Hefty fees and taxes placed on new housing developments are a significant contributor to Vancouver’s sky-high housing prices.
An new, independent study conducted for the Greater Vancouver Board of Trade’s Housing Forum 2018 found that government taxes and fees account for 26.22% or $220,256 of the total $840,000 cost of a typical new apartment.
The research was carried out by appraisal and tax expert Paul Sullivan from Burgess, Cawley, Sullivan and Associates Ltd., a local commercial real estate appraisal and property tax consulting group.
“When expressing their deep concerns over housing affordability, why haven’t governments taken a long hard look in the mirror?” asks Sullivan.
“Governments at all levels are increasingly addicted to real estate fees and taxes. At a time when all governments are purportedly concerned about housing affordability, all of these increased taxes and fees are just making housing even more expensive.”
Sullivan took on redevelopments on Vancouver’s Cambie Street Corridor as a case study, specifically the example of a $30-million, 20,000-sq-ft redevelopment site with a buildable floor space ratio (FSR) density of 2.5 times the size of the lot or 50,000 sq. ft. of floor area. The average unit size is 800 sq. ft., and the average unit value is $960,000.
Based on his analysis, a local buyer or developer would pay the following in fees and taxes for an 800 sq. ft. unit:
New taxes – the DCC and ST – are included in the analysis. This scenario also assumes a three-year wait time for a permit and two years of construction.
The total in taxes and fees comes to $276.65 per buildable sq. ft. and $314.65 per saleable sq. ft., creating a total added government cost of $251,721.00 for an 800 sq. ft. unit.
Here is a further breakdown from the 26.22% cost impact from government taxes and fees on typical housing units:
“UDI is very concerned about the impacts of all the onerous, new fees, plus provincial and federal taxes on both homebuyers and renters,” said Anne McMullin, President and CEO of the Urban Development Institute (UDI).
“If governments really want to get serious about delivering more affordable housing options, they need to reduce their heavy reliance on taxing real estate and consider providing tax relief on land used to build housing, including purpose-built rentals.”
This adds to a separate study earlier this month that found that strict and inflexible zoning regulations, development charges, and limits on development add $644,000 to the cost of constructing a single-family home in the city.
According to the Real Estate Board of Greater Vancouver, the average price for all residential properties in the region in April 2018 was $1.092 million, with single-family homes averaging at $1.606 million, apartments averaging at $701,000, and townhouses averaging at $854,200.