HOUSING CRISIS: Nearly 30% of a Toronto home’s cost is tax
HOUSING CRISIS: Nearly 30% of a Toronto home’s cost is tax

Torontonians who think they’re taxed to the hilt probably have no idea just how right they actually are.

Nearly 30% of a Toronto condominium’s purchase price comprises levies imposed upon developers who, in turn, pass them onto consumers.

According to a report from Altus Group on the Residential Construction Council of Ontario’s (RESCON) behalf, development charges (DCs)—which increased by 46% year-over-year in 2023—parkland levies, ‘community benefit charges’—formerly known as Section 37—and HST, among other taxes, add 22 to 27% onto the cost of a condo’s sale price.

“A new buyer comes along for a $1 million home and they saved up their $200,000 down payment and it goes towards paying off most of the taxes, fees and levies, and then they ask why people live with their parents until they’re 35,” RESCON President Richard Lyall said. “It’s not a failure to launch, it’s a failure to grow properly.”

Developers, for their part, pay the city up to 40% tax on a single unit, typically cashing out of projects with profits ranging from eight to 15% that are often reinvested in subsequent projects in the supply-constrained city.

Asked by True North why levies are so high in a city devoid of affordable homeownership options, Lyall said, “The short answer is the city does it because it can,” noting that DCs “have increased exponentially in the last decade.

“A development charge is one of the ways municipalities could raise funds because they don’t have a share of sales taxes and other things,” Lyall added. “They came up with these development charges to pay for new development, but they also came up with this bullshit that ‘growth pays for growth,’ when in fact development charges and the whole lot of levies don’t pay for anything growth-related.”

According to the Toronto Regional Real Estate Board’s latest statistics, the average sale price of a Toronto proper home in March was $1,054,563, which means a buyer paid as much as $284,732 in taxes on a condo in the city last month.

The building industry has long pilloried the idea that growth pays for growth as sophistry, pointing out that revenue derived from the suite of development taxes ultimately borne by homebuyers is not spent on servicing roads or anything else remotely growth-related.

According to Luke Johnston, VP of development and general counsel of Dunpar Homes, all three levels of government make more combined than developers do on a project.

“The common misconception is it’s taken out of developers’ profits, but the best way to really characterize it is it’s a tax on the home purchaser,” he said. “HST is added onto the purchase price, so the government takes in much more revenue than the developer, which makes eight to 10 per cent profit, and they pay taxes on that as well, so on a $1 million unit in Toronto, the three levels of government takes in about $250,000.

Johnston added that the homebuyer, who pays HST, get taxed twice.

“It goes towards ongoing capital obligations the City of Toronto has. They’re just increasing tax on new home purchasers and using those funds to fulfill the city’s cost needs in other areas,” Johnston said.

The ramifications of taxing young people, whose earnings are paltry relative to the cost of living in Toronto, so exorbitantly is they will leave for greener pastures, Johnston surmises.

“I do expect to see younger people leave the city. Not just people currently renting who want to buy something, but also people in small condos downtown who maybe have young families and want to get something with a small backyard, which they simply can’t afford in Toronto,” he said.

“So they have to move to the hinterlands and find something more affordable, so we’re unfortunately likely to see more sprawl and less ownership, and for previous generations, their principal retirement investment was their own home.”

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