Why Development Charges Are the Wrong Way to Pay for Growth

July 21, 2026 – As Canada’s housing crisis persists, development charges have become an increasingly significant policy issue, with a new C.D. Howe Institute report finding that they raise housing costs and unfairly place the cost of growth-related infrastructure on new homebuyers.

In “Growing Pains: Rethinking Development Charges in Canadian Municipalities,” author Andrew Sancton recommends that governments gradually reduce their reliance on development charges and adopt alternative financing models that spread infrastructure costs more broadly among those who benefit. He finds that this would help lower barriers to new housing supply while creating a fairer approach to funding.

“Development charges vary across Canada, but in many of the country's fastest-growing regions, they add a substantial cost to new homes,” says Sancton, Fellow-in-Residence at the C.D. Howe Institute. “In many Greater Toronto Area municipalities, these charges exceed $100,000 per single-family home, a cost that is generally passed on to homebuyers.”

The report also discusses the recently announced Canada-Ontario Development Charge Reduction Program, through which the federal and provincial governments have committed up to $8.8 billion over the next decade to municipalities that substantially reduce development charges. While the agreement reflects growing recognition that development charges have become a barrier to housing supply, Sancton argues it also raises questions about fairness, complexity, and accountability.

Municipalities seeking compensation for reducing their charges may face additional approval requirements for infrastructure projects, potentially slowing local decision-making. The report also notes that taxpayers, including recent homebuyers who already paid high development charges, could end up subsidizing future buyers through publicly funded reductions.

Sancton also acknowledges the challenges of moving away from development charges. Existing residents may oppose paying a greater share of infrastructure costs through general taxation, while recent purchasers who financed development charges through their mortgages could view the transition as inequitable. In addition, if competition among developers is limited, lower charges may not translate into lower home prices, with some of the savings instead accruing to developers or landowners.

To create a fairer and more sustainable system, he recommends financing growth-related infrastructure through long-term borrowing rather than upfront levies. This could include establishing independent water and wastewater authorities that recover costs through user fees over the life of infrastructure assets, while municipalities make greater use of borrowing to finance growth-related capital projects.

“The roads, parks, and water and wastewater infrastructure that support growing communities benefit everyone, not just new homebuyers,” says Sancton, former Chair of the Political Science Department at Western University. “Gradually easing municipalities away from relying on development charges would spread those costs more fairly while helping reduce the upfront cost of housing.”

Read the Full Report

For more information, contact: Andrew Sancton, Fellow-in-Residence, C.D. Howe Institute, and Professor Emeritus, Political Science, Western University; and Raquel Schneider, Communications Officer, C.D. Howe Institute, 647-805-3918, rschneider@cdhowe.org. 

The C.D. Howe Institute is an independent not-for-profit research institute whose mission is to raise living standards by fostering economically sound public policies. Widely considered to be Canada’s most influential think tank, the Institute is a trusted source of essential policy intelligence, distinguished by research that is nonpartisan, evidence-based and subject to definitive expert review.

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