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Canada's Home Builders Say Taxes Are Putting Homeowners At Risk

Written by on Monday, 30 June 2014 2:26 pm

Canada's home builders recently visited Ottawa with a simple message for politicians: taxes on new home purchases are putting all homeowners at risk.

The Canadian Home Builders' Association (CHBA) says the hard costs of building a home have increased by about 3.5 per cent during the last 10 years, but that municipal development charges have increased much faster -- in some cases, 10 times faster.

"The simple truth is that when municipal councils vote for excessive and irresponsible development taxes, they are deciding that hundreds, or even thousands, of young people and families will not own a home," said CHBA president Bard Golightly recently.

The association says that average house prices in Canada increased by 58 per cent between 2005 and 2011, while the average income of 25 to 34-year-olds increased by just six per cent.

"Common sense would suggest that a generation who completed college and university laden with student debt, entered the job market altered by the worst recession in 70 years, and who now confront new home prices swollen by government-imposed taxes inflating prices to six times their income, will have profound difficulty achieving the home ownership levels of their parents, without some help."

Golightly says, "This matters because housing markets have always stood on a foundation of first-time home buyers. If we are seeing the beginnings of a fundamental change in home ownership patterns, governments need to be discussing this. They need to be considering how Canada's economy and Canadian homeowners could be impacted in the future."

Fuelled by low mortgage interest rates, Canadian housing prices have been rising steadily for more than a decade. Golightly says that while the CHBA's mission is to provide affordability and choice in housing, "what we hear in the broader conversations about housing -- those taking place in the media or those within municipal governments -- is quite different."

He says slogans such as "housing bubble", "growth must pay for growth" and "it's time to end sprawl" are used as an excuse to "justify loading an ever-broader array of taxes, fees, levies and charges on to the price of a new home, and into the mortgages of new home buyers.

"New home buyers represent just over one per cent of homeowners in a given year -- they should pay their fair share, not everyone's share."

It's much easier politically for municipalities to add taxes to developers than to increase property taxes for everyone else to pay for infrastructure improvements.

"An increasing number of municipalities are levying exorbitant development charges (in some cases as much as a 20-per-cent hidden tax -- before GST) to infrastructure projects that can benefit the entire community," says the CHBA. "That's unfair to young people and families trying to get into the market for the first time."

The association also has a beef with development regulations that are designed to limit urban sprawl around major centres.

"Canada has the second largest land mass in the world, yet we have a shortage of land for housing -- there is something wrong with this picture," says the association.

The CHBA is pleased with the federal government's commitment to invest in infrastructure, but wants it to focus on core infrastructure rather than "nice to have" municipal projects.

It's also asking Ottawa to make charges and levies by provincial and municipal governments exempt from the GST, which the association says is a "tax on a tax".

Two existing programs for first-time homebuyers should be indexed to allow young people to have a better shot at being able to afford a home, and well-qualified first-time buyers should be able to have access to 30-year amortization periods, says the CHBA.

The association also represents renovation contractors. For many years it has called for a crack-down on the "underground economy" where those who accept cash payments and don't pay taxes have an unfair advantage over those who play by the rules. The CHBA says tax incentive programs for homeowners for improvements such as energy efficiency or making a house more accessible have proven to suppress these cash transactions, since proper paperwork is required to claim the credits.

There are two other major issues on the home builders radar. It wants the government to continue promoting careers in skilled trades and make all trades designated by provincial governments eligible for federal training support; and it says the government needs to invest more in technical and social-economic housing research.

Most analysts are predicting that Canadian house prices will rise by a few percentage points during the next year or so. A recent survey by Point2 Homes Canada says that more than half of Canadian consumers also believe house prices will rise this year, by an average of eight per cent.

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  About the author, Jim Adair

Individual news stories are based upon the opinions of the writer and does not reflect the opinion of Realty Times.