Published in The Globe and Mail.
The federal government’s introduction of the Canada-Ontario Development Charge Reduction Program, and a new partnership with British Columbia to lower municipally levied development charges for multi-unit housing, represent a promising step toward addressing these fees, but come with key issues.
Under the Ontario agreement, the federal and provincial governments will finance approved infrastructure projects in municipalities that lower development charges for all residential types by 30 to 50 per cent for at least three years. The B.C. agreement is aimed at lowering development charges by up to 50 per cent in priority communities, though implementation details, including what qualifies as “multi-unit housing,” are still unclear.
The agreements, both funded through the federal Build Communities Strong Fund, are intended to reduce the cost of new housing amid an affordability crisis. Ontario and B.C. have the highest development charges in the country (more than $100,000 a residence in many municipalities in the Greater Toronto Area, and more than $50,000 in Metro Vancouver). But there are three main issues with these agreements, especially as they apply in Ontario.
The first is that they seem manifestly unfair to recent purchasers of new housing. Imagine having bought a new house for $800,000 in Milton, Ont., in 2025. Included in the cost was more than $100,000 in development charges, originally paid to the municipality by the developer. This cost was absorbed by the owner’s mortgage, meaning that they have borrowed money to pay for the cost of future municipal infrastructure required by the new subdivision in which their new home is located.
After the Canada-Ontario agreement is implemented, similar houses in a new adjacent subdivision should be selling for tens of thousands of dollars less, depending on the municipality, provided lower construction costs are passed on to buyers. With similar, less costly houses for sale nearby, the value of the home purchased in 2025 will decline.
Everyone takes a financial risk when they purchase a new home, but few would expect to lose money as a direct result of a new government program aimed at helping purchasers of new houses. It is true, of course, that if an owner is able to hold on to the home for many years, the gap in home values might erode. But we all know that life, especially for young families, is rarely so stable.
The second problem with the agreements is that taxpayers in areas of the country where development charges are not levied end up subsidizing new local infrastructure in prosperous places such as the Greater Toronto Area and Metro Vancouver. The main reason these other areas do not levy development charges is precisely because they are less prosperous; such areas are not going to levy charges on developers trying to build new housing.
Greater Montreal is a prime example of a growing major Canadian metropolitan area in which development charges are either non-existent or very low. Here, municipalities, including the City of Montreal, borrow funds to build new local infrastructure. That is why they are far more indebted than municipalities in Toronto or Vancouver.
When residents of these municipalities pay their property taxes, they pay to service the debt taken on by their municipality. When these same residents pay their federal taxes, a portion of these funds will now go to pay for new local infrastructure in Toronto and Vancouver. These funding agreements fall under the umbrella of the federal Build Communities Strong Fund, but equal provincial repartition is not guaranteed.
The third problem is that the agreements require the federal and provincial governments to get into the business of choosing which municipal infrastructure projects merit funding. No one can possibly believe that the potential involvement of three levels of government is likely to promote overall public-sector efficiency and effectiveness.
The prospect of bureaucrats from the province or federal government poring over submissions pleading for funds for new wastewater plants, local roads, libraries and fire stations is concerning, especially when we consider that such submissions will presumably be coming from some of the country’s largest and most sophisticated municipalities. This comes after many years of attempting to disentangle the affairs of such municipalities from the grip of so-called senior levels of government.
The long-term solution is to gradually reduce development charges by expanding municipal borrowing, which is constrained by provincial legislation and municipal fiscal rules, and using financing tools to spread infrastructure costs over time. It would mean that all municipal taxpayers, rather than just the purchasers of new homes and renters in new buildings, would eventually pay for the cost of new growth-related local infrastructure.
This is the way it was 50 years ago before fast-growing municipalities conveniently stumbled into the development-charge trap. It’s time to return to a system that spreads these costs more fairly.
Andrew Sancton is a fellow-in-residence at C.D. Howe Institute and a professor emeritus, department of political science, at Western University.