Travis Allan and Cherise Burda over at the Pembina Insitute, a Toronto-based energy think tank, have an interesting post up on the prospects of using real estate development charges as a funding mechanism for transit. Development charges are fees developers pay to municipalities meant to offset the capital costs of extending or improving services like water or sewage systems that are imposed by new construction. However, the manner in which these fees are calculated is not always conducive to the type of development a city may be trying to encourage. Moreover, transit is rarely a serious consideration in assessing the charge. This is particularly important when development occurs in a place or a pattern that is difficult or impossible to provide good transit service to, such as those that violate the "Be on the way" rule. The original post explains some of the problems the authors observe in Ontario's development charge:
The development charge, as currently implemented in most Ontario municipalities, is crudely designed. There is a strong chance that it is subsidizing less-dense, single family homes while making compact, transit-friendly development more expensive. Development charges also likely overcharge some commercial development, and this could be contributing to the flight of office space to the suburbs, in locations underserviced by transit.
In many Ontario municipalities, including Toronto, new development is charged based on who will use it. For example, many municipalities have a per-unit rate for apartment building units, and another rate for detached single-family homes, regardless of where the buildings are located within the municipality, how much land area they occupy and the cost necessary to service them.
No matter the amount of new road or sewer needed to adequately serve a place, the development charge is assessed based on the number of residents or users. This is obviously perverse. Actual development impacts on the public purse vary based on location and density than by the number of residents or users.
If a city like Toronto wants to make it easier to developers to build a certain type of development, changing the fee structure is one way to create an incentive. But what does this mean for transit?
The authors propose to use a portion of this revenue to pay for infrastructure investments needed to provide transit service to new developments. At the same time, the city could make changes to the structure of the development charge to incentivize the construction of transit-supportive development. If it worked, and there were no unforeseen consequences, the effect could be self-reinforcing: development charges encourage the type of development that transit needs to work well, and pay for some of the cost of providing that service. The supply of housing and commercial buildings that are accessible and designed to work with transit increases, more people are able to live and work in them:
Developers continue to build in sprawling greenfields because it is often cheaper and easier than building developments in walkable, transit-oriented neighbourhoods. Lack of supply means homebuyers are priced out of these locations and are literally “driven” to the urban and suburban fringes, where long and stressful auto commutes are required — and this only leads to more congestion.
Since the vast horizontal distances of greenfields require much more infrastructure person, why should this be as cheap, in development charges, as building compactly??