There are a whole lotta reasons why housing is so costly today. And one is the rising government development fees, levies and taxes associated with new development.
According to the Residential and Civil Construction Alliance of Ontario and the Residential Construction Council of Ontario, much of this push in prices can be traced back to high fees and taxes from the municipal and provincial governments.
Here’s an article quoting Yours Truly recently published in PropertyWire.Ca.
~ Steven
Government Fees Threaten Affordability
Heather Wright, Real Estate Trade Journalist
Published on Propertywire.ca, a resource for Real Estate and Mortgage Professionals, March 2011.
Home prices are on the rise in the GTA, and according to the Residential and Civil Construction Alliance of Ontario and the Residential Construction Council of Ontario, much of this push in prices can be traced back to high fees and taxes from the municipal and provincial governments.
Two separate reports released jointly by the Residential Construction Council of Ontario and by the Residential and Civil Construction Alliance of Ontario (RCCAO) suggest that “Housing prices in the Greater Toronto Area have more than doubled since 1998, … provincial and municipal governments have fuelled much of this increase through a myriad of fees, charges and regulatory costs that ultimately are borne by new homebuyers.”
The worry is that, with the likelihood of rising interest rates, coupled with increases in prices- which they attribute to government levies- home ownership and affordability may move beyond the reach of the average homebuyer.
According to the findings of the report,” Up to 30% of the cost of new housing in the GTA is now attributable to direct and indirect government charges.” And “Regional and municipal development charges alone now add $30,000 to $50,000 to the price of a new home.”
Breaking down the numbers in the GTA, total development charges for single and semi-detached homes ranged from $27,212 in Oshawa at the low end to the high end of $50,458 in Oakville; these costs place development costs for the GTA among the highest- not only the country- but all of North America.
In Canada, the next highest is Vancouver at $ 23,418, followed by Calgary at a much lower $ $7,475.
These associations believe that the municipal and provincial governments are being less than transparent in their tax collection. “Government-imposed costs on housing have doubled, and in some cases tripled, over the last decade. The reason? Faced with mounting fiscal pressures, governments have increasingly looked to housing for additional revenue because often these charges are not transparent to consumers, unlike property tax increases.”
The common fear here is that this benefit of cash flow into governmental coffers now, will have long term negative impact both on the market itself, and on the overall affordability of housing for homebuyers in the GTA.
Also, the two bodies are concerned about the impact affordable housing will have on employment, land use policies, urban density and a possible slowing of demand.
Toronto Realtor, Steven Fudge, Sales Rep, Bosley R.E. Ltd., Brokerage has seen evidence of upward pricing in his market: “”Market conditions have already begun to push the threshold of affordability out of reach for first time buyers. If affordability exists it will be on the outer reaches of the GTA or in smaller infill housing developments with a higher density.”
It is important to remember though, that the local governments deem these to be development fees- so if they are being used to properly enhance infrastructure, they do ultimately increase the value of the property- and the value of the homeowner investment. Says Fudge: “”Costs for public transportation, schools and community services are costly to build, but having any of these items in proximity to your residence will enhance the value of the property.”
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