Scrutinizing housing tax revenue may affect affordability
It’s no secret that governments at all levels rely heavily on real estate as a source of tax revenue to pay for the services and amenities we all appreciate and expect in our lives. A report, recently published by economists Warren Lovely and Marc Pinsonneault called (Cash) Cow Tipping? puts the figure at a whopping $120 billion per year.
Well, you say: So what? Don’t we need all the services and goodies these revenues provide? The quick answer is yes, of course, those revenues are important.
But it’s also true that if we scrutinized them a little more closely — and perhaps reduced them — we might find ways to make homes more affordable for buyers, especially first-time buyers, because ultimately, taxes on housing in whatever form are ultimately paid for by the homebuyer. Let’s break it down a bit.
Federal and provincial taxes on housing related to income and consumption taxes — especially GST — amount to roughly $75 billion per year. Municipal property taxes come to $45 billion.
Approximately 25 per cent of the cost of construction of new low-rise homes goes to various levels of government, according to a 2013 report by Altus Group for the Toronto market. The figure for highrise homes is a bit lower, but still stunning at 22 per cent. In their calculations, Altus included government-imposed costs such as land transfer taxes, community amenity charges, development cost charges, permitting fees and so on. Although Altus hasn’t done a similar report for Vancouver, our building environment is relatively similar, and if anything, the costs may well be higher here. The moral of the story? First, consider that most of the taxes discussed are “hidden” — many or most homeowners don’t appreciate they’re paying them or how significant they are. A relatively small reduction could make a big difference for many homeowners, especially first-time home buyers.
Finally, as a homeowner, don’t forget how important you are as a source of revenue to government. Consider how you can encourage your elected representatives to shave a few points of their extraction from your home to make a living in our great country slightly more affordable.