In addition to these ‘hard’ costs of housing – labour, equipment and supplies – there are other things that factor into the cost of housing. ‘Soft’ costs, including taxation, development fees, return on capital and land values, appear to make up nearly half the cost of each new dwelling.30 These ‘soft’ costs are more complicated to unravel.
They are affected by everything from international capital markets to land values, to government policy. In addition, VAT, local government policy, approvals processes, mezzanine finance rates, property price expectations, vacancy taxes and development levies all play a role. Some of these appear to be unintended consequences, others represent carefully considered trade-offs between policy goals.