City council has voted to end the downtown development fee exemption as part of widespread changes to municipal charges on building projects.
The exemption will be continue for a grace period of two years before being eliminated entirely.
Somerset Ward Coun. Diane Holmes proposed an extension of five years instead of two at both a council meeting on June 24 and a planning and environment committee earlier.
The committee defeated the motion 5-2 while council defeated it 16-6.
Knoxdale-Merivale Ward Coun. Gord Hunter argued that the exemption simply inflated the land price, with the profits going to landowners instead of the city. He voted against the exemption.
"All we're doing (by keeping the exemption) is hurting the development bank account," he said.
Alta Vista Ward Coun. Peter Hume, chair of the planning committee, said he received several submissions confirming Hunter’s point.
Holmes said the city would be better off with the exemption.
"The development community is asking for the exemption to remain and the BIAs are asking too," she said in council.
She said much of the recent development in the downtown core would not have been possible if there were development fees. She cited the difficulties of building in such a built-up area, including ensuring the safety of neighbouring buildings, having to rent part of the street and the inflexibility of hydro poles.
"It's a shame," said Gerry LePage, executive director of the Bank Street BIA, describing the exemption as "one of the best practices the city has."
LePage says removing the exemption will affect first-time homeowners because it will not only remove the incentive to build affordable units but also increase the prices of the lower-end homes.
"The exemption has worked and it continues to work," he said.
The exemption will end Aug. 1, 2011, but any projects that have a city site plan by that date will still be exempt. The five-year extension would have removed the charges until 2014.
"At least we got the two year extension," said Holmes.