Province targets ‘hidden’ fees levied by cities on new homes

Premier wants to shine light on municipal development charges, urge reductions

A townhouse unit under construction in Surrey.

The provincial government has served notice it intends to make municipalities share in some of the blame for high housing costs.

Tuesday’s throne speech pledged the province will “work with municipalities to reduce the hidden cost in home purchases, and to make those hidden costs clear and transparent to the home buyer.”

That’s expected to translate into a requirement that home buyers receive a breakdown of how various fees and levies imposed by local governments on developers add to the cost of a new unit.

Premier Christy Clark said she won’t force cities to reduce their fees, which help fund everything from water and sewer lines to parks and social housing.

“We don’t intend to interfere with that,” Clark told reporters. “I think local governments are just as concerned about this as I am. So hopefully they’ll address their end of it.”

Vancouver Mayor Gregor Robertson said development cost charges reflect the city and staff cost of dealing with a development, while community amenity charges are invested in new facilities so neighbourhoods keep pace with growth.

“If we’re going to do a whole bunch of growth and not collect that money then we don’t have money to invest in community centres and parks and that,” Robertson warned.

A 2014 study commissioned by the Greater Vancouver Home Builders’ Association found municipal fees and charges added $17,124 or four per cent to the cost of a typical townhouse across Metro Vancouver.

But that can vary wildly – the study found fees in Surrey added $33,700 or 10 per cent to the cost of each unit in one sample development.

Home builders’ association CEO Bob de Wit said the total additional costs from fees and taxes likely climbs to around 23 per cent once provincial and federal taxes are added.

“If we can reduce that 23 per cent from all government fees to 15 or 18 per cent, that’s a huge chunk of money for most people and it could be the difference between not being able to buy at all or buying a house instead of a townhouse or a townhouse instead of a condo,” de Wit said.

While rising land values are the dominant factor in soaring prices for Vancouver houses, de Wit said fees “matter a lot” for first-time buyers seeking more affordable entry-level homes, particularly in outlying suburbs.

De Wit noted cities are inconsistent in how high the fees are and what they go towards.

“In Vancouver, the emphasis is on social housing. In Surrey, it’s more on parks,” he said.

Community amenity fees are negotiated in some areas and fixed in others, he added.

“They’re all calculated differently,” he said. “What we like as an industry is predictability.”

Robertson said the only government interventions that make sense to him  are luxury or speculation taxes to target the “very high profits that are being harvested from a market that’s growing very fast and punishing people on low and middle incomes who can’t afford to stay.”

The province has signalled it may adjust the property transfer tax to charge more when high-value homes change hands.

The B.C. Liberals have long argued that cities could help the housing affordability crisis on the supply side by giving the green light to denser neighbourhoods and the construction of more units.

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