How Your New Home Got So Expensive

If you were to receive an itemized bill for the

purchase of your new home, you may be

surprised to see where the majority of the costs

are attributed. The most expensive component is,

predictably, the land at approximately half of the

total price tag, depending on where you are buying.

Mississauga is one of the more expensive places to

develop in the GTA, with land costs as high as

$6,000 per front foot (totalling approximately 60 per

cent of the cost of the home). Durham Region offers

a more affordable rate of around $3,500 per front

foot, usually 40 per cent of the final price. The

second item on the list is the hard construction

(materials, equipment, etc.). The third, and most

aggravating, component of fees is the taxes to the

three levels of government.

"A striking part of the cost of any new home,

included in the land cost, is around $25,000 to

$30,000 in development levies paid to the region and

the town. On top of that are the building permit fees

and GST on top of that again. This is an issue

builders like consumers to know because it is such a large amount of money," says Bob Finnigan, senior

vice-president of operations for The Heron Group.

Indeed these figures are staggering. According to a

1996 study conducted by the Canada Mortgage and

Housing Corporation (CMHC), as much as 21 per

cent of the price of a new home in southern Ontario

is ancillary costs: levies, fees, land transfer and transaction

costs, and taxes.

To put these figures into dollars, consider the

development of a subdivision consisting of 500 new

detached homes in Vaughan, one of the highest taxed

regions in the country. The average price of each

home is, for example, $400,000. At 6 per cent that's

$24,000 in GST, plus approximately another

$60,000 in municipal charges, land development

fees, building permits, plumbing fees, and fees for

"soft" services such as education and recreational

facilities. In total the three levels of government will

collect $42 million from the development and sale of

these homes and will continue to collect indefinitely

from property taxes.

"New homebuyers annually represent 2 per cent of

the population, but a disproportionate amount of

money comes out of that 2 per cent," says Finnigan,

who along with the Greater Toronto Home Builders-

Association/Urban Development Institute

(GTHBA/UDI), is in constant negotiation with

municipalities to try and halt the increase of these

fees. "It's certainly not going to go backwards,

but every year there are additional charges that

[municipalities] would like to foist onto the builder.

Governments are limited in their funds and they

have always looked to the building industry as one

that is able to absorb their needs."

Rebates and incentives have been instituted to

lower some of these costs for first-time buyers, such

as the Refund for First Time Purchasers of Newly

Constructed Homes Program and the Ontario

Home Ownership Savings Plan Land Transfer Tax

Refund. However, with rising costs of commodities

such as lumber and oil (necessary to produce asphalt)

and inflated land values, increased levies and charges

will continue to make the purchase of a new home an

option available to fewer people every year.

The GTHBA/UDI continues to monitor,

negotiate, and report on development charge

increases, but as Finnigan cautions, "you just can't

squeeze too much."