An economist from London, Ontario, is praising Mayor Josh Morgan’s initiative to waive development fees for homeowners. However, some local politicians express concerns regarding who will truly benefit from this initiative before they lend their support.
On Wednesday, Morgan revealed that he would utilize his provincially authorized strong mayor powers to introduce a new homeownership initiative. This program aims to have both the city and builders cover development fees for homes priced below London’s average selling price of $630,000.
Under this plan, the city would assume 60 percent of the development fees, while builders would take on the remaining 40 percent. However, the proposal requires approval from the city council before it can proceed.
“It’s encouraging that the mayor is exploring new strategies to tackle housing issues for first-time buyers, but at first glance, it seems that developers might be the primary beneficiaries of this method,” commented Councillor Skylar Franke.
Development fees can vary significantly, ranging from $20,000 to $50,000, depending on the property type, as reported by the Home Builders’ Association.
Mike Moffatt, the founder of the University of Ottawa’s Missing Middle Initiative, described the concept as a “fantastic idea” that could help lower costs for attainable housing.
He praised both the city and the construction industry for utilizing the limited tools available to municipalities to enhance housing affordability for a broader audience.
“We are witnessing a significant drop in housing starts and pre-construction sales across southern Ontario. The only way to stimulate more housing activity is by reducing prices and costs. Development fees are among those costs,” Moffatt stated.
“Builders are finding it financially unviable to construct homes that families can afford. This initiative will assist them in building houses, selling them at reasonable prices, and maintaining their workforce,” he added.
Mike Moffatt is the founding director of the PLACE Centre at the Smart Prosperity Institute, a policy network at the University of Ottawa. (Raphaël Tremblay/CBC)
The city has allocated a budget of $5 million to support 260 housing units, which will be funded through the Housing Accelerator Fund provided by the Ontario government, as per a staff report.
Before committing taxpayer money, Franke seeks clarification on the profit margins available to developers and whether the savings will be transferred to homebuyers.
“Whenever public funds are involved, we must ensure that they genuinely address the pressing needs of our community,” she added.
Councillor Sam Trosow expressed the need to understand if this plan would benefit middle-income earners.
“I still require more information about which income groups this will assist,” he stated. “I am also concerned about zoning regarding where these developments will be located.”
He believes that establishing strict criteria for eligibility would ensure that assistance reaches those who are close to homeownership but require additional support.
Real estate market ‘totally out of people’s price range’
Trosow mentioned that this plan could complement an existing homebuyer loan program the city reintroduced in October. The Homeownership Down Payment Assistance Program provides London residents below a specific income threshold with interest-free and forgivable loans to cover five percent of the home’s purchase price.
“The current real estate market is completely unaffordable for prospective first-time buyers,” Trosow remarked. “Unless you have significant equity, other investments, or parental support, entering the housing market is nearly impossible.”
Both Trosow and Franke are curious as to why the initiative is limited to new constructions and not applicable to existing homes. They advocate for similar affordable programs for houses that are already built or on the market.
In contrast, Moffatt believes that the incentive will be beneficial for younger families and seniors looking to downsize. Ultimately, it will enhance the housing supply, yielding long-term advantages.
The council is expected to decide on the proposal during its upcoming meeting on February 10.
