Municipalities normally generate big surpluses through development and permit fees.
Victoria’s development fees generated a $500k surplus in 2016 and in 2017 they increased the fees.
A review of Saanich accounts reveals inspection fees earning a 50% surplus during the past few years. In 2016, the surplus was more than $1 million.
According to the province, fees should be connected to the cost of providing a service and charged under the principle of reciprocity (eg. fair market fee for reciprocal service).
However, in Saanich, and many other municipalities, the fees are calculated on “value of construction” which includes contractor’s profit, workers’ compensation, liability insurance and other factors having no relationship to the cost of delivering inspection services.
This is similar to BC’s Property Transfer Tax where the tax is based on a home’s market value with no relationship to the cost of doing the property transfer.
As the market rises, including the cost of labour and materials such as lumber due to BC wildfires, building permit fees generate more revenue for municipalities, driving up the cost of homes for purchasers.
Yet costs to inspect the home remain the same, so municipalities receive big surpluses at the expense of housing affordability.
It’s another example of homebuyers being used as a source of govt revenue.
The calculation of building permit fees must change from market value to real costs of inspections, trips to the site, etc.
This is in the interests of both housing affordability and complying with the intent of provincial regulations.