In the three largest cities in the country, the burden of government fees imposed at the time of housing construction is significantly greater for high-rise buildings than it is for single-family homes. A “surprising” situation in a context where these metropolises wish to promote densification to counter urban sprawl.
This is at least what emerges from a report published Tuesday by the Canada Mortgage and Housing Corporation (CMHC). The latter commissioned the Altus Group to analyze the role of government fees applicable to residential development on the cost of building housing in the Montreal, Toronto and Vancouver areas. Moreover, it is not only the bill for real estate projects that is affected by these costs — essential for financing the public infrastructures of cities — but also their schedule. “The more costs you have, the more likely you are to have delays before starting construction,” summarizes CMHC economist Francis Cortellino.
“All of this means that the offer [de logements] can come later and at a higher cost,” he adds.
The 25-page document shows that this financial burden, which includes, among other things, fees related to development permits as well as park fees and those related to density, is proportionally lower in the Quebec metropolis than in the two other cities under consideration. These government fees, on average per square foot, reach $86 and $70 in Toronto and Vancouver, respectively, compared to $24 in Montreal.
“Overall, the government fee structure in Montreal does not drive up residential construction costs as much as in Toronto and Vancouver,” confirms the report.
However, this conclusion must be taken with a grain of salt, a nuance To have to Professor at the School of Urban Planning and Landscape Architecture at the University of Montreal, Jean-Philippe Meloche. In Toronto and Vancouver, significant fees apply at the time of purchase to finance various public infrastructures, such as those intended for water treatment and the development of public transit. In Montreal, the payment of these infrastructures by the owners is done rather in the long term, through a relatively higher tax burden, explains the expert. But in the end, it is substantially “the same charge” that the owners of Toronto and Montreal pay, analyzes Mr. Meloche.
Costly Density
The report also analyzed to what extent construction costs would be reduced, by housing type, if the government fees that are imposed by these three metropolises were non-existent. In Montreal, the cost of construction would therefore decrease by 1.7% for a single-family home, but by 11.8% for a condominium located in a residential tower. While this gap is a little smaller in Toronto, it strikes the mind in Vancouver, where 19% of the cost of building a high-rise condominium is associated with government fees, compared to 3.7% of the bill. of a single-family home.
A situation that CMHC is questioning, at a time when public policies are increasingly valuing density to counter urban sprawl in different regions of the country. “In a context where many municipalities have implemented policies to increase density, it may seem surprising that the least dense type of housing is also the one whose government fees represent the lowest proportion of the total cost”, notes the report on single-family homes.
CMHC thus believes that the cities studied should consider increasing the financial burden associated with the construction of low-density housing and, conversely, reducing that associated with high-rise construction, in order to encourage them to make up for the lack of housing in these cities. “Perhaps we could review the criteria that govern municipal taxation” in order to include new criteria that value “sustainable development”, advances Jean-Philippe Meloche, who welcomes the line of thought put forward by the federal body. .
“The purpose of the report is also to raise questions about the financing of cities” in order to encourage them to diversify their sources of income and thus depend less on the real estate market, also notes Mr. Cortellino. “These are not easy questions to answer, but I think if we want to achieve our goal of adding more offers to the market, these are discussions that must take place,” he adds.
Cheaper in the suburbs
The report also notes that the fees charged for the construction of housing are significantly higher in Montreal than they are in Brossard and Terrebonne, two cities in the suburbs of the metropolis. This situation is attributed in particular, in the report, to the Regulations for a mixed metropolis of the administration of Valérie Plante, in force since April 1, 2021.
“There are promoters who will prefer the suburbs to the city because it’s simpler, it’s easier,” foresees Mr. Meloche. The latter notes, however, that the metropolis remains attractive for several builders due to the strong demand for new housing, which is driving prices up.