Are the taxes levied on new housing driving skyrocketing prices in the Vancouver market?
That’s the claim being made by the Canadian Taxpayers federation who’ve produced a report that claims new Vancouver homes are slapped with 107 different taxes.
It offers the model of a single Vancouver condo, retailing for $403,809, of which they assert $109,118 is government costs.
Spokesperson Jordan Bateman says that’s a big problem for a young home buyer.
“For someone just trying to get into the market, the fact that there’s 107 taxes that are levied on housing in the city of Vancouver it’s got to be a little bit daunting, and not matter what Gregor Robertson and other politicians want to say about housing affordability and the causes of it, they certainly have a role to play and need to look in the mirror to address some of these issues”
Under the CTF breakdown, more than $41,000 comes from federal taxes, nearly $17,000 from provincial taxes, and a whopping $50,500 from the municipal level.
But a deeper dive into the numbers shows it’s not so simple.
Under the federal calculation, for example, income tax and CPP contributions are counted, but are payed by workers to Ottawa and would not make their way into a final sale price of a unit.
Similarly, at the municipal level, Heritage Density Purchases occur in a just small fraction of developments when a developer pays to restore heritage property in exchange for more density.
Vancouver Councillor Geoff Meggs says the numbers simply don’t add up.
“They’re counting federal fuel tax as part of the cost of housing. Not sure how they get there, but they do. They’ve put in WorkSafe levies. What has the Canada Pension Plan got to do with the cost of housing? This is a kitchen sink kind of research program, it’s not serious work.”
That still leaves a hefty chunk of change being collected by the city but Meggs says it’s yet another red herring.
He says the fees are a key element of the way the city funds infrastructure upgrades, parks, childcare and social housing… money that would be spent developer fees or no.
“If we were to take the Taxpayer federation argument we’d stop collecting those charges and then lay it straight onto all property owners even if they aren’t building something.”
“All of these fees would be eliminated and then presumably paid, because the work still needs to be done, by the taxpayers at large.”
He says in a hot market, eliminating the fees would just put the difference in the pockets of developers as fatter profits.
Bateman disagrees. He says on top of the big ticket fees like Community Amenity Contributions and Municipal Development Cost Levies there are still dozens of small regulatory costs collected on every project and passed on to the consumer.
And the provincial government seems to agree. Earlier this year in the throne speech, it pledged to force cities to reveal the “hidden costs” applied to development:
“Your government will work with municipalities to reduce the hidden costs in home purchases, and to make those hidden costs clear and transparent to the home buyer.”
Supply and demand
Meggs insists the fracas over municipal fees is a distraction from the real problem: low supply.
“If there’s a tremendous market demand as we see today then you’re going to see those prices go up – and they’re going up at a very quick rate, like 25% a year, whereas our fees are going up at 1.5-2%.”
Here too he butts heads with the Bateman, who asserts the process involved in collecting municipal fees is actually helping curb supply by piling up the paperwork.
“All of this slows the amount of supply that gets out to customers. In a free market like we have the only way to break the back of a huge pricing issue is more supply. You’ve got to find a way to get more supply to market faster.”
But Meggs says the rules are there for a reason, and that cutting back on scrutiny would lead to shoddy construction by unscrupulous developers.