The Canada-Ontario Partnership to Build has initiated reductions to municipal development charges (DCs) across Ontario, lowering them by 30 to 50 per cent for a three-year period. This program aims to improve housing project viability and supply, but it raises the question of how to make these reductions permanent.
What Are Development Charges?
Development charges are one-time fees developers pay to municipalities to fund housing-supportive infrastructure such as parks, water and wastewater systems, and roads. These costs are passed on to new homebuyers, adding up to $130,000 to the cost of a single-family home and up to $80,000 to a condo in the Greater Toronto Area (GTA).
Impact on Homebuyers
When development charges are passed on, new homebuyers pay the entire cost upfront and incur mortgage interest on that amount. This double burden is a key concern. According to Dave Wilkes, President and CEO of the Building Industry and Land Development Association (BILD), 'the new home buyer is doubly aggrieved – they have to pay the whole cost upfront and they have to pay mortgage interest on it.'
Need for Permanent Reform
BILD advocates for using the three-year period to rightsize and modernize DCs, not eliminate them. Wilkes emphasizes that 'new infrastructure benefits everyone, so let's make sure that everyone pays their fair share.' Currently, the 'Benefit to Existing' calculation is often distorted, leading new homebuyers to pay a disproportionate share. For example, in Toronto, roughly 42 per cent of DCs cover transit-related costs, between $22,000 for a bachelor apartment and $55,000 for a single-family home, while existing residents pay less than $1,000 annually in property taxes for transit.
Lessons from Other Jurisdictions
Ontario and British Columbia are unique in North America for enabling province-wide use of municipal development charges, and they also have some of the most expensive housing markets. Other jurisdictions, such as Texas with Municipal Utility Districts (MUDs), Florida with Community Development Districts (CDDs), and Quebec's approach to funding water and wastewater infrastructure, offer alternative models worth examining.
Recommendations for the Future
To ensure fairness, infrastructure payments should match the life expectancy of assets. Roads and water systems last decades, so amortizing costs over 20 to 25 years via utility or tax bills would be more equitable. Wilkes concludes, 'The provincial and federal governments’ Canada-Ontario Partnership to Build has given us three years to figure out a long-term fix for where 40 years of development charges in Ontario have brought us. Let’s not miss the opportunity.'
