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Comment: 29% of the cost of a new home goes to taxes and fees

When taken together, as much as 43 per cent of the cost of a new residence goes to one or more levels of governments

A commentary by the president and CEO of Hartwig Industries.

As governments dig into affordable housing, the facts have been revealed: Governments — municipal, provincial and federal — are a huge part of the problem, and not the solution.

The cost breakdown on a new residence looks something like this, on a percentage basis.

Twenty-nine per cent goes to governments for taxes, development permit fees etc., according to the Urban Development Institute.

In addition:

Three per cent (approximately) health tax is charged on all labour, including manufactured goods and services.

Five per cent (approximately) carbon tax is charged on deliveries, materials made from oil products including fuel taxes paid by workers commuting to work, putting added pressure on wages.

An average of six per cent tax for duties on materials coming into Canada. Some duties, such as drywall, are more than 60 per cent.

When taken together, as much as 43 per cent of the cost of a new residence goes to one or more levels of governments, and this does not consider what I consider to be outrageous hydro fees in many cases.

When you factor interest rates into the equation, you are looking at carrying costs for the builder of about seven per cent for land and construction loans over the duration of the build.

For larger projects, this can be four years, not including the time that the project is in the approvals process with local governments, which adds years.

So looking strictly at a four-year build, in that time, the financing starts low with land purchase then goes up proportionately with the building construction average over four years being 18 per cent of the project.

And the clincher: Interest rates will remain high as long as governments keep spending! Governments are telling us all to tighten our belts to curb ­inflation, yet they continue to spend.

By comparison, the average profit for a developer is 12 per cent over four years, so three per cent a year.

So what do all these numbers mean when it comes to affordability?

A one-bedroom unit that costs $600,000 would actually cost $342,000 if the governments would stop money-grab taxation. If governments stopped unnecessary spending, interest rates would drop, which would further bring costs down.

Now we might have a one-bedroom at $300,000.

With 10 per cent down payment, that means a monthly mortgage payment of $1,705. This is affordable.

A two-bedroom at $800,000 without government tax grabs would come in at roughly $456,000. With a reduction in interest rates we are looking at something in the neighbourhood of $405,000. A 10 per cent down payment and a monthly mortgage payment of $2,557 becomes affordable for a couple.

Take any new listing and multiply it by 0.57 to get the figure you could be/should be paying .

At the end of the day, all levels of government are to blame. Out-of-control government spending fuels over-reaching taxation and greed. A fatally flawed immigration policy has created a supply crisis which further erodes affordability.

There seems to be a lot of noise coming from all levels of government with complicated solutions.

But it is an easy fix — which means they still don’t understand that they are the problem, not the solution.

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