Building Permits – The Gathering Economic Storm

By August 23, 2013Business News, Hot Topic

By Mike Archer. The first six months of 2013 provided what seemed like some much needed good news for those who watch building permits as an indicator for the local economy.

Even more important, for those who are concerned about the hemorrhaging city finances, building permit values have been steadily declining for years and, along with housing starts have lead to anemic levels of economic growth in Abbotsford. Without housing starts, and before them, building permits, the construction sector weakens, the local economy falters and municipal revenues dry up.

When municipal revenues dry up the city can either cut costs or raise taxes. After several years of double digit tax increases and the recent doubling of water rates, Abbotsford taxpayers are in no mood for additional tax or fee increases. With news this week that interest rates are beginning to rise, the average family living with a $500,000 mortgage will pay between $60 and $100 more per month financing their home.

Plan A costs from 2006 to 2012 were roughly $41 Million. The reduction in Abbotsford’s Development Cost Charges fund from 2006 to 2012 was roughly $41 Million and, as a result, we are the only municipality in the Fraser Valley which owes ourselves money and has no money set aside for the infrastructure required for economic growth.

Plan A, which, according to former councillor Bruce Beck and current councillor John Smith, was supposed to be bringing in millions in profits each year by now is, instead, costing taxpayers millions – some estimate it at about $10 Million a year – and since municipalities can’t run a deficit … you do the math.

If you look at the record of housing starts and building permits over the last decade you will see that, other than for a brief stretch of condo building in 2006-07, both key indicators have been on a steady decline.

In 2012 we didn’t even have the numbers we were managing to achieve in 2004. Numbers for the first six months of 2013 are up 27 percent – which is good news.

It may well be too little too late.
Building Permits
Though realtors and economists are arguing over the meaning of the July sales increase in most Canadian real estate markets, the underlying truth is frightening. Realtors tend to see a revival of the somnolent real estate market – economists tend to see the calm before the storm.

We reported last week on news that there has been a major reduction in investment in building permits across the country and the belief among some experts that this signals the fact that the smart money is pulling out of the housing and building construction market.

RealNet reported last week that purchases of land for new housing all but collapsed in Calgary, Toronto and Vancouver, which the firm suggests is a sign developers believe Canada’s long-running housing boom is at an end.”

Whereas this is a major threat to the Canadian economy as a whole, it is a disaster-in-the-making for Abbotsford which has no economic or population growth on the horizon and, due the millions of dollars a year represented by the Plan A commitments and costs, we can’t update our water and sewer infrastructure fast enough to accommodate whatever growth might be out there.

Despite all of the rhetoric about our population being 140,000 and rising towards upwards of 170,000 – the fact is our population grew from 12,3000 to 133,000 between 2005 and 2012.

For a city in such precarious financial straights the storm clouds which are gathering do not bode well.

What The Meltdown In Housing Starts Means To City Hall

Abbotsford Building Permits And DCCs 2004 – 2012

Abbotsford Housing Starts … A Relentless, Steady Decade Of Decline

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