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The current housing challenges are less about affordability from the buyer's perspective and more about the escalating costs associated with delivering housing projects. In certain areas, approximately 58,000 homes are on hold because the expenses to develop them surpass what potential buyers can afford. This situation underscores a significant issue in the housing supply chain, where rising costs hinder the completion of necessary housing units.
Several factors contribute to these elevated delivery costs, including high financing expenses, substantial development cost charges (DCCs), and municipal levies that developers must pay upfront. Additionally, the practice of double taxation—where DCCs are subject to GST, PST, or HST, as well as land transfer taxes—further inflates prices. These financial burdens not only stall current projects but also discourage new developments, exacerbating the housing shortage.
To address these challenges, reforms are suggested to reduce delivery costs and unlock stalled projects. Proposed measures include allowing DCCs and municipal levies to be paid at the end of a project rather than upfront, exempting DCCs from various taxes to prevent double taxation, and expanding municipal surety bond programs to replace capital-intensive letters of credit. By adopting these strategies, the government can play a pivotal role in mitigating the cost-of-delivery crisis and facilitating the completion of housing projects.
Read the full article on: REAL ESTATE MAGAZINE
