We recently wrote about homebuyers paying for the layering of government fees and regulations, such as the Step Code and Victoria’s recent “deconstruction” initiative.
Municipal councils’ claims to support housing affordability often conflict with their actions evidenced by rising home prices.
A source of high costs is inspection fees. Municipalities have been generating big surpluses through these fees despite declining housing starts.
For example, Saanich’s Financial Reports show inspection revenue increased 15% from 2018 to 2020, despite a 63% decline in new home construction. Surpluses of more than one million dollars were posted each year.
How is this possible? It is explained in a report footnote: “Inspections – permitting revenues increase due to increased cost of construction.”
“Cost of construction” includes the spiraling cost of materials like lumber, as well as labour, workers’ compensation, liability insurance and other factors with no relationship to the cost of inspections.
This is similar to BC’s Property Transfer Tax based on a home’s market value unrelated to the cost of doing a property transfer. The PTT generates about $2 billion annually for the BC government.
Municipal permit fees should not be a tax. They should be connected to the cost of providing a service and charged under the principle of reciprocity (eg. fair market fee for reciprocal service).
Instead, they have become a significant source of municipal revenue and are another example of how three levels of government are driving up the price of housing.
It’s no wonder government fees and regulations add $230,000, about 23%, to the price of an average home in our region according to the CD Howe Institute.
Housing prices will continue rising until elected officials address issues of fairness in fees, regulations, and development approval processes.