Much Ado About Not Much

Last month, Prime Minister Harper announced a $14 billion infrastructure fund, part of the $53-billion New Building Canada Plan that takes over this spring from the old model announced in 2007. They’re now working on the parameters and application process for accessing what Harper says will be “predictable, sustainable” funds for a decade.

It’s still up in the air what exactly will qualify, and at February’s announcement, the Federation of Canadian Municipalities president Claude Dauphin expressed reservations, saying that the fund’s rules could in fact force municipalities to carry a larger share of infrastructure costs in the future, and that local roads may not be eligible for funds at all.

Of the $14 billion, $10 billion is dedicated to community projects and infrastructure (with $1 billion of that going to communities with populations less than 100,000), while the remaining $4 billion is set aside for projects of “national significance,” whatever they may be. Up to 50% of costs for provincial highways, major roads and public transit may be covered, and up to one-third of most other projects; public-private partnerships (a funding model for which is included in the larger New Building Canada Fund) and for-profit private ventures will be funded up to 25%. Harper also said he wanted to see more public-private partnerships.

I’m inclined to agree with the New Democrats for once, who said that the announcement was recycled from last year — “There’s really no new funding per se,” said Olivia Chow. As the National Post points out, the funding framework actually means there will be a reduction in annual average funding for most provinces and territories, which will get the money over 10 years instead of the seven over which the last fund was spread. A Gas Tax Fund will supposedly mean that annual funding will be about the same as what we’re used to.

On the feds’ list of eligible categories for cash are wastewater management, green energy, airports and post-second infrastructure that supports advanced research. As Chow said, “We will continue to have traffic gridlock, mired in sinkholes, and the bridges will continue to crumble because we have a huge infrastructure deficit in this country.”

In their latest newsletter, The Canadian Home Builders’ Association (CHBA) commended the feds on the plan, but unfortunately, it seems like nothing more substantial than wishful thinking.

“The New Building Canada Plan provides tremendous support for Canadian communities, and creates an environment where direct benefits will flow through to individual homebuyers,” said CHBA CEO Kevin Lee. “CHBA hopes that this substantial federal investment will lead to a lessening in the development charges tax burden many municipalities now place on new-home buyers.”

CHBA president Deep Shergill expressed concern that young families are being priced out of the market by “rapidly rising municipal development taxes,” a concern we’ve expressed here many a time, as development charges have increased by more than 10 times the rate of inflation, a 500% increase between 1997 and 2007 and another 50% since 2008.

“Home builders are pleased with the federal government’s infrastructure investment priorities, and to see these investments start flowing,” Shergill said. “All Canadians will benefit from the stable, long-term municipal infrastructure funding that the Building Canada Plan provides. Also welcome is the fact that implementation will be able to proceed more rapidly, something that the CHBA and other associations have sought.”

This funding is not much different from what has been available for the last seven years, during which development charges went up by half. I don’t see the government relaxing those charges any time soon. We consumers are like the proverbial frogs in the frying pan — although the heat from increased development charges hasn’t even been turned up slowly, we’ve still managed to absorb it, and people are still buying houses (see next item). When have you ever known the government to back out of a tax the public has already swallowed? Once development charge increases have been passed, they’ll stay. Our only hope is that with this federal infrastructure funding, we at least won’t see any more huge hikes for a while.

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New home sales in the GTA were way up in January, according to RealNet Canada Inc; with 2,197 homes sold, sales were 16% above the 10-year average and 74% up from the same period last year, with high-rise sales leading the way. In fact, instead of going soft as so many have predicted, the condo market had its strongest January in 10 years, up nearly 70% from the year prior and nearly 50% over the 10-year average. Low rise sales were up 80% from 2013 and 6% below the 10-year median.

As BILD president Bryan Tuckey points out (as we also did, just last week), the GTA’s market fundamentals are in great shape, and it’s a good time to buy a new home!