Belleville reduces bond burden on developers to boost housing builds

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Calls for municipalities to cut red tape to help local developers build faster to counter a housing crisis will be answered in part by a new approach in Belleville.

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Belleville city council approved Monday a staff recommendation to adopt surety bonds called ‘Pay-On Demand Subdivision Bonds’ for development agreements.

Allowing developers to pay for a surety bond is an alternative to the city demanding traditional letters of credit from developers which tie up capital funds that can be used alternatively to push construction through more quickly.

Letters of credit require developers to post up to half of the development costs as a security to guard against uncompleted projects.

City staff recommended the surety alternative after attending a webinar in November of last year hosted by Ontario Home Builders Association (OHBA) and the Surety Association of Canada (SAC).

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Coun. Paul Carr, chair of Belleville’s Planning Advisory Committee, praised the idea.

Carr said the surety bonds “still gives the municipality the assurances and the coverages as development is occurring but not requiring the transferring of funds which means the developers continue to have access to liquidity in order to continue to build.”

He lauded city staff for “taking the initiative to look for ways to drop barriers to allow development to occur and be at the front end of this.”

Carr, however, also noted later in the meeting that developers who have secured building permits must work harder to deliver construction projects faster.

Ontario forecasts a housing shortage of 1.5 million housing units in the next decade.

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There are estimates up to 14,000 new housing units are needed in Quinte.

Coun. Barbara Enright-Miller said, “we have an ever-growing housing market and this will help developers keep some money in their pocket and continue to grow for us.”

In a report to council, Jarrod Gliddon, city development engineer, informed that with a “Pay-On-Demand Subdivision Bond, the developer would pay a premium to a Surety Company to provide the same security to the City, but would not require the actual funds to be held for the duration of the agreement. This would allow the Developer to free up cash required for the development and still provide the city with access to funds from the Surety Company, if required.”

“With the current pace of development and often with multiple projects underway at same time, the financial implications of the LOC process places significant financial burden on the development industry. This in turn increases the pressure being placed on the city to keep pace with the post-construction inspection and conformance process, amidst other competing work pressures,” Gliddon wrote.

He said after staff researched the new surety-approach, “staff believes that surety bonds are just as liquid as a letter of credit and would not carry any additional risk to the municipality.”