HST Will Increase Costs for Condo and Home Owners

Last week we released the results of our survey and study on the increased costs Ontario and BC residents will have to incur on selling and buying a new home after the HST is introduced on July 1st. As a follow up we have also looked at the additional money current home owners and condo owners would need to cover their higher expenses as a result of HST.

Our estimates include average household costs that many home owners and condo owners incur. Our calculations found that home owners should expect expenses to increase by approximately $580 per year because of HST, while condo owners will likely see a rise of $504 per year. Although condo fees aren’t directly affected by HST, condo corporations costs are going to increase because of HST and they won’t be able to claim them back. As a result, many condo corporations will be passing on the HST they will have to pay on after July 1st, 2010 to condo owners in the form of increased fees.

Other condo corporations are being more creative. We spoke to one resident of a downtown Toronto condo, who said that his building is installing smart meters into all units in order to try and save energy costs. Hopefully, these energy savings would offset the higher HST costs, and condo fees would not need to be increased.

Here are our calculations:

Increased costs due to HST on condo owners:

Condo costs

Monthly cost

Current monthly cost incl. tax

Monthly cost incl. HST

Monthly difference

Annual difference

Condo fees [1]

$475.00

$475.00

$513.00

$38.00

$456.00

Internet

$50.00

$52.50

$56.50

$4.00

$48.00

Cable

$65.00

$73.45

$73.45

$0.00

$0.00

Phone

$50.00

$56.50

$56.50

$0.00

$0.00

TOTAL

$42.00

$504.00

Note:

  • [1] Using average 1,000 sq ft condo, condo fees average $0.475/ sq ft in Toronto and include electricity, gas, water, maintenance fees, security, parking, etc.
  • Condo fees vary depending on the square footage of the condo, when the condo was built, and the amenities included.
  • Condo fees are not necessarily subject to HST, but condo corporations will be paying HST on their costs that cannot be recovered, therefore these costs will likely be passed on to condo owners in their fees

Increased costs due to HST on home owners:

House costs

Monthly cost

Current monthly cost incl. tax

Monthly cost incl. HST

Monthly difference

Annual difference

Electricity and heating

$90.00

$94.50

$101.70

$7.20

$86.40

Internet

$50.00

$52.50

$56.50

$4.00

$48.00

Home service calls [2]
($1,000/year)

$83.33

$87.50

$94.17

$6.67

$80.00

Cable

$65.00

$73.45

$73.45

$0.00

$0.00

phone

$50.00

$56.50

$56.50

$0.00

$0.00

Lawn care/snow removal
($800/year)

$66.67

$70.00

$75.33

$5.33

$64.00

Home renovations [3]
($3,772.23/year)

$314.35

$330.07

$355.22

$25.15

$301.78

TOTAL  

 

 

$48.35 

$580.18

Notes:

  • [2] Home service calls include electrician, plumber, heating and AC pre- seasons, carpenter, etc)
  • [3] CMHC Renovation and Home purchase report outlined that 43% of Canadian home owners surveyed intend to renovate their homes this year (minimum renovation spend was $1,000)
  • CMHC Renovation and Home purchase report average renovation cost is $11,431 (estimated 1/3 of renovation costs are attributed to labour costs (installation for a new kitchen, painting services, etc.)
  • Lawn care includes weed management, fertilizer, landscaping and private snow removal

There is alot of confusing information out there and it’s not surprising that 80% of respondents to our survey said they knew little or nothing about HST and how it will impact them. Some industry experts are confused themselves. A case in point is that during our research we found an article outlining how moving costs are not going to be HST eligible in Ontario. After phoning 3 Ontario moving companies and the Ontario Ministry of Revenue, we were told that moving costs in Ontario will be eligible for HST.

With any new tax there will always be some grey areas that need to be ironed out and it looks like the HST will be no exception. I think the main point is that if you’re unsure of what is included, please consult a tax specialist to make sure.

Kelvin

Related Topics

Economic News / Home Ownership / Mortgage News / Mortgages

One thought on “HST Will Increase Costs for Condo and Home Owners

  1. Any way you slice it, the HST is a major transfer of the tax base from inomce to consumption. This is a good thing, IMHO, because the tax is only applied when people consume things. So if you’re a cheap ass like I am, then you end up paying less tax over all.The GST rebate will provide a rebate for HST for poor people, which means they’ll end up paying zero HST effectively. The one exception would of course be people who are so poorly resourced that they can’t file a tax return. Efforts to make sure these people file and get their credit would be a sound thing for any progressive elements to be pushing for.The gripes from new home owners about the HST are pure whinging. The housing market gets more government pork than any other sector (think about the enormous amount of government backed insurance that is provided by CMHC, without which home prices wouldn’t be nearly as high). I for one am glad that HST is going to start recouping some of that ridiculous largess from a sector that is already far too distorted by government incentives.I also think that food should be HST taxable. Before the GST (and the GST exemption for groceries), restaurants and grocery stores shared about 50% of the food market each. Now restaurants have only 39% probably because people have to pay a tax to eat in a restaurant. I don’t understand why there is this distortion. If HST is charged at restaurants, then it should be charged at the grocery store as well. The extra tax collected on groceries could fund food banks and other mechanisms to help the poor feed themselves, while restaurants would be back on fair ground providing the awesome economically sound service of providing prepared meals in an efficient way to a hungry public.

Leave a Reply