Government various fees and charges for new homes are ‘rip-offs’

Government takes one-fifth of cost of new homes in greater GTA

New study of greater GTA shows average paid is $119,200 on a new single-detached home and $66,000 for new highrise home.

 

What would you say if I told you that more than one-fifth of the cost of a new home goes to the government through various fees and charges?

The issue of home affordability poses a significant challenge for new home buyers in the GTA. So we commissioned a study by Altus Group, and released this past week, to help make sense of the variety of fees and charges collected by municipal, provincial and federal governments — and the impact of those costs on the affordability of a new home in the region.

The study looks at a variety of fees and charges in six municipalities across the GTA — Town of Oakville, City of Brampton, City of Markham, Town of Bradford-West Gwillimbury, Town of Ajax and the City of Toronto.

The rates can vary in each municipality, so the report lists the value of fees and charges like development charges, planning and building permit fees, parkland dedication, property and land transfer taxes, mortgage insurance, HST and more. To calculate fees and charges based on the land or home value, the average price of a new lowrise or a highrise home in that municipality was used.

On average, the total government charges and fees amount to one-fifth the cost of a new home. In one case, they represent 27 per cent of a new home’s cost.
In dollars, the average adds up to $118,400, or 23 per cent, on a new single-detached home. For a new highrise home, it’s 20 per cent or roughly $ $64,400.

Here’s why it matters: right now, municipalities across the GTA are looking at how they are going to pay for critical infrastructure like roads, bridges, sewers and public services that will be used by not only new residents, but existing residents as well.

Increasing development charges and other government fees is not the answer.

These facts show that new homebuyers across the GTA are already doing their fair share to support the development of essential public infrastructure.

It is estimated that in 2012 alone, the industry, new home buyers and businesses contributed more than $1 billion toward the construction of growth-related infrastructure like sewers, roads and transit in the GTA through development charges paid to municipalities.

The largest government fee on new homes is development charges, according to the study. Since 2004, for the municipalities studied in the report, development charges have increased between 143 per cent and 357 per cent. As I write this, many municipalities across the GTA are proposing further increases to their rates.

Everyone needs and wants the public services these government fees and charges fund. But it’s time we all contact our government representatives to tell them how important it is to keep the rates affordable, so that future generations of new home buyers will one day be able to put these services to good use.

Bryan Tuckey is President and CEO of the Building Industry and Land Development Association (BILD) and can be found on Twitter (twitter.com/bildgta ), Facebook (facebook.com/bildgta ), Youtube (youtube.com/bildgta ) and BILD’s official online blog (bildblogs.ca).

Government charges blamed for record new home costs

Development fees, taxes now add up to average $118,400 on a new, detached house, report says.

Up to one-quarter of the cost of a new home in the GTA is the direct result of government fees — especially municipal development charges that have skyrocketed in less than a decade, according to a new report by the building industry.
The growing list of fees being slapped on new home buyers now adds up to an average of $118,400, or 23 per cent, of the price of a new, single-detached home in the GTA, and more than $64,000, or 20 per cent, of the cost of a new high-rise condo, said the Building Industry and Land Development Association in a report being released Tuesday. (If you are on mobile and/or don’t see the interactive graphic at the top of this story, try this link.)
Those charges — everything from municipal development charges to the HST and transit levies — have helped push the price of a new detached home to a record $640,000 and out of reach of a growing number of buyers, said Bryan Tuckey, president of BILD, which represents 1,400 building-related companies across the GTA.
In 2012, new home buyers in the GTA contributed about $1 billion to government coffers through development charges alone, Tuckey said. He estimates the carrying costs alone of all those government fees can be $60,000 over the life of a mortgage.
Developers say fees, especially development fees, have been escalating so quickly, they have no choice but to pass the costs on to buyers, and have actually diverted some of their building away from especially pricey municipalities like Markham.
But Oakville Mayor Rob Burton, whose municipality ranks tops in the report for fees on condo developments and second in the GTA for new home charges, said subdivisions have continued to sell out and builders’ real fear is protecting their profits.
“There is still huge headroom in the market price of new homes for us to be collecting the cost of growth from developers,” said Burton, adding that he’d like to see development fees cover 100 per cent of the cost of new roads, sewers and community centres needed for new subdivisions, but provincial legislation sets limits on what local governments can recoup from developers.
Municipal development charges alone have skyrocketed between 143 and 357 per cent just since 2004 in the six GTA municipalities studied, the report said.
But, when other government fees are added, such as the HST, land transfer taxes, education and GO Transit levies, as well as requirements for developers to allocate parkland or give cash in lieu, it’s clear that new home buyers are carrying an unfair share of the burden for infrastructure that benefits everyone, Tuckey said.
Those fees hit a peak in the fast-growing City of Markham where local development charges, combined with those levied by the Region of York, amount to $149,077, or 25 per cent of the cost of a new single-family home. And that’s not including a “voluntary” development levy — $5,000 per new home and $2,000 per condo — for a proposed $325 million NHL-sized hockey arena planned for Markham.
Markham Mayor Frank Scarpitti said $10 million has been collected through the special levy just on new homeowners.
“There is no way we could facilitate growth without development charges,” Scarpitti said. “There wouldn’t be another municipality in the GTA that would grow by a single house if we had to put the billions in new infrastructure needed to accommodate new growth on property taxes.”
Oakville ranks top when it comes to condos, with government fees including development charges from the city and Halton regional government adding up to $80,500 or 21 per cent of the price of a condo apartment, according to the report.
BILD commissioned real estate research and consulting firm Altus Group to examine the cumulative effect of government charges in six GTA municipalities, all of which, with the exception of Toronto, have two tiers of government and development charges: the City of Toronto, Oakville/Halton Region, Brampton/Peel Region, Markham/York Region, Ajax/Durham Region, and Bradford West Gwillimbury/Simcoe County.
That was before the City of Toronto, which has among the lowest development charges in the GTA but its own land transfer tax, announced it hopes to double its fees later this year. That could result in extra costs being passed down to thousands of condo buyers who are still waiting for their units to be built.
Affordability is becoming a major challenge across the GTA, and fees slapped on homeowners are part of the issue, but so are escalating land costs and the profits reaped by developers who are getting civic approvals to build higher, more lucrative, buildings or have farmland rezoned for more valuable residential construction, said James McKellar, associate dean of York University’s Schulich School of Business and an author of three studies on development fees.
“Of course, it’s grossly unfair for municipalities to say that new development will pay for all the new infrastructure. But municipalities never intended for (development charges) to be fair. And homebuyers don’t really care.
“There’s no question they are a reasonable cost for all the value that has been created (for developers) across the GTA from rezoning.”

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