Layers of B.C. taxes and fees add up to 26% 'tariff' on new home costs

What if, in the midst of a housing and rental crisis the government implemented a 26 per cent tariff on all new homes. How would you react?

Many of you would likely protest on social media, demonstrate, sign petitions and even demand the resignation of the politicians responsible for the decision.

And I would be right there, supporting you because I believe that a 26 per cent tariff is outrageous and for many, unaffordable.

Luckily our politicians would never do that to us, or would they? Well, we might not be as lucky as we think.

Paul Sullivan, who is a senior partner in the largest commercial real estate appraisal and property tax consulting group in Canada, crunched the numbers and found that if you combined all government fees and expenses, they added 26 per cent to the cost of a new build.

Sullivan, a partner at Vancouver's Burgess, Cawley Sullivan and Associates, based his calculations on a new, one bedroom and den Cambie Street condo in Vancouver priced at $840,000.

After accounting for the labour, materials and time to build the condo unit, $220,000 had to be set aside to pay for all the government taxes, levies and fees. That's an additional cost of 26 per cent.

Nickel and dimed with fees 

In order for a developer to build a Cambie street condo, a developer would also be responsible for covering the following costs: city fees and taxes, a community amenity contribution, development cost levies, the vacant home tax, property taxes, regional water and sewer charges, Translink's new regional development cost, the speculation tax  — when that takes effect — property transfer tax and GST.  

These add up to approximately $220,000, so a condo that could sell for $620,000 now sells for $840,000.

I'm a realist and don't expect that all of these charges and levies will disappear. I'm also aware these fees help pay for transit, community centres and infrastructure, but B.C.'s fees are higher compared to other big cities in Canada. 

A similar report by the C.D. Howe Institute noted that fees and taxes on new homes in Toronto, for example, add about $70,000 to the final cost. In York Region, the figure is $125,000 and $100,000 in Hamilton.

Knowing it would be political suicide, politicians avoid placing a single/transparent 26 per cent tariff on housing. Instead they nickel and dime us with several fees, all of which add up to 26 per cent.

In the end, the amount you pay is the same. It is an excessive amount and needs to be reduced. If not, I doubt we will ever fix housing problem.

Take the empty home tax. Its purpose is to penalize people who own vacant homes but are not renting them out. This tax is also charged to developers.  

It shouldn't because developers create housing, they don't remove it. They are also at the mercy of the city's planning departments. It takes at least three years to get all the necessary city permits and approvals — all the while, the land that they bought and intend to develop is subject to the vacant home tax.

Costs passed to buyer or renter

Before you think "what's the big deal, the developers can afford it," remember, in the end, these extra costs will be passed on to the eventual condo purchaser or renter.

And with municipal elections coming and every candidate looking for votes, it is the perfect opportunity to call out our government's own policies.

Both Paul Sullivan's research and a CD Howe Report on housing point to "government" as one of the largest contributors to the lack of affordability in our housing market.

So far politicians have taken measures to curb demand by introducing new taxes, targeting foreign buyers and speculators however they have done little to address the supply side.

The C.D. Howe Institute's report on housing makes several recommendations to bolster the supply-side. They conclude that fewer fees, new zoning, and a streamlined approval process would equate to more homes, built in a timely manner, and at a lower price point.

It's time for politicians to look at themselves in the mirror and admit that they are a big part of the problem. The first step is admitting that they have a problem, only then can they make necessary changes to fix it.

This column is part of CBC's Opinion section. For more information about this section, please read this editor's blog and our FAQ.