How Taxes, and Taxes-on-Taxes Add Over $250K to a Vancouver Condo
Fees and taxes compound to create a lack of affordability
Highlights
Taxes and fees raise the price of new home construction, in both direct and indirect ways.
A new 700-750 square foot condo unit in the City of Vancouver faces development charges of over $130,000 a unit.
Because these fees must be debt-financed, and the fees must be incorporated into margin requirements, they indirectly increase the price of homes by an additional $36,000 a unit. And that’s before sales and property transfer taxes.
The federal GST, along with the provincial property transfer tax (PTT), add $86,000 to the price of the home.
Nearly $12,000 of this GST and PTT is from tax-on-a-tax. That is because development charges and related expenses are embedded into the price; they are assessed a GST and PTT, creating a tax-on-tax.
GST, PTT, and development charges will account for over $250,000 of the cost of a $1.35 million condo. This does not include permitting fees, property taxes, and all other fees, taxes, and charges assessed to the developer during construction.
A case study in high taxes and fees
There is no pathway to affordability without addressing the cost-of-delivery crisis that plagues homebuilding in Canada. To do that, however, we need to better understand what goes into the cost of building a home.
An increasing number of outlets are producing case studies on the size of various costs. One recent example comes from the Waterloo Region Record, which contained an excellent piece examining the cost of building a home in the Region. The following graph from the article made the rounds on social media and illustrated the cost of building a 1,900-square-foot home.
Figure 1: Cost to build a 1,900 square foot home in 2025 in Waterloo Region
Source: Waterloo Region Record
When these costs get too high, construction declines, as they exceed buyers' ability to pay. The issue here goes beyond simply that homes are less affordable for those who make a purchase; it also involves some families being priced out of buying a home altogether, thus reducing supply.
There is no pathway to increasing the supply of housing to a level that can support our population without a substantial reduction in homebuilding costs.
The size and proportion of these costs are not uniform; they will vary substantially between regions and types of homes. Let’s conduct a similar exercise but examine the cost of building a condo unit in Vancouver.
Using data obtained from Wesgroup Properties, we created a highly simplified version of a condo building containing 74 units, roughly 700-750 square feet in size. We have made many simplifying assumptions and provided rounded numbers to protect confidential business data, but these are a good approximation of costs.
Suppose we exclude development charges and development charges. In that case, the lowest price the company could charge for a unit and still obtain financing is just under $1.1 million, which includes construction costs (hard costs), soft costs, the profit margin on construction, and the value of the land. Note that banks will not lend money on a project unless the profit margin is high enough, as a low-margin project creates risk that the borrower will be unable to pay back the money if economic conditions change or there are cost overruns.
Figure 2: Cost per unit on a Vancouver condo project, excluding development charges, GST, and property transfer tax
Source: Author’s Calculation
It is important to note that we have not removed all taxes and fees from this calculation. There are permitting fees, property taxes, and other fees that the builder must pay during construction. We have only removed development charges and other major taxes. So, let’s start adding those in.
An alphabet soup of municipal fees
We have written a great deal about the alphabet soup of development charges and related fees in Ontario. While these charges are typically highest in Ontario, British Columbia is a close second, as this condo project helps illustrate. For this building, there are four relevant development charges, with the following estimated costs:
Development Cost Levies (DCLs) + Utility DCLs: $38,641
Community Amenity Contributions: $66,174
Metro Vancouver Development Cost Charge (DCC): $23,915
TransLink Development Cost Charge (DCC): $1,801
Added together, that is over $130,000 in municipal fees:
Figure 3: Development cost charges per unit on a Vancouver condo project
Source: Author’s Calculation
However, the true cost of these fees is substantially higher due to financing costs, margin impact, and tax-on-tax.
Financing Costs: The developer pays development charges and related fees at the beginning of construction but does not receive payment (beyond a down payment) until the end of the project. For this project, the developer would have to carry these fees for 28 months, at an annual construction loan interest rate of 4.7%.
Margin Impact: Because the lender requires the project to hit a minimum profitability threshold, any additional construction cost, including development charges, increases the projected profit required for a developer to obtain a loan.
These two factors increase the total cost of those municipal fees by just over $36,000.
Figure 4: Development cost charges and interest + margin on those charges
Source: Author’s Calculation
Next, let’s add in taxes charged to the buyer
GST and PTT raise costs even further
When the condo unit is sold, the buyer must pay the federal GST, along with a provincial property transfer tax (PTT), but not a provincial sales tax (PST), as British Columbia’s PST exempts new home purchases. The GST is a flat 5%, whereas the PTT is 1% on the first $200,000, 2% on the next $1.8 million, and 3% on any amounts above $2 million. There are GST and PTT rebates for new homes, but the maximum price for eligibility is $450,000 for GST and $1,150,000 for PTT, and this condo unit will exceed both of those thresholds. So this unit will be ineligible for either rebate.
Because development cost charges and related fees (and the interest payments and margin on those charges) are embedded into the purchaser's price, they are subject to GST and PTT, creating a tax-on-tax. Of the over $86,000 of GST and PTT the purchaser must pay, nearly $12,000 comes from tax-on-tax.
In total, the purchaser must pay over $250,000 in taxes and development charge-related expenses, pushing the final cost of the condo unit to over $1.35 million.
Figure 5: Cost per unit on a Vancouver condo project, including development charges, GST, and property transfer tax
Source: Author’s Calculation
For this particular project, land costs, soft costs, and development charges and taxes make up roughly equal proportions of expenses.
Figure 6: Cost breakdown per unit on a Vancouver condo project, including development charges, GST, and property transfer tax
Source: Author’s Calculation
These units are unlikely to be built unless costs are reduced
At a $1.35 million price point and current economic conditions, these units are unlikely to sell, and this building will not get built. If the federal government has any hope of reaching the ambitious housing supply target they have set for itself, it will need to find policies to reduce these costs and make projects like this one viable.
Later this week, we will examine a series of government options that can reduce these costs and make a project like this one viable.
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