affordable housing projects, cities have the discretion to waive these charges. However, the Province is now taking this decision out of municipal hands and forbidding ACCs on affordable housing projects, although a precise definition of “affordable” has yet to be provided.

While the changes to DCCs will apply province-wide, the adoption of ACCs by local governments remains optional. Nonetheless, given the reduced impact of CACs, many are likely to opt for ACCs.

City of Burnaby

The City of Burnaby has emerged as one of the early adopters of ACCs, deliberating over a series of proposed rates during a recent special council session.

Under the proposal, the City suggests ACC rates of $28,993 per residential lot for low-density residential developments, $20,295 per residential unit for medium-density residential developments, and $14,497 per residential unit for high-density residential developments. Additionally, a rate of $65.23 per square meter of gross floor area is proposed for commercial developments.

Initially, the proposed rates for low-density residential developments were presented on a floor area basis, as previously requested by the Council. However, the City has decided to proceed with rates on a per unit/lot basis.

The new DCC rates and ACC rates.(City of Burnaby)

The new DCC rates and ACC rates. (City of Burnaby)

In a report presented to the Council, City staff projected an annual population growth of 1% to 2% over the next 25 years, equating to approximately 100,000 new residents. The current population is estimated to be around 250,000.

In response to this growth and recent provincial legislation promoting new housing initiatives, the City is transitioning towards a DCC and ACC model to address growth-related expenses. This shift aims to allocate funds towards larger facilities, improved park spaces, enhanced water and sewer infrastructure, as well as policing, fire services, and transportation needs. This move is a departure from the previous reliance on a voluntary and cyclical Community Benefit Bonus (CBB) program.

In City of Burnaby, CACs are known as Community Benefit Bonuses (CBBs). City staff elucidates the transition away from CBBs towards ACCs, mentioning that while CBB charges will remain an option, the availability and usage of these funds remain uncertain. This outcome aligns with the City’s objectives.

On Monday, February 26th, Burnaby City Council approved its new Development Permit Transition process. This introduces a stage between the rezoning application and building permit stage, addressing a gap previously unique to Burnaby among major BC municipalities. This stage is commonly used to regulate the form and character of development, contrasting with Burnaby’s former reliance solely on the rezoning process. This shift aligns with the provincial trend towards pre-zoning.

City staff acknowledge that the new DCC and ACC-centric program does not solve all infrastructure funding challenges. They stress the importance of considering other funding tools, including taxation.

Finalized rates are expected to be presented for approval on March 25th, allowing Council to grant first, second, and third readings. The amended DCC bylaw will then require approval from the Provincial Inspector of Municipalities before returning to Council for final approval.

The City of Burnaby aims to implement the new DCC and ACC rates before June 30, 2024. These rates will undergo refinement and adjustment over the next two years, coinciding with the approval of the City’s new Official Community Plan and Zoning Bylaw.

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City of Burnaby development, City of Burnaby, City of Burnaby new development financial tool

BC Budget 2024 to Introduce Flipping Tax and Property Transfer Tax Enhancements

The government of British Columbia has unveiled a plan to impose a tax on the profits from properties sold within two years of acquisition.

This tax is designed to reach up to 20% for properties sold within a year of purchase, and will gradually decrease to zero for properties sold between 366 and 730 days after purchase.

This tax initiative, announced by B.C. Finance Minister Katrine Conroy, is one of the latest measures introduced by the province to curb housing speculation in an area where affordable housing is a significant issue.

“As governments retreated, speculators stepped in, causing prices to rise. That’s why we’re implementing a home-flipping tax as our latest action to clamp down on these harmful practices,”

Conroy stated during her budget presentation in the legislature.

This tax is one of 20 legislative pieces the government plans to introduce this session, which means it will need to be passed within the next three months to become law. The intention is to apply this tax to properties sold on or after January 1, 2025, including those purchased before this date.

The 2024-25 budget, presented by Conroy, predicts that this tax will generate an additional $44 million in revenue for the 2025-26 fiscal year. This revenue is earmarked for the construction of affordable housing across the province. Sellers can expect to be taxed around 10% after owning a home for a year and a half, with the tax being lifted after two years of ownership.

The tax will be applicable to income from the sale of properties with a housing unit and properties zoned for residential use, as well as income from condo assignments. However, it will not apply to land or parts of land used for non-residential purposes, as per the government’s budget documents.

There are several exemptions to this tax, including life circumstances such as separation, divorce, death, disability or illness, relocation for work, involuntary job loss, change in household membership, personal safety or insolvency. “The aim of this tax is to support, not hinder, housing supply. Exemptions will be granted to those who contribute to the housing supply or participate in construction and real estate development,” the government’s budget documents state.

This tax will be payable in addition to any federal or other provincial income taxes incurred from the sale of property. Alex Hemingway, a senior economist with the Canadian Centre for Policy Alternatives, expressed uncertainty about the effectiveness of the tax in addressing speculation. He suggested that while the tax might deflate some speculative activity, it doesn’t address the root of the housing crisis, which is a shortage of overall housing and particularly non-market housing.

Hemingway also warned that the tax could unintentionally reduce home sales and transactions, diverting tax revenue away from property transfers.

tax targeting flipping

In addition to the new tax, the budget introduced expanded property transfer tax exemptions, raising the First Time Homebuyers Program threshold to $500,000 for the purchase of a home valued up to $835,000.

Effective April 1, the B.C. government will increase the purchase price for first-time home buyers and buyers purchasing newly built homes to qualify for the Property Transfer Tax exemption. Until then, first-time home buyers who purchase a home with a fair market value of $500,000 or less (assuming they meet all the program qualifications) were exempt from paying the Property Transfer Tax. The tax on a home priced at $500,000 would normally be $8,000, so this is a significant benefit. After April 1, the exemption will be granted for first-time home buyers purchasing homes up to a fair market value of $835,000, with a partial exemption up to $860,000.

For a home purchased at a price of $800,000, the savings would amount to $14,000. This is particularly noteworthy because this is a closing cost that cannot be rolled into the mortgage and must be paid upfront. In this example, the minimum down payment on an $800,000 home would be $55,000.

One of the most significant hurdles people encounter is accumulating their down payment, so this increase in the exemption will provide substantial assistance to many buyers.

Please check the first-time home buyers’ exemption amounts

There have also been changes to other exemptions from the Property Transfer Tax (PPT).

Individuals purchasing newly constructed homes, whether they are first-time home buyers (FTHB) or not, can also be exempt from paying the tax.

Currently, the purchase price for this exemption is $750,000. However, effective April 1, this exemption will rise to $1.1 million, with a partial exemption up to $1.15 million.

The Secondary Suite Incentive Program is another initiative set to be introduced on April 1. In essence, the provincial government will offer a forgivable loan covering up to 50% of the cost of renovations to add a secondary suite to an existing home, up to a maximum of $40,000. Applications for this program will start being accepted from April 17.

To have the loan fully forgiven, certain conditions must be fulfilled:

• The unit must be constructed in the same location where the homeowner resides.

• The unit must be rented out at rates below the market value for five years.

Furthermore, the province will also exempt eligible purpose-built rental buildings that have four or more units from the property transfer tax until 2030.

Sources: CBC News, Castanet, Government of British Columbia

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