Governments blamed for “sticker shock”
May 24 2018
Feeling the pinch as an Ontario house builder while margins narrow in a changing sales environment?
Well, you will be glad to know that one outfit adds six-figures to every new home, regardless of the market conditions.
According to a study released this month by the C.D. Howe Institute, government hands in the Greater Toronto Area (GTA) grabbed an average of $229,000 from the cost of each new house built in the past 10 years, due to regulations and fees.
The C.D. Howe study parallels research from BILD GTA that we reported on here last week.
The latest research revealed that zoning regulations, development charges, and housing limits added around $168,000 to single-family houses in the GTA.
The study also found regulations caused single-family home prices in Victoria to increase by about $264,000, Calgary costs to jump by $152,000, and Ottawa-Gatineau’s to spike by about $112,000.
Benjamin Dachis, C.D. Howe associate director of research and a co-author of the study, said that development charges levelled by cities are largely responsible for some of the increases.
“Most people can’t afford to pay for their house all up front with cash, so they get a mortgage and pay for a house over time, but that is not what cities are requiring. They are requiring developers to pay for the municipal infrastructure all up front and not over time, so that all gets loaded onto the sticker shock of housing,” Dachis told the Canadian Press.
Dachis argued the study proved that the charges are “flawed” because they get passed on to buyers. He urged cities to allow these add-ons to be paid over the course of a house’s existence, rather than when it is built, to help mitigate skyrocketing prices.
The C.D. Howe study noted that allowing development on land dedicated for the GTA Greenbelt—an area protected from development—could reduce single-detached home prices by around $50,000 in Hamilton and between $25,000 and $30,000 in York and Halton regions alone.
Modestly increasing land availability for housing while cutting development and zoning costs would have an even larger effect. It would slash the cost of a single-detached house by more than $70,000 in Toronto, Peel, and Durham regions, $90,000 in Halton Region, more than $100,000 in Hamilton, and around $125,000 in York Region, the study stated.