Land developers and new home builders are criticized by anti-development groups and individuals in cities across Canada..Naysayers claim developers and builders have city officials ‘in their pockets’ and can build anything they want, anywhere they want..Nothing is further from the truth..Governments control the industry providing shelter with a never-ending pile of bureaucratic regulations, which delay new homes from coming onto the market. .The lack of new supply increases the costs of all housing, as do all the government charges, highlighted in a new report from Canada Mortgage and Housing Corporation (CMHC), prepared in conjunction with the Altus Group..The report studied the costs of government policies in Canada’s three largest Metros: Montreal, Toronto and Vancouver..“These centres have seen the highest housing demand and affordability pressures, especially Toronto and Vancouver where affordability challenges have been longstanding,” says the report..Government fees added, on average, 12% to prices in Montreal, 15% in Toronto and 20% in Vancouver, over and above land and construction costs as well as soft costs such as architects, engineers, urban planners, lawyers, project management fees, marketing costs, fees and interest on loans, and contingency costs arising from uncertainty in the development approval timeline..Critics claim their residential taxes pay for new infrastructure and roadways associated with new communities. Not true..The costs for these and other components of new communities are covered by the builders and developers through infrastructure and community levies and taxes..Critics should take note of this comment from the report: “The above charges represent one of the few limited channels for municipalities to raise revenues. Lowering input costs, and specifically government charges, would require broader changes by municipalities in order to maintain the current level of municipal service.”.Or, in more direct terms, without new communities, the critics’ taxes — everyone's taxes — would increase..Governments and bureaucracies, being what they are, can add to the costs (and their revenues) by increasing the number of levies, lengthening the development process, increasing the cost of new home.."By municipality, centres in the Montréal CMA have the fewest government charges and, correspondingly, the shortest development approval timelines,” says the report. ”Timelines in the Vancouver and Toronto CMA are comparatively longer.”.Focusing on Vancouver, and based on average current new home prices, government fees add approximately $180,000 to a price of a typical new condo in Vancouver..Adding to the pain, government fees become part of mortgages and become even larger with rising interest rates..“The City of Vancouver had the highest cost per-square-foot on low-rise and high-rise strata condo buildings of all cities studied, an average of $143 per square foot, owing entirely to density payments,” says CMHC. “Density payments relate to the amount of density permitted on a site and are designed to raise revenue for community amenities, such as swimming pools, parks, etc.”.Charges for low-rise rental buildings in Vancouver, $45/sq. ft., were the second highest in Canada. .The average of 9.3 charges per new multi-family development account for from 7% to 20% of construction costs, with new condominiums paying the higher percentage..“On a per-square-foot basis, depending on the dwelling type, the City of Vancouver’s government fees range between $12 and $143, the lowest being for single-detached, and the highest being for high-rise condominium apartments.”.“Density payments and development charges make up the largest share of the government fees per square foot in the latter.” .Odd that the lowest fees are applied to single-family homes, which is contrarian to the densification mandates favoured by municipal governments in an effort to increase housing supplies. .It’s suddenly not so odd when you consider many more hi-rise buildings are constructed than single-family homes in Vancouver. More hi-rises mean more higher fees finding their way into government coffers..The report verifies what land developers and home builders have said for years — government costs and fees add tens of thousands of dollars to the price of a new home and increasing associated costs, such as mortgages..Something not discussed in the report is the fact subdivisions pay municipal taxes long before construction begins and new homes contribute to the tax base the moment they are sold..The report also dispels critics’ views they’re paying for new developments..Will those fees be diminished? .Not likely..Once a government gets its teeth into a revenue source, it never lets go. .CMHC offers a solution..“Increasing certainty around the number, timing, and magnitude of government fees could improve housing affordability by decreasing other development costs, such as those for construction, e.g., labour, equipment and financing.”.So, pay the workers less, get tougher with your banks and use older equipment?.Such a solution should be adopted by government agencies.
