How Kamloops, Okanagan governments raise prices of new homes
Everyone knows housing in Vancouver is some of the most expensive in the country.
There are many reasons for that – land prices being a huge one – but fees to governments for each new condo are astronomical there compared to places like Kamloops, Vernon or Penticton.
Even the much higher building fees paid in Kelowna are a fraction of what the City of Vancouver charges.
“At the upper end, government charges can represent more than 20% of the cost of building a home in major Canadian cities,” states a new report published July 5 by the Canadian Mortgage and Housing Corporation.
READ MORE: A few reasons why new housing is so expensive in the Okanagan
It compares three major Canadian cities and some of their suburbs, Vancouver, Toronto and Montreal.
It looks at fees like building permits, development cost charges and density payments for six categories of housing, from single-family to high-rise rentals.
When it comes to fees for high-rise condos, Markham, ON reaps the biggest reward from the markets surveyed, charging $101,007 per unit. Vancouver comes in second at $92,565 while the City of Terrebonne, QC only charges $1,588.
The report does not include similar data for Thompson-Okanagan cities but development cost charges for the five largest cities shows how they compare.
Those charges go to pay a share of new roads, parks, sewers and water lines.
The Thompson-Okanagan numbers don’t include things like permit, municipal and warranty fees, which added about 10% to the national figures.
Builders have to shell out $23,976 per high-rise condo unit in Kelowna’s inner city. Kamloops charges $8,214, Vernon $4,872 and Penticton $3,638. That makes Vancouver’s fees 3.5 to 25 times higher.
West Kelowna lists fees for condos per square foot so those were not included here.
Most cities, both in the Thompson-Okanagan and nationally, charge substantially less for condos than single-family houses.
Vancouver is a notable exception. Its $92,565 per unit fees for condos drops to $35,700 for single-family homes.
Kelowna, in contrast, charges $48,507 for single-family homes in the South Mission, more than twice the fees for condos.
Vernon charges $20,168, Kamloops $19,050, West Kelowna $18,481 and Penticton $16,297.
All these fees are eventually absorbed by buyers, not developers or builders.
There’s even a significant difference in the other three Lower Mainland cities included in the national report, ranging from $17,502 for a single-family home in North Vancouver versus $36,965 in Langley.
When it comes to the percentage of construction cost these fees represent, that too varies considerably by city and housing type.
In Vancouver, they make up 3.7% of the cost of building a single-family home and 19% of a condo. That share rises to 34% of the cost of row housing in Markham.
It’s hard to do local comparisons because, even with single-family homes, the quality of materials and appliances can vary widely.
Kelowna homebuilder Stark Homes posted on its website that a three-bedroom, 2.5 bath home covering 2,400 square feet costs $540,000 to build – or it did in June 2021 when the post was made.
That means development fees account for 3% to 3.7% of the cost of building single-family homes in four of the five largest cities in the region. Kelowna’s fees account for 9% of the cost.
The national report raises two concerns about these fees in terms of housing affordability.
One, of course, is that they add to the cost of a home.
The other is based on the assumption that the more fees levied (Vancouver averages 9.3) the more complex the development process becomes. That leads to more time required and, by extension, higher costs.
What the national report highlights as well is the fact that fees for rental construction are significantly lower.
That $92,565 per unit charge for a highrise condo in Vancouver drops to $28,291 for highrise rentals.
The Thompson-Okanagan cities don’t show lower development cost charges for rentals but some have incentive programs.
Kelowna, for example, has a development cost charge offset program for affordable rental housing. Another program gives a 10-year break from property taxes on the rental building. Taxes are still charged on the land value.
See the full national report here.
It’s one in a series of reports being written by the Canada Mortgage and Housing Corporation that look at housing affordability in Canada.
This report suggests local governments do things like make the fee structure clearer, avoid spot rezoning in favour of neighbourhood or city-wide zones and looking for other ways to raise money to build infrastructure.
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