With development charges (DCs) accounting for a significant portion of the cost of new housing, the time for cautious and tentative steps to cut the exorbitant and unnecessary levies has passed.
To tackle the housing supply crisis, boost the number of new homes being built and bring down prices, the escalating fees must be substantially reduced. To spur the residential construction market, we need conditions that enable builders to build houses people can afford.
In Ontario, the government should roll-back municipal DCs by at least 10 years, to 2014/2015 levels, and future increases in DCs should be tied to the rate of inflation.
For many years, and particularly over the last decade, municipalities have increased these DCs at an exponential rate which has added costs unrelated to housing growth.
The justification has been that the market could absorb the hikes due to home prices rising. The obvious challenge to this logic is that during a time of falling home prices, DCs should be lowered.
Thirty-six per cent of the cost of a new home is now the result of the tax burden – taxes, fees and levies like development charges. It is little wonder there is a housing crisis with this sort of figure.
While affordability gets worse, the DC system resembles a runaway train that is out of control. DCs and sales taxes on new housing in the last 10-plus years are equal to a downpayment.
Meanwhile, municipalities continue to stockpile reams of cash from the DCs.
Over the past decade, we have seen development-related taxes rise faster than inflation. The tax burden increases are inconsistent with market realities and are killing the new housing market.
Nationally, municipal fees charged on new low-rise homes in cities averaged $82,600 in 2024 – up $27,500 from 2022, and for a highrise the charges averaged $35,000 in 2024 – up from $32,000 in 2022, according to figures released earlier by the Canadian Home Builders’ Association.
In Toronto, for example, DCs for single and semi-detached homes increased by 464 per cent from 2014 to 2024, whereas incomes in Ontario only went up 29 per cent over that time.
The CMHC indicated in its 2025 Housing Market Outlook that a relentless culprit of the negative construction market is the climbing costs. The report notes the rising cost of land and government-imposed fees, such as development charges, are the primary factors driving up housing prices.
With a critical need for new housing, governments must lower DCs.
The municipalities of Vaughan, London, Mississauga and Burlington have taken action. Recently, in Durham Region, BILD and the Durham Region Home Builders’ Association successfully appealed a bylaw that was enacted in June 2023 and raised DCs. While any reduction is welcome, the adjustments were mediocre. Nipping at the edges of the problem isn’t good enough. We need province-wide rules.
Housing starts are expected to slow down from 2025 to 2027, mainly due to fewer condominium apartments being built, but total starts will remain above their 10-year average.
A report prepared by RESCON indicated employment in new residential construction has peaked and will likely fall further in the years ahead. The slowing construction of new homes could lead to widespread job losses both in the housing sector and industries linked to construction.
Urbanation reports new condominium apartment sales in the Greater Toronto and Hamilton Area (GTHA) totalled 4,590 homes in 2024 – a 78-per-cent decline compared to the latest 10-year average of 20,835 homes, and the slowest year for new condo sales in the region since 1996.
Sales of new homes in the GTA hit near a record low in January as buyers continue to wait on the sidelines. There were 347 new home sales in January, down 40 per cent year-over-year, and a whopping 77 per cent below the 10-year average. Condos were down 58 per cent from January 2023. New home sales in the GTA in January were down 27 per cent from the year before.
To kick-start building, the Ontario government needs to mandate a roll-back of municipal development charges as well as implement legislative provisions to better govern the eligible scope of DCs and future increases tied to the rate of inflation.
In the Progressive Conservative Party platform released prior to Ontario’s recent election, Premier Doug Ford pledged to work with municipalities like Vaughan and Mississauga that have implemented policies to lower DCs to bring a rational, common-sense and sustainable approach to the levies, and ensure that DC revenues are invested transparently by municipalities.
It is time to walk the talk.
Recently, a paper authored by Ross McKitrick, a professor of economics at the University of Guelph, and published by the Macdonald-Laurier Institute, suggested each region should publish a set of DC benchmarks that indicate the reasonable amounts municipalities should aim to charge. As the author noted, publishing them would provide some constraint on excessive DCs.
Without swift, decisive action, housing costs will continue to rise and undermine the financial stability of Canadians. DCs are a big part of the problem. The time has come for bold action.
Richard Lyall is president of the Residential Construction Council of Ontario. He has represented the building industry in Ontario since 1991. Contact him at media@rescon.com.
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