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Two new studies by construction industry groups says that housing prices in the Greater Toronto Area have more than doubled since 1998, and that the provincial and municipal governments have fuelled much of this increase through fees, charges and regulatory costs that ultimately are borne by new homebuyers.

The two studies conclude that these government-imposed costs are “conspiring to make housing unaffordable for a growing number of families, particularly in the GTA.”

A report prepared for the Residential Construction Council of Ontario (RESCON), written by researcher Will Dunning, estimates that up to 30 per cent of the cost of new housing in the GTA is now attributable to direct and indirect government charges. Another study, written by Ryerson professor David Amborski for the Residential and Civil Construction Alliance of Ontario (RCCAO), says that regional and municipal development charges alone now add $30,000 to $50,000 to the price of a new home.

The organizations say that development costs in the GTA are among the highest in North America. For example, development charges on comparable housing in other jurisdictions are $23,418 on average in the Greater Vancouver Area; $7,475 in Calgary; and $1,425 in Edmonton.

Similar increases are evident in new high-rise construction, the groups say. In addition to development charges, other government-imposed costs on housing include sales taxes, land transfer taxes, application and processing fees, building permit fees, new home warranty fees, land dedications, and a multitude of other revenue-generating mechanisms for government.

Oakville Mayor Rob Burton told The Globe and Mail that the city charges developers the maximum amount allowed under provincial legislation because development fees haven’t covered the cost of growth in more than a decade. “Local property taxpayers subsidize billionaire developers whose subdivisions make higher profits by not paying for the hospitals, transit and other infrastructure they require,” he told the Globe. “Oakville’s council is proud to have development charges that capture the maximum permissible amount of the costs of growth.”

But the construction groups say that government-imposed costs on housing are short-sighted and have serious negative consequences:

- As house prices escalate, home ownership moves beyond the reach of an increasing number of lower and moderate income families.

- A lack of affordable housing leads to a lack of an available nearby workforce to attract employers, which in turn works against the planning objectives to have a balance of jobs and housing within a community.

-  Development charges are applied on a per unit basis. Consequently, higher density development pays a higher charge per hectare than low density development. This works at cross purposes to land use policies aimed at intensification.

- Higher prices slow demand, and reduce employment within the construction industry and suppliers. The Dunning study estimates that if house prices in the GTA could be reduced by 10 per cent, annual housing starts would increase by 4,500 to 4,750 dwelling units. This would create 7,400 new jobs, say the industry groups.

“We understand that government must be able to fund the infrastructure investments, but this should not be at the expense of housing affordability,” says Richard Lyall, president of RESCON. “Governments should conduct a cost-benefit analysis each time another housing charge is proposed.”

Andy Manahan, executive director of RCCAO, says the dramatic increases in fees, charges and regulatory costs are unsustainable and penalize working families. “Governments should consider alternative funding mechanisms that will help alleviate the upward pressure on new home prices.”

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