Municipalities and the Province need to mitigate these
risks in order to support new housing development,
especially purpose-built rental. This report examines
one of the key development risks and drivers of
new housing costs - taxes and fees - and provides
recommendations for governing bodies to reduce
barriers to new housing delivery.
Taxing Growth
Summary Analysis
items impact the costs associated with new housing.
The layers of taxes and fees on projects often coincide
with communities where housing is greatly needed.
The current analysis also examines a purpose-built
rental development in Vancouver. For the renter of
a new unit at $2,698 per month, it is estimated that
approximately one-third of their monthly rent, or
$882.70, could be paid towards the government taxes
and fees which were incurred during the development
process. The challenges associated with rising costs
and uncertainty are especially significant for rental
housing. Rental housing projects are viewed as long-
term investments, with tight budgeting processes.
If there are unexpected changes in government
charges, projects can quickly be rendered unviable.
In addition, builders may not be willing to take on
the risk of additional charges and will look for other
investment opportunities that provide more certainty.
This has a significant impact on the ability to deliver
new rental housing to an underserved market, creating
additional pressure on rents for existing homes.
In CMHC’s most recent Rental Market Report, it was
identified that vacancy rates in Vancouver’s Census
Metropolitan Area (CMA) dropped from an already-
low 1.2% in 2021 to 0.9% in 2022. There has been an
uptick in supply in the past year, however, demand
continues to outpace the creation of new rental housing.
This has led to decreased vacancy rates and higher rents
for the units that are available on the market.2
Rental developments have significantly higher equity
requirements than condo developments, contributing
to the cost sensitivities in the initial budgeting process.
Rental developments, unlike strata and condo projects,
cannot gather equity from presales. Rents can only be
charged once the units are occupied, and initial rents
are generally determined by the market at the time,
regardless of the additional cost pressures which may
occur during the permitting and construction process.
As policies change, often resulting in increased
costs, the development process becomes riskier.