'Growth Pays For Growth' Harms Younger And Future Generations
Gen Squeeze supporter Terry Bell calls out municipalities for using this mantra to deflect from years of either inadequately taxing homeowners or spending beyond their means
Gen Squeeze supporter Terry Bell copied us on a letter he sent to the Metro Vancouver Finance Department about a recent proposal to increase development cost charges (DCCs) on residential and other development. And wow – once again, we were blown away by what generational fairness mavens are doing to make sure elected and public officials consider the impacts of their decisions on younger and future generations.
The backstory: Metro Vancouver wants to increase DCCs by between $14-23k on various types of new housing. The rationale offered by supporters of this proposal is that ‘growth should pay for growth.’ In practical terms, this means people who want to join a community who should pay for new and upgraded infrastructure, so that existing community residents don’t incur these expenses.
Terry’s analysis is bang on – and we share his deep concern. Here’s what Terry had to say:
The argument that ‘growth-pays-for-growth’ is simply a deflection from the fact that either (1) the municipalities, for years, have been spending beyond their means, or (2) that existing homeowners have not been paying enough in taxes. The development cost charges (DCCs) will, without question, be passed down to future homebuyers. Thereby, raising the cost of housing and debts of future generations of homeowners. This is the same generation of homebuyers that are already imperilled by incredibly high housing costs, which are gutting our cities of working-class families; teachers, nurses, police officers etc.
In response to the increase in DCCs, the Mayor of Burnaby, Mr. Mike Hurley, was quoted in Business in Vancouver as saying: “We don’t want to burden existing taxpayers for paying for infrastructure that’s really for new developments and to bring new people into the country. We believe growth should pay for growth.” In a CBC article, he said, “People who have been paying taxes in this region for a long time — 50, 60, 70 years … would have a hard time accepting that they're going to pay for future growth. They have paid their share and they continue to pay their share.”
Future home buyers will also be subject to municipal taxes, and ‘pay their share’. But, the proposed increase in DCCs will, in effect, result in a $10,000-$30,000 lump sum tax to live in these communities… And, they will still be subject to ongoing municipal taxes. Were ‘existing taxpayers’ burdened with a lump sum payment of $10,000-$30,000 at the time they purchased their home in the 1960s, 70s, or 80s? I should also point out that many ‘existing taxpayers’ have seen six-figure, untaxed capital gains due to the increase in value to their properties. The next generation that is being burdened with these DCCs will not see such windfall gains. The argument that “growth-pays-for-growth” is effectively an argument that younger generations must pay for (1) overspending by municipalities, or (2) ensure that previous generations can keep all of their windfall capital gains.
I understand that the funds are required to upgrade water, wastewater, and park facilities. But it is disingenuous and extremely inequitable to argue that the only way to do this is to further tax and burden future generations.
Yes! As Terry so clearly articulates, supporters of the Metro Van proposal fail to acknowledge the profound intergenerational tensions at the heart of Canada’s housing system. Thanks to rapidly rising prices, many current homeowners (especially those who are older) have gained enormous housing wealth. They haven’t done anything in particular to merit this windfall – mostly, they lucked out in the lottery of good timing.
The very same rising prices making many homeowners rich are harming their kids and grandkids, who are too often locked out of the housing market altogether – whether as owners or renters. In response, younger generations are making enormous adaptations in where and how they live, and whether or when they will start families – while also experiencing declining mental health and wellbeing.
We can’t fix the housing system by exacerbating these intergenerational tensions, yet this is precisely what Metro Vancouver will do with its ‘growth should pay for growth’ mantra.
The truth is that we’re all entangled in the mix of policy incentives that deliver windfall gains to homeowners, and harmful unaffordability to younger and future generations. And we all have a role to play in creating a fairer and more affordable housing system.
The beneficiaries of decades of home price increases can stand up for their kids and grandkids by supporting Gen Squeeze’s proposal to put a price on housing inequity.
The proceeds from a small progressive surtax on annual property taxation of homes valued above $1 million would allow Metro Vancouver to reduce the DCCs that drive up expenses for young people and newcomers entering the market. This approach would ask those who have benefitted from surging home values to contribute a bit more to the infrastructure needed to price young people back in.
Thanks, Terry for weighing in on this important issue and shining a light on its generational implications.
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Great job Andrea! The existing incentives are all wrong. My 30-year-old trainer making around 90 K a year can't afford to buy a house. He lives with his parents. Yet he has the same mentality that my rich peers have when they sell their houses for 1.7 million- houses that they paid less than $90, 000 for in the late 80s early 90s. Both generations like the idea of owning a house as the best investment out there. House values should rise to keep up with inflation but not be a better investment than the stock market!! It's a shame we do not have leadership that says that this is all wrong. It's as bigger shame that young people like my trainer wanting to buy a house but can't get behind Generation Squeeze. Far from being an engaged citizen protesting for fairness, he like so many are passive consumers looking to get in on housing as the best investment out there. "The government should not interfere-that's socialism" says my trainer. No it's not, I say, its merely a matter of changing the incentivization...the rules to the game and seeing housing as an essential -basic need. That "merely" requires engaged citizens to have the will to actively speak out to make politicians take notice and address it.
"We don’t want to burden existing taxpayers for paying for infrastructure [...] to bring new people into the country," is honestly such an interesting comment on the part of the mayor. Population growth and the extra one-time infrastructure expansion costs that come with it genuinely are a little different than just factoring in infrastructure replacement appropriately (which as Terry notes municipalities also often don't collect enough revenue from existing taxpayers for in the first place). This link is about Australia but is also extremely relevant to Canada in terms of some of the ignored costs (some private, some public) of expanding capital stock. https://www.smh.com.au/opinion/the-huge-hidden-cost-of-population-growth-20160219-gmyddb.html
The very frustrating part is boomers themselves (who are not the only existing homeowners but I will pick on them anyway) were such enormous beneficiaries of public investment to accommodate them despite the claims they have paid their share. And, they will benefit from population growth both through increased housing demand and the economic growth to pay for services and benefits as they age. But there is a real difficulty for municipalities both because they don't have all the revenue sources other levels of government do (e.g., have more limited ability to benefit financially from growth) and also population growth might have diffuse benefits (say for the income tax base) but local infrastructure costs concentrated in municipalities that are growing faster than others. So definitely a tax shift makes sense, but I also think that it makes sense to acknowledge that the costs of growth are real costs (not just overspending) even while acknowledging new residents are not the only beneficiaries of growth. I saw "the beneficiaries of growth should pay for growth" once which is much less pithy than the original but also probably right.