Qualico puts brakes on development's expansion as city mulls growth fees

Land developer Qualico says it's halting work in Winnipeg in the wake of a study suggesting Winnipeg should charge big fees for new developments.

• Winnipeg needs development fees otherwise everyone will pay more, consultant says

Eric Vogan, Qualico's vice president of community development, told CBC News his firm is putting the brakes on its 63-lot expansion in Sage Creek until city council decides if it will apply charges for new developments. 

"[It's] definitely scary," said Vogan. "If the price of lots is going to be materially changed or increased then the last thing I want to do is produce more until I find out what's going on. It's created a lot of uncertainty in my mind and certainly the customers I deal with, which are the major builders in the city."

On Thursday, the City of Winnipeg released a report by consulting firm Hemson suggesting growth in the city is not paying for itself. The report recommends a fee structure that would charge $109.45 for each square metre of a new residential development. This translates to an $18,303 charge being levied on an 1,800-square-foot home.

Mayor Brian Bowman said he would bring in growth fees at his State of the City speech in February. Thursday he suggested he was pleased the Hemson report concurred with his belief that new developments in the city don't pay for themselves.

Vogan said if the price to build goes up, demand will fall. Qualico is not going to assume the risk of developing more lots, he said.

"The market is clearly being disrupted here and we've got to react with due caution," he said.

Vogan said even if the situation "rights itself," because it's September, the Sage Creek expansion will be on hiatus until at least next summer.

Mayor Bowman responds

In a statement through a spokesman, Mayor Brian Bowman called Qualico's decision "premature" given the consultant's report on growth in Winnipeg was just released.

"Up until now, industry groups and home builders have been advocating for more time and more discussion before any decisions are made," the statement reads. "It appears they now want decisions expedited in order to provide clarity and certainty moving forward. We need to take another deep breath. The concept of recouping the costs of growth through fees is not new."

Bowman said "every municipality neighbouring Winnipeg" uses this model and he questions why Winnipeg should be different.

He underlined he does not want all taxpayers to shoulder the burden of growth in the city through higher property taxes.

Bowman said a meeting to discuss the report with key industry groups will happen soon. 

Council property chairman John Orlikow (River Heights-Fort Garry) said he understands the development industry desires some form of certainty regarding development fees.

Ripple effect

Mike Moore, president of the Manitoba Home Builders Association, said the move could have a snowball effect if other developers follow Qualico's lead and halt work.

"It could result in a slow down," Moore said Friday, pointing to developments like Waverley West, for example, where there are roughly 1,200 vacant lots.

"If a lot went for $150,000, that's $180 million dollars that's going to be sitting [if other developers react as cautiously]."

Moore said nobody is in "panic mode" yet and he suspects this will be resolved.

"I think that cooler heads will prevail and we will discuss this is on a greater level with the city and I think we'll find this dollar figure is outlandish, unreasonable."

Moore said he wants the city to go back to the "development agreement parameter process" and examine the costs and contributions of subdivisions.

"Those cost-benefit analyses show that new development is a net contributor to the city," Moore said.

"People [are] paying taxes on those lots before there's any community centres, before there's any bus service — the same expenses aren't there that are in existing neighbourhoods but more taxes are being paid. Where is that money going?"

The prospect of new development charges may also lead to a rush to purchase existing residential stock, said Tim Comack, vice president of Ventura Land Company.

The smart move would be to buy now before new fees are passed on to consumers, he suggested.

Asked about a potential rush on Thursday, Bowman said he would not speculate.