I’ve revised this post on the consequences of negating the CAC mechanism – and why most candidates probably don’t understand the implications of their own platform. Yeah, it gets into the weeds – as it should – and I’m open to criticisms of points I may have missed (or, gasp, failed to understand fully.) Comments encouraged.
Does any candidate really understand Community Amenity Contributions (CACs)? Maybe one or two. A lot seem happy to entertain the idea of gutting them in the name of transparency or fairness or expediency or something better. Whatever. But something valuable – literally some of the value of land that CACs are meant to capture – may get lost.
To begin, here are some basics.
Community Amenity Contributions are not a tax. It’s in the title: they’re “contributions”. And while some developers may roll their eyes when they hear that word (yeah sure, contributions), it’s still true that there is no obligation to pay them if they don’t want to. And that’s because …
They are only applicable to rezonings.
Let’s be really clear: when developers own or buy land, their rights are within the maximums spelled out in the Zoning and Development Bylaw. If they want more density, they may apply for a rezoning – but they are not entitled to it.
Normally, developers who aren’t rezoning will apply for permits to develop under the zoning bylaw, and at that point they will likely be charged a Development Cost Charge to cover some of the defined public expenses – often something that involves pipes. That really is a tax; they don’t have a choice. But they can include the DCC in their calculations beforehand because it is a knowable charge.
And this is where some candidates get it wrong: they say or imply that a CAC is like a DCC (or should be) – a tax to pay for public amenities. And it therefore increases the cost of housing because it will be passed on to the consumer. So let’s eliminate it if we want more affordable housing.
Guarantee: eliminating CACs will not reduce the cost of housing if the market prices it up anyway. No developer will come up to City Hall, declaring that even though there was no CAC, the price didn’t go down. So here’s a cheque for the difference. The City also has studies which maintain that the cost of CACs comes out of the land being sold, not the end consumer price.
Some candidates, prodded by the development community, believe CACs should be standardized, set at a flat rate, knowable in advance by everyone. At least on the public sector side. I doubt many developers want their financials publicly released along with the City’s.
CACs can’t easily be knowable in advance, especially before a rezoning is requested. And it can’t be assured. Neither City Hall nor the real-estate market knows what the rezoning may ask for in the way of density, much less whether it will be approved, or what the market conditions will be at the time of asking.
If the City is going to require 70 percent of the increased value on a site, then it has to determine what that value is. And come to an agreement with the development making the rezoning request. That requires some negotiation.
If incoming candidates are going to scrap that negotiated part and set a fixed value, it’s likely leaving something on the table – maybe a lot, especially over time.
The CAC is the additional value provided to the City for the additional value created by the City. The amount is determined near the time the decision is made to add the value.
To repeat: If developers don’t want to incur that cost or disagree with the amount, they don’t have to apply for the rezoning!
Several parties and candidates wish to do away with rezoning – especially what they consider ‘spot’ rezonings -altogether. After a comprehensive plan is agreed on (good luck with that), then much of the city would be ‘pre-zoned’ to allow for new development under the traditional approval process (or an expedited one for more affordable housing). That effectively means that the increase in value from the higher densities would either go to the landowners or be assessed through some other mechanism (often termed a land-value capture). Even if an approximation of CACs are used, the idea seems to be that they should be lower. Does that mean foregoing amenities through this mechanism, or making up the amazing amounts that have been generated from the recent increase in land values.
Guarantee: the attempt to find a substitute for CACs will be complicated and, more than that, will be seen to be unfair if its essentially a flat tax across the city or a DCC added on to unrezoned land values. There would be a call for some more fine-tuned mechanism, based on the particulars of the site and the conditions at the time. Landowners and neighbourhoods would most likely want to … um, negotiate with the City to set the charge and then change it every time a significant development was proposed.
We have a name for that: CACs.
So candidates who would do away with CACs, are you potentially giving landowners and developers potential windfalls? You won’t be able to know til after that fact, and then you’ll likely be ‘fine-tuning’ the process until you are pretty much back where you started.
But first of all, do you actually understand what it is you’re so determined to abolish or change?