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STAFF REPORT Planning Title: Bill 23: More Homes Built Faster Act, 2022 - 10 Point Adaptation Plan Report Number: IPPW2022-063 Author: Joel Cotter, Filipa Reynolds Council Date: December 12, 2022 File: N/A Attachments: Appendix ‘A’: Council Resolution (November 14, 2022) Appendix ‘B’: Letter to Minister Clark Ward No.: City Wide Recommendation: 1. That Council support, in principle, the 10 Point Adaptation Plan described in IPPW2022-063. A. Executive Summary: On October 25, 2022, the Government of Ontario introduced Bill 23: More Homes Built Faster Act, 2022 in respond to Ontario’s ‘housing supply crisis’ and the Province’s ambitious goal for 1.5 million new homes to be built within the next 10 years. Bill 23 was posted to the Environmental Registry of Ontario (“ERO”) on October 25, with commenting open until December 9th (45 days). Recognizing the highly consequential nature of Bill 23, Waterloo City Council passed a motion (attached as Appendix ‘A’) on November 14, 2022 requesting that the proposed legislation be deferred. City staff submitted administrative comments on the proposed Bill 23 on November 22, 2022 (attached as Appendix ‘B’). Despite the open commenting period, Bill 23 was passed by the Legislature and received Royal Assent on November 28, 2022. Bill 23 is highly consequential legislation, with significant amendments to various Acts including the Planning Act, the Conservation Authorities Act, the Ontario Heritage Act and the Development Charges Act. Bill 23 follows the earlier passage of Bill 109: More Homes for Everyone Act, 2022, which included amendments to the Planning Act to require a pro-rated refund of planning application fees where a site plan application is not approved within the prescribed timeframe, or a decision is not rendered with respect to a zoning by-law amendment application within the prescribed timeframe. The refund provisions of Bill Council Meeting Page 9 of 38 December 12, 2022 2 Integrated Planning & Public Works 109 are scheduled to come into force on January 1, 2023, unless delayed by the Province. With the enactment of Bill 23, the City of Waterloo must now adapt its operations to address the legislation’s many changes to land use planning, municipal financing, heritage conservation, and local governance. IPPW2022-063 identifies ten (10) core areas to focus on as the City of Waterloo adapts to Bill 23 and other recent legislative amendments such as Bill 109: 1. Continue to streamline development approvals. 2. Revised approach to planning application consultation. 3. Joint initiatives with other local municipalities. 4. Collaborating with the Development Industry. 5. Adjusting staffing. 6. Evaluating options to mitigate financial impacts. 7. Engagement in Bill 39, Better Municipal Governance Act, 2022. 8. Station Area Zoning. 9. Affordable Housing Strategy. 10. Public Communication. B. Financial Implications The City of Waterloo maintains support for the widely accepted concept that ‘growth should pay for growth’. However, Bill 23 proposes numerous changes to the Development Charges Act and the Planning Act that significantly impact how municipal governments can recover costs associated with growth. As the City of Waterloo’s current Development Charges (DC) By-law was passed prior to January 1st, 2022, there are some aspects of Bill 23 that do not currently apply and will not come into force until a new development charge by-law is passed. The City’s existing DC By-law expires December 31, 2024. For the City of Waterloo, the capital financial impacts of Bill 23 are estimated at upwards of $23 million to $31 million (27%-36% lost revenue) over the next five years if all aspects of Bill 23 were applicable today. This is driven mainly by: • lost DC revenue from the mandatory 5-year DC rate phase-in period ($8.8 million) • additional rental housing discounts ($1.1 million) • affordable and attainable housing exemptions (estimated at $8.4 - $16.5 million for affordable housing; attainable TBD based on Provincial definitions) • potential loss of certain land purchases as DC eligible ($1.6 million) • removal of studies as a DC eligible service category ($3.4 million) • replacement of 10-year historical service level calculations with a 15-year calculation ($0.1 million) With the City retaining its current DC By-law, immediate impacts are (financial estimates based on a 5-year period starting November 28, 2022): Council Meeting Page 10 of 38 December 12, 2022 3 Integrated Planning & Public Works • additional rental housing discounts ($1.1 million) • affordable and attainable housing exemptions ($8.4 - $16.5 million for affordable housing; attainable TBD based on provincial definitions) The remaining items would take effect upon the City passing a new development charge by-law. The above is understated, as no estimated impacts have been included for attainable housing, nor have operating impacts been factored in. The funding gap created by the lost revenue will need to be filled by senior levels of government, otherwise municipalities will face large increases to property taxes and utility rates, and/or a reduction/deferral of growth related projects in the capital program. While municipalities maintain certain balances in development charge reserves, this is not “extra cash”. A positive overall consolidated development charge reserve balance ensures that there is money available to move forward with planned investments in multi-year capital growth infrastructure projects. As development charges are not a guaranteed revenue stream, the timing of when development charges are received in comparison to budget is not linear.
For additional context, as of December 31, 2021, the City of Waterloo’s year end DC Reserve Fund (combined) balance was $22.2 million. Of that amount, $9.1 million was funding committed to active capital projects, but was returned to the reserve at year end in order to allocate interest to unspent development charge funding, after which the development charge funds were returned to the active projects on January 1st of the proceeding year. Therefore, the January 1, 2022 development charge balance would be reduced to $13.1 million. Additionally, on September 18, 2022, $5.8 million of the reserve balance was transferred to the new CBC Reserve due to parking and cemeteries no longer being development charge eligible services pursuant to changes from Bills 108 and 197. The City’s current DC Reserve Fund balance as of October 31, 2022 is only $3.4 million. The City’s 2023-2032 DC Capital program totals $228 million. Development charge revenues anticipated over the same period are currently estimated at $154.7 million, resulting in a significant DC Reserve Fund deficit within the 10-year projection period. The current approved DC Background Study contemplates the recovery of these balances by 2041. Total existing DC Debt as of December 31, 2022 is estimated to be $2.9 million, and for 2023 an additional $10.8 million of DC Debt is proposed in order to minimize the deficit in the DC Reserve Fund. Based on the above, the City of Waterloo does not have a significant unallocated DC Reserve Fund balance, and the substantive financial impacts of Bill 23 cannot be absorbed by the City’s existing development charge reserves.
C. Technology Implications None Council Meeting Page 11 of 38 December 12, 2022 4 Integrated Planning & Public Works
D. Link to Strategic Plan (Strategic Objectives: Equity, Inclusion and a Sense of Belonging; Sustainability and the Environment; Safe, Sustainable Transportation; Healthy Community & Resilient Neighbourhoods; Infrastructure Renewal; Economic Growth & Development) (Guiding Principles: Equity and Inclusion; Sustainability; Fiscal Responsibility; Healthy and Safe Workplace; Effective Engagement; Personal Leadership; Service Excellence) Fiscal Responsibility. Effective Engagement. Service Excellence. E. Previous Reports on this Topic None Council Meeting Page 12 of 38 December 12, 2022 5 Integrated Planning & Public Works Bill 23: More Homes Built Faster Act, 2022 - 10 Point Adaptation Plan IPPW2022-063 On October 25, 2022, the day after the municipal election, the Government of Ontario introduced Bill 23: More Homes Built Faster Act, 2022. Bill 23 was posted to the Environmental Registry of Ontario (“ERO”) on October 25, with commenting open until December 9th (45 days). The purpose of Bill 23 is to respond to Ontario’s ‘housing supply crisis’ and the Government’s ambitious goal for 1.5 million new homes to be built within the next 10 years. In simple terms, the Government states that “Bill 23 proposes changes to the Planning Act and the Development Charges Act to further streamline approvals for housing and reduce barriers and costs to development.” Recognizing the highly consequential nature of Bill 23, Waterloo City Council passed a motion (attached as Appendix ‘A’) on November 14, 2022 requesting that the proposed Bill 23 be deferred until the incoming new council can evaluate and comment on the legislation. The term for all municipal councils began on November 15, 2022 and the City of Waterloo held the Inaugural Meeting of Waterloo Council on November 21, 2022. Given the short commenting period, City staff submitted administrative comments on the proposed Bill 23 on November 22, 2022 (attached as Appendix ‘B’). Despite the open commenting period, Bill 23 was passed by the Legislature and received Royal Assent on November 28, 2022. Comments received after November 28th will be considered by the Province as part of the implementation of Bill 23. Notwithstanding the concerns identified in staff’s November 22nd letter, which are shared by the Association of Municipalities Ontario (AMO), Municipal Finance Officers’ Association (MFOA) and many other municipalities, Bill 23 has been enacted with few modifications. As a result, the City of Waterloo must now adapt its operations to address the legislation’s many changes to land use planning, municipal financing, heritage conservation, and local governance. Leading up to the passing of Bill 23 by the Legislature: a.) The Government of Ontario released More Homes, More Choice: Ontario’s Housing Supply Action Plan in May 2019, with a vision to reduce “red tape” to make it easier to build housing, make housing more affordable, and help taxpayers keep more of their income. b.) The Government of Ontario passed Bill 108, More Homes, More Choice Act, 2019 on June 6, 2019, resulting in various amendments to the Planning Act, the Development Charges Act, the Ontario Heritage Act, and Conservation Authorities Act. Council Meeting Page 13 of 38 December 12, 2022 6 Integrated Planning & Public Works c.) The Government of Ontario passed Bill 138, Plan to Build Ontario Together Act, 2019 on December 10, 2019, amending the Development Charges Act. d.) The Government of Ontario passed Bill 197, COVID-19 Economic Recovery Act, 2020 on July 21, 2020, further amending the Planning Act and the Development Charges Act. e.) The Government of Ontario passed Bill 213, Better for People, Smarter for Business Act, 2020 on December 8, 2020, further amending the Planning Act and development charges via the Ministry of Training, Colleges and Universities Act. f.) The Government of Ontario announced $45 million in January 2022 to help streamline development approvals and increase the supply of housing in Ontario’s thirty-nine largest municipalities, including up to $1 million to the City of Waterloo to fund the implementation of online systems, improve development approvals processes, and hire temporary staff to manage applications until February 28, 2023. g.) The Government of Ontario received the Report of the Ontario Housing Affordability Task Force on February 8, 2022 which concluded that not enough housing is being built to meet the needs of Ontario’s growing population during this affordability crisis. The report contains 55 recommendations, and set an ambitious goal of constructing 1.5 million new homes in the next ten years. h.) The Government of Ontario passed Bill 109, More Homes for Everyone Act, 2022 on April 14, 2022 with the intent of streamlining development approvals in order to build homes faster, including imposing financial penalties on municipalities that do not issue a decision on zoning by-law amendment applications within 90 days (or 120 days if submitted concurrently with an official plan amendment application), and imposing financial penalties on municipalities that do not issue an approval of a site plan application within 60 days. i.) The Minister of Municipal Affairs and Housing issued a letter to the City of Waterloo on October 25, 2022 asking the City of Waterloo to demonstrate its commitment to accelerating housing supply by issuing a Municipal Housing Pledge on or before March 1, 2023 for the construction of 16,000 new homes in the city by 2031, contributing to the Provincial goal of 1.5 million new homes built over the next 10 years. j.) The Government of Ontario introduced Bill 23, More Homes Built Faster Act, 2022 on October 25, 2022. k.) The Government of Ontario introduced Bill 39, Better Municipal Governance Act, 2022 on November 16, 2022, which has received second reading. Bill 39 seeks to extent strong mayor tools to rapidly growing municipalities in Ontario, Council Meeting Page 14 of 38 December 12, 2022 7 Integrated Planning & Public Works with provincially-appointed facilitators tasked with assessing regional governance in Durham, Halton, Niagara, Peel, Waterloo and York, to determine the optimal mix of roles and responsibilities between upper and lower-tier municipalities and to ensure municipalities are equipped to deliver on the Province’s commitment to tackle the housing supply crisis. The City of Waterloo is supportive of efforts to streamline development approvals and increase the supply of housing in a manner that is context sensitive, responsive to the needs of the community, contributes to good land use planning and quality built form, and that is cost-effective to taxpayers and ratepayers. We estimate approximately 22,000 housing units in the pipeline at various stages of the design, review and construction process. While the City will do our part to plan for development capacity to achieve the Provincial housing target by 2031, it must be recognized that the construction of new housing is contingent upon the development industry doing its part to construct the homes (including affordable and attainable housing units) in a timely manner. A collaborative approach by all is needed to achieve positive results. Since Bill 23 does not impose requirements on the development industry, including requirements for affordable or attainable housing, it is unclear how the legislation will increase the supply of housing beyond the City’s current fast pace of growth, or how it will lead to more affordable housing in the community. It should also be recognized that new construction is influenced by a wide range of factors beyond Provincial and municipal control including economic conditions, a shortage of skilled tradespeople, supply chain disruptions, and developer disputes/ appeals. City of Waterloo - 10 Point Adaptation Plan Moving forward, with the enactment of Bills 23 and 109, the City of Waterloo must modify its operations to address the new legislation as passed by the Province. To that end, staff have identified ten (10) core areas to focus on as the City of Waterloo adapts to Bills 23 and 109, as follows: 1. Continue to streamline development approvals. The City will need to further evaluate and amend current development approval processes to better align with the timelines under Bill 109 and legislative amendments under Bill 23. Various municipal by-laws will need to be amended to prevent conflicts with the legislation. Additional delegated authority from Council to staff will be evaluated, as contemplated in Amendment No. 34 to the City’s Official Plan. Mechanisms and tools to achieve local planning objectives and standards will be revisited, recognizing that buildings remain in a community for 50-100 years, and urban design and landscaping matter – both are critical to creating successful built environments and a sense of community identity and comfort, particularly in the context of infill and intensification. 2. Revised approach to consultation. The City of Waterloo has long supported inclusive, open and transparent planning processes with meaningful consultation Council Meeting Page 15 of 38 December 12, 2022 8 Integrated Planning & Public Works opportunities for interested persons and community groups. Bill 23 prioritizes approval speed over consultation, in an effort to construct new homes faster. Existing communication and engagement strategies will need to be revisited, with more reliance on electronic submissions with shorter consultation windows. 3. Joint Initiatives. City staff are actively engaging and collaborating with our counterparts in Planning, Building, Finance and Legal Services in the region, to identify joint initiative opportunities that align with the intent of the legislation, such as mirroring approaches to processing planning applications going forward with a stronger emphasis on pre-consultation and better supporting documents from consultants before applications are deemed ‘complete’. 4. Collaborating with the Development Industry. In order for Bills 23 and 109 to yield positive outcomes, a collaborative approach by all is needed. The development industry will need to do its part to construct new housing at the required pace, including affordable and attainable housing units. City staff will continue to engagement the development industry on housing policy, regulations, processes and finances, including the Waterloo Region Home Builders’ Association. 5. Adjust staffing. Bill 109 combined with Bill 23 will create operational pressures related to development approval processes and further downloading of upper-tier and conservation authority responsibilities to lower-tier municipalities. In the City of Waterloo, it is anticipated that 5-8 additional full-time equivalent positions will be required in various divisions (e.g. Planning, Engineering, Legal Services, and Finance). The use of specialist consultants and contract staff may also be needed. Increased staffing needs are expected to create financial pressure that will be evaluated and addressed through the 2024-2026 budget process. 6. Evaluation of options to mitigate financial impacts. We are in a period of high inflation combined with rapidly increasing infrastructure costs, straining our capital budget. Bill 23 will exacerbate existing financial pressures by negatively impacting development charges, community benefit charges, and parkland contributions. In the City of Waterloo, Bill 23 will reduce development charges in the range of $23 to $31 million over the next five years – that’s a 27% to 36% reduction in funds normally receive from the development industry – and another $2 to $3 million per year in operating costs. Collectively, this could equate to a 7% to 10% tax increase: Potential Range of Tax Implications Council Meeting Page 16 of 38 December 12, 2022 9 Integrated Planning & Public Works In concert with Bill 23, Bill 109 will negatively impact municipal revenues used to fund planning services as a result of monetary penalties tied to processing timelines for zoning by-law amendment applications and site plan applications. It will be extremely challenging and resource intensive to process the quantity, scale and scope of development applications that are typical for an intensifying municipality like the City of Waterloo within the mandated 60-90 days. Financial impacts will need to be offset by senior government funding, reduced levels of service, delayed or cancelled capital projects, and/or alternative funding sources (e.g. property tax increases, city utility rate increases, advanced timing of infrastructure agreements with developers). Staff will update Council in February 2023 on potential capital adjustments in response to Bill 23 impacts. In the meantime, staff are pausing the review of the Development Charges Background Study / By-law, which was initiated earlier in 2022. By continuing to rely on the City’s existing Development Charge By-law #2019-064 (which is effective until December 31, 2024), staff can mitigate some, but not all, of Bill 23’s immediate financial impacts until 2024-2025. Financial implications are further discussed in Section B of IPPW2022-063. 7. Engagement in Bill 39. Bill 23 proposes to designate the Regional Municipality of Waterloo as an “upper-tier municipality without planning responsibilities”. As outlined in our November 22nd letter, staff recommended that this component of Bill 23 be deferred until after Bill 39 is acted upon. It is anticipated that the Provincial facilitator appointed under Bill 39 will recognize the collaborative and efficient working relationship that exists between the Region of Waterloo and each of the lower tier municipalities, the innovative and practical approaches to urban and rural planning in this region, and the merits of the Region remaining involved in select planning functions. The Grand River Conservation Authority (GRCA) have also been an important partner in promoting careful and sustainable land development. In our experience, planning for and coordination of large scale transportation and infrastructure servicing works, and land budgeting is most effectively planned at a regional level. Such planning would extend to important environmental considerations and protection of the: • countryside line • significant cultural heritage • natural features / systems (including source water) Waterloo will constructively and collaboratively engage the Provincial facilitator appointed under Bill 39 to help shape regional planning-related responsibilities, and advocate for inclusive discussions with all stakeholders. In the event upper-tier planning responsibilities are removed from the Region and shifted to the City, we will need to hire additional staff and retain specialized consultants to complete the work currently being undertaken by the Region – this will be evaluated and addressed through the 2024-2026 budget process. Council Meeting Page 17 of 38 December 12, 2022 10 Integrated Planning & Public Works Bill 39 seeks to extent strong mayor tools to rapidly growing municipalities like the City of Waterloo. If strong mayor powers are conferred, an agreed upon approach to the use of such powers should be established by the Ontario Big City Mayors, to provide consistency and reassurance as to how and when such powers may be acted upon, with the public interest in mind. 8. Station Area Zoning. Bill 23 provides municipalities one (1) year to update their zoning by-laws for station areas. For Waterloo, we require Provincial approval of Regional Official Plan Amendment No. 6 (ROPA 6) to satisfy the municipal comprehensive review (“MCR”) requirement under the Planning Act, which in turn will allow certain employment areas surrounding the Research & Technology ION Station, Northfield ION Station, and Conestoga ION Station to be modified to accommodate residential uses where appropriate. City staff support the timely approval of ROPA 6 as written, and will commence a zoning by-law amendment application to implement the City’s Station Area Planning, 2017 immediately after Provincial approval of ROPA 6. ROPA 6 was posted to the ERO on December 5, 2022 for a 30 day commenting period ending January 4, 2023. 9. Affordable Housing Strategy. A strategic objective of the City of Waterloo is to increase the amount of local affordable housing. In accordance with the City’s Strategic Plan, staff are preparing an Affordable Housing Strategy (“AHS”) for Council’s consideration in February 2023. As a municipality, our authority is derived from the Province. With respect to affordable housing, the City of Waterloo has very limited authority. Our primary role is to support the Region of Waterloo. The Region is the local housing service provider responsible for policies and programs related to affordable housing. Bill 23 creates a legislative framework to incent affordable housing through development charge exemptions and parkland contribution reductions. This Provincial led approach will require the City of Waterloo to rethink its approach to affordable housing incentives (i.e., affordable housing grant program), in part due to budget pressures created by Bill 23. 10.Public Communication. Bill 23 is highly consequential with substantive changes to land use planning, municipal financing, heritage conservation, and local governance. Many local constituents and groups are concerned about diminished municipal land use planning authorities, potential for negative environmental outcomes, and prospects of higher taxes. As we adapt to Bills 23 and 109, it will be important for the City to reassure the community that our strategic objectives, planning principles, and financial standards remain intact and engrained in our municipal ethos. Council Meeting Page 18 of 38 December 12, 2022 11 Integrated Planning & Public Works Appendix ‘A’ Excerpt from the City of Waterloo Council Meeting Minutes of November 14, 2022 NOTICE OF MOTION Moved by Councillor Bodaly, seconded by Councillor Henry: WHEREAS the Province of Ontario’s Bill 23 – “More Homes Built Faster” Act recently passed Second Reading and is now open for comment; and WHEREAS Bill 23 is a significant piece of legislation that would, if passed, be highly consequential to land use planning at both the City and Regional level, significantly altering municipal responsibilities, restricting appeals, decreasing review timelines and eliminating public consultation for plans of subdivision; and WHEREAS Bill 23 would have highly consequential financial implications to the City of Waterloo with respect to funding infrastructure and growth, as well as creating staffing pressures related to shifting Regional planning responsibilities, leading to an increased tax burden on ratepayers in the City; and WHEREAS Bill 23 has far reaching impacts related to environmental protections, ranging from challenges in meeting Regional planning objectives such as the Countryside Line, to limiting of the City’s ability to implement Green Development Standards, to restrictions of Conservation Authorities and reduced protections for wetlands; and WHEREAS the City of Waterloo acknowledges the affordable housing crisis and is in the process of creating the City’s first ever Affordable Housing Strategy; and WHEREAS City of Waterloo staff are preparing comments on Bill 23 that will be submitted to the Province prior to the November 24th deadline, however the timing of introduction of Bill 23 does not permit ample opportunity for newly elected City of Waterloo Council to appropriately assess the significant changes proposed and provide their commentary, given their inaugural meeting is November 21st and their first regular meeting is December 5th; and WHEREAS the Ontario Big City Mayors have requested that the Government of Ontario extend the comment period on Bill 23, to allow for full municipal participation, in recognition of twelve newly-elected Mayors in Ontario, including in the City of Waterloo; Council Meeting Page 19 of 38 December 12, 2022 12 Integrated Planning & Public Works THEREFORE BE IT RESOLVED that the City of Waterloo requests the Government of Ontario to defer clause-by-clause review of Bill 23 at committee stage until such time as f