in government charges. The updated Vancouver condo
analysis demonstrates a project that is not viable in
today’s environment if the purchase price for a 700
sq. ft. one bedroom unit were set at $980,000. The
estimated hard costs and contingency, land costs, and
government taxes and fees nearly exceed the total
market value revenue for the project. The project is
facing viability challenges even before the estimates
of soft costs, financing, and the margin for risk is
factored in. This renders the project unviable and
would likely not be financeable.
The market-driven cost increases,
in combination with higher taxes
and fees, has led to a significantly
more risky environment for
builders to provide much-needed
housing in British Columbia.
The condo example from Saanich illustrates that
between 8.66% and 10.32% of the cost of housing
is attributed to taxes and fees, while a comparable
project in Vancouver could have government charges
nearly three times as high.In the condo example from
Kelowna, 12.97% to 14.63% of the potential purchase
price is attributed to taxes and fees. Both the Saanich
and Kelowna examples demonstrate that despite the
lower percentage of taxes and fees relative to the
price of a new unit, there are still challenges in both
regions. The layering of these charges along with other
costs will still impact project budgets. Jurisdictions
across B.C. are seeing supply unable to keep up with
demand, putting pressure on home prices of all types
and the availability and affordability of housing.
In the City of Vancouver, there are additional taxes
and fees on new housing development such as the
recently increased Empty Homes Tax (EHT) and the
Public Art fee. There are also regional charges such
as the TransLink DCC, the newly increased Greater
Vancouver Sewer DCC, and the Water DCC, which
is pending approval from the Province. These line
Taxing Growth
Summary Analysis
Summary Analysis
The analysis in this report of four mid-rise housing
projects in B.C. shows that the layering of taxes and fees
can create cost barriers and added risk for builders.
For a new condo unit in Vancouver, the value of the taxes
and fees paid by the builder as part of the development
process can total over $250,000, not including taxes the
buyer pays at the time of purchase. These costs form
part of the purchase price paid by the buyer, along
with the additional taxes paid at time of sale. In total,
these taxes equate to 29% of the potential purchase
price in our example. The developer must determine
whether the market can bear this cost burden when
considering whether to undertake the project.
It has been argued that rising costs do not directly
impact housing costs because they assume increasing
fees and taxes come out of the price of the land and
unit prices and rents are driven by the market, as
are land values. However, it is not guaranteed that
a land vendor will be willing to reduce their selling
price to reflect rising costs. They can and have taken
their sites off the market, which reduces the amount
of land available for development and fewer homes
available to rent or buy. In a Province with severe land
constraints and increasing demand due to immigration
and other factors, this leads to and widens the gap
between supply and demand, indirectly resulting in
higher prices overall.
There are also instances when taxes and fees rise after
land is purchased by a builder. If these cost increases
exceed the project risk margin, it may be delayed (until
prices/rents increase) or not built at all; both would
undermine affordability.
In 2018, UDI conducted a similar analysis, where it
was identified that the purchaser of a new condo unit
in Vancouver could be paying up to 26% of the cost of
their unit in taxes and fees. Between 2018 and today,
builders have seen unprecedented cost increases
in all budget areas, including construction costs,
insurance, and financing, alongside dramatic increases