Governments collect more fees than they use on new housing and commercial space development, new study says
Municipal policies play a surprisingly major role in eroding housing affordability in Canada’s largest urban markets, according to Altus Group and the Building Industry and Land Development Association.
The case of the Greater Toronto Area is emblematic of this phenomenon, with more than $5 billion in cash reserves currently on hand across 16 municipalities, Altus Group said in its recent market analysis.
These sums were hoarded due to the municipal governments’ decision to collect “significantly more” in fees when compared to their spending on new housing and commercial space development – a trend that might sustain itself considering that the governments are also angling to increase rates and add further costs to new housing, Altus said.
“Municipal fees and charges are by far the largest component of the government-imposed taxes and fees that make up 22% to 24% of the cost of a new home,” said Dave Wilkes, president and CEO of BILD. “Within the City of Toronto, this percentage rises to nearly 27% with the introduction of the new inclusionary zoning tax. Overall taxes and other charges applied on new homes in Toronto have risen much faster than property taxes.”
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In Toronto, development charges have grown by 606% since 2009, while property taxes have only increased by 22%, according to BILD figures. Wilkes described the situation as “a story of missed opportunity” for the region.
“Either municipalities should deploy these funds for the purposes they were collected – more infrastructure, services, affordable housing and parks – or they could make a meaningful dent in the housing affordability challenge the region is facing by reducing, or at least capping, charges on new homes,” Wilkes said. “There is a clear opportunity to right-size reserves and in doing so help solve the housing affordability challenge facing the entire region.”
