Hidden Costs of Housing
Published in the Globe and Mail November 30, 2001.
In last week's article on the true costs of housing, I looked at the more obvious and apparent ones – GST and Land Transfer Tax. There are, however, numerous other local, regional and provincial charges that are added to the cost of new houses, that together with GST and Land Transfer Tax, represent anywhere from 16 per cent to 28 per cent of the total cost of purchasing an average new home in the GTA.
The City of Toronto, at 16 per cent, is at the lower end of the scale because many of the services for which additional charges are imposed already exist in the City (with higher land costs, in part representing the maturity and availability of services). In regions like Durham, Peel, Halton and York, the percentage of government charges dramatically rises to the range of 22 per cent to 26 per cent.On a recent Greater Toronto Home Builders' Association housing tour to view new home construction in the Greater New Orleans area, I was once again reminded of the vast differences between costs of American and Canadian housing.
In Louisiana, builders do not have to concern themselves with significant insulation of houses, nor construction of basements (given that the water table is one foot below the surface!). However, New Orleans, like many other cities in the United States, benefits from two large differences in the cost of housing.
The first is that in the United States, the mortgages are generally tax deductible. In Canada, homeowners pay their mortgages with after-tax dollars.
The second key difference relates to development charges. In New Orleans, the developer only pays for all of the “hard” services needed for the subdivision (e.g. new roads, sanitary and storm sewers, electricity, gas, hydro, etc.) as it would in the GTA. Sites may have to be set aside for new schools that are purchased at fair market value by the school board. Developers and builders also pay the processing fees, development fees and building permit fees as they do in Ontario.
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