How Government Fees Increase Your Home Purchase Price

How government fees boost the total cost of your home

The allure of a buying a brand new home – or housing start – can be inescapable. Many home buyers want to buy “off the plan” in order to design their own kitchen, pick out fixtures and have their choice of hardwood floor. It’s the best way to get a custom designed house without paying the custom home prices.

However, there are a number of government fees new homeowners should be aware of that can greatly contribute to the end cost of buying a new home – more than one-fifth, according to a new study by the Building Industry and Land Development Association (BILD) of the cost of as new home or condo.

The study looked at six municipalities across the GTA – Town of Oakville, City of Brampton, City of Markham, Town of Bradford-West Gwillimbury, Town of Ajax and the City of Toronto.

Here’s what new home buyers should know.

What Can You Expect To Pay?

According to the report, the total government fees and charges amount to an average of $118,400 on a new single-detached home, which is 23 per cent of the overall cost, and $64,400 on a new high-rise home, which is 20 per cent of the cost. Since 2004, for the municipalities studied in the report, development charges have increased between 143 per cent and 357 per cent and they continue to rise.

Understanding Municipal Development Fees

In the last decade municipal development costs have risen significantly. These local development costs are charged to the builders.  Home builders say since costs have gone up so much so fast they have no choice but to download them on to the buyer.

Fees Cover Infrastructure Costs

It is estimated that in 2012 alone, the industry and new home buyers contributed $1 billion toward the construction of growth-related infrastructure like sewers, roads and transit in the GTA through development charges paid to municipalities, according to the BILD report.

Industry Leaders Are Concerned

President of BILD Bryan Tuckey says he knows why municipality are collecting fees but he doesn’t agree on the tactic. “Right now, municipalities across the GTA are looking at how they are going to pay for critical infrastructure that will be used by not only new residents, but existing ones as well,” he says, adding, “Increasing development charges and other government fees is not the answer.”

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