Winnipeg Free Press
Sunday September 4 2005
GARTH STEEK - YOUR NEW HOME
MEMBERS of the Manitoba Home Builders' Association, Urban Development Institute and Winnipeg Real Estate Board met with city administrators, politicians and Hemson Consulting on Aug. 25.
Hemson Consulting was hired by the city for $80,000 to review the financing of infrastructure related to new land development.
In the course of the meeting, the city confirmed that the costs to service single residences are $1,200 per unit annually. The servicing costs for new residential units are $700 because the infrastructure supporting them is new.
Unlike at earlier meetings, politicians and Hemson Consulting agreed that new development not only pays its own way, but in effect creates a surplus of funds which are used to service other areas of the city.
Both an ND Lea study and the city's own study confirmed that Waverley West, once fully built up, would create significant surpluses after covering the costs of appropriate infrastructure.
During the Aug. 25 meeting, Hemson Consulting suggested one-time charges from $4,600 per new home up to $6,500. This amount, over 25 years at five per cent, will cost the home owner $11,300. To add insult to injury, the new tax would also be subject to GST, adding another $200 to $300 to the cost of a new home. Hemson's rationale was that a one-time charge would address broader infrastructure requirements.
Those in attendance noted that this new tax on families would undermine affordability, reduce new housing starts and send new starts outside of the city.
Quite simply, the proposed new tax is an attempt to raise additional funds from new home buyers. It is inequitable. The new buyer is being expected to pay double taxation; once via their municipal tax bill, then through a special tax as well.
The new home buyer is an easy target for a tax grab. Future home buyers aren't being given the opportunity to speak to the issue and arguably it would be hard to identify today who that buyer may be; that is what makes them an easy target.
Even better, Hemson consultants themselves stated that the new tax would be "hidden in the price of the home" and the consumer won't see it.
The real problem is that we will all bear a cost if the tax on new homes is approved. As the price of new homes rises, it also drives up the cost of used housing, particularly impacting first-time buyers at the entry level. Winnipeg is already facing a housing crisis, with bidding wars for used homes common and vacancy rates near one per cent. We are a city poised for prosperity with many megaprojects on the books and new opportunities for economic growth. To achieve economic growth, we will need to grow our workforce and that will simply not be possible without choice and affordability in housing options.
Residential construction represents 12 per cent of the economy and affects one in six jobs here. If the city continues to pursue this tax, it will not only cost our city jobs, it will undermine the residential tax base at the expense of all homeowners.
Perhaps the most startling revelation of the recent meeting was that the city is also examining new taxes on commercial and industrial land. The terms of reference for the study it commissioned did not refer to these other sectors nor were leaders in these industries aware of this attempt to realize new tax revenue.
The purchase of a new home is a major investment. Another level of taxation will undermine affordability, reduce housing starts, reduce job opportunities and reduce our assessment base.
To remain competitive with the capital region and other jurisdictions, the City of Winnipeg needs affordable housing. Additional taxation is not the answer.
Garth Steek is president of the Manitoba Home Builders' Association.