Ontario's housing affordability crisis is intensifying, and one major factor contributing to rising costs is development charges ("DCs"). These fees, essential for financing growth-related infrastructure, are becoming a growing burden for developers and homebuyers alike. Over the last decade, DCs have risen sharply, in some cases adding over $100,000 to the cost of a single-family home. As municipalities face mounting pressures to balance development needs with housing affordability, it's time to rethink how DCs are structured and explore alternative models that better align with the province's housing goals.
Rising DCs, an unsustainable trend
Across much of the Greater Toronto Area ("GTA"), DCs have more than doubled over the last decade. In Toronto, for instance, a recent study by Keleher Planning + Economic Consulting examining the state of DCs across Ontario (PDF) (the "Keleher Study") indicated that the DC rates per single-detached unit rose from approximately $14,000 in 2011 to over $97,000 by 2023: a staggering 592% increase.
Other municipalities like Vaughan, Mississauga, and Oshawa have experienced similar hikes with some areas seeing DC increases surpassing 200%. These rising fees have significantly increased the cost of delivering new housing, making it even harder to meet the increasing demand for housing
Importantly, the manner in which DCs are calculated and imposed may no longer reflect the realities of development economics or fiscal policy best practices.
Currently, DCs are imposed upfront, before a unit is built or sold, creating significant cash flow constraints for developers. This is especially problematic for large-scale projects or during periods of high interest rates. In the GTA, DCs are often forecasted and collected years ahead of their actual use, leading many municipalities to build up substantial reserve funds.
A study conducted by Altus Group and BILD (PDF)reports that, from 2013 to 2019, 16 GTA municipalities brought in an average of $1.49 billion annually through DCs. By the close of 2019, these municipalities held a combined total of $3.25 billion in unused DCs reserves, including more than $1.5 billion designated for road infrastructure, prompting concerns about lags in delivering critical amenities for new housing growth.
The inclusion of land values in DC rate calculations has also become a concern. Escalating land costs in high-growth municipalities have introduced volatility into rate setting and contributed to a feedback loop: higher land prices increase DCs, which in turn make housing less viable and exacerbate supply shortages, driving prices even higher. Reform proposals include removing land value from the formula used to cap DC rates, and limiting recoverable land costs to actual, incurred costs only. This would reduce upward pressure on rates and better reflect the infrastructure-related purpose of DCs.
Municipal responses to rising costs
In response to mounting costs the City of Mississauga has introduced measures aimed at lowering municipal costs. These include:
- A temporary 50% reduction in DCs for residential projects that begin before November 13, 2026. This equates to a savings of over $28,000 per new single-family home.
- Additional provisions include deferring payment of DCs until first occupancy, helping to ease upfront financing burdens, and waiving charges for three-bedroom purpose-built rental units to support increased rental availability.
- The City has also encouraged the Region of Peel to adopt similar incentives and to introduce a long-term property tax discount of 35% for purpose-built rentals, in an effort to further promote housing supply and affordability.
In another example, the City of Vaughan has:
- Implemented a DC Rate Reduction and Deferral Policy to help address these issues. Having taken effect on November 19, 2024,
- The policy introduced substantial reductions in DCs, between 88% and 92% depending on housing type, resulting in savings of up to $44,273 for single-detached or semi-detached homes, and also
- Includes a suspension of interest on DCs for residential projects.
These changes follow a period in which Vaughan had some of the highest development-related fees in the region.
Legislative response
Recently proposed legislation may also serve a role in addressing this issue. The Protect Ontario by Building Faster and Smarter Act, 2025 purports to tackle the growing cost pressures in housing construction. The proposed legislation aims to improve the financial feasibility of new developments by deferring DC payments until occupancy, updating and clarifying the DCs framework, and streamlining land use planning and approvals.
While DCs remain an essential fiscal tool for municipalities, the current structure, marked by front-loaded costs, complexity, and land value distortions, must evolve. A reformed system could continue to fund vital infrastructure while also ensuring that development remains feasible, especially in the high-growth areas where new housing is most urgently needed.
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