The municipal by-laws instituting development royalties which are multiplying in Quebec do not respect several of the conditions specified in the Urban Planning Act (LAU), according to a legal opinion.
Some twenty cities in Quebec have adopted a by-law requiring the payment of a financial contribution on new housing due prior to the issuance of a building permit.
“There is a fundamental problem with the validity of the regulations and their compliance with the LAU”, analyze lawyers Nicolas Cloutier and Élena Sophie Drouin, of the firm McCarthy Tétrault, on behalf of the Cercle juridique de l’Institut de développement urbain du Quebec (IDU), lobby of real estate developers.
To name just one weakness, the regulations do not establish a link between the fee and the increase in the provision of municipal services resulting from the housing project, a condition of fundamental substance dictated by article 145.21 of the LAU.
“The current practice that we have seen for a few months does not correspond to the letter or the spirit of the LAU, said the CEO of the IDU, Jean-Marc Fournier, in an interview. In the regulations, it is clear that there is no causal link between the royalty charge and the real estate development itself. This challenges the State, in particular the Ministry of Municipal Affairs, which should, out of consistency, carry out an analysis, as the IDU has done, to send messages to the authorities to respect the spirit and the letter of the law. »
Permitted since 2016, this charge aims to make developers pay the marginal cost of municipal services resulting from the increase in the city’s population. Let us think of the construction of a brand new residential district which would require the construction of a new drinking water production plant, for example.
This power was given to the cities by Quebec in response to their requests concerning the diversification of their revenues, which depend too much, according to them, on the property tax.
In the regulations adopted so far, the levy ranges from $4,000 to $6,000 per new dwelling, regardless of its size. In Beauharnois, however, it can be up to $15,000 for housing located on the upper floors of a tower, the document points out.
These amounts are added to the costs of new housing, which affects its affordability, in times of housing crisis in addition, deplores the IDU.
In fact, according to the opinion commissioned by the organization, the royalty, as it is defined in the municipal regulations, is akin to a hidden tax.
“Given the very high amounts required, and the sometimes tenuous causal link between the expenditures put forward by the municipality and the activity for which a contribution is required, the fiscal nature of the development charge becomes clear”, reads- on in the 30-page document released Monday.
According to the Legal Circle of the IDU, a regulation must respect three conditions of substance, the causal link and seven conditions of form, such as integrating a territory of application.
“Based on our analysis, one or more conditions of validity provided for in the LAU are not respected in one or other of the regulations examined”, write the lawyers in conclusion.
Basically, their criticisms relate to the summary nature of these regulations, a situation which results from the lack of legislative framework by the LAU which establishes the development royalty. This situation gives municipalities a lot of leeway, without control mechanisms.
For example, the LAU stipulates that the regulation applies to any category of infrastructure or equipment without defining them. It appears that the City of Prévost plans to finance the construction of its new 5.6 million city hall by this means. The estimate of its cost is not detailed in the regulations, nor the causal link between the addition of housing in Prévost and the need to build a new town hall.
Instead of a development charge, the IDU suggests that cities make more use of pricing to increase their own-source revenue.
In 2020, 14% of municipal revenues in Quebec come from user fees, compared to 19% in Ontario, 31% in British Columbia and 41% in California, according to CIRANO.
