Off Track on Housing: Why Development Charges Are Making Homes Unaffordable

Driving faster in the wrong direction won’t get you to the right destination. To make progress you need to follow the correct path.

The same can be said for the housing supply and affordability crisis that we are presently facing. For years, we’ve been off track. And, as a result, we now find ourselves in a predicament.

The truth of the matter is that exorbitant taxes, fees and levies, including sky-high development charges (DCs), are making it difficult for builders to build homes people can afford.

The charges end up pushing the cost of a community’s new growth onto the purchaser of a new home. They are footing the bill up front, even though the infrastructure will serve generations.

Add in a cumbersome, expensive and glacially slow approvals system and you have a real problem.

Reports indicate that taxes are killing the market, and the already-dire housing situation could get worse. Governments will lose money for years if the industry does not pick up. Costly taxes and fees and lengthy approvals processes combine to hinder housing development.

DCs, specifically, are out of control. These are one-time fees that municipalities collect from developers for new construction to help fund infrastructure and services like roads, water, sewers, parks, transit, and police. But they’re also being used for projects like daycares and schools.

The levies are a problem and contribute significantly to the cost of buying a new home. A report done for RESCON found that 36 per cent of the cost of a new home is due to the tax burden. CMHC reports that DCs make up nine per cent of the total cost of a detached home in Toronto. The agency found that DCs alone could add more than $100,000 to the cost of new units.

Over the years, the fees have increased substantially, worsening affordability of new housing. In Toronto, DCs for a one-bedroom apartment increased to $52,000 in 2024 from $10,000 in 2014.

It is a problem that has been decades in the making. Governments now rely on revenues from DCs to fund their projects.

Four years ago, the Ontario Housing Supply Task Force Report recommended that action be taken to stem exorbitant DCs. However, the problem has not been addressed. The federal government has indicated it intends to reduce DCs, but we have yet to see any action.

The Ontario government provided some relief for builders with the passage of Bill 17. Payment of DCs will be pushed back until occupancy of the home. In the past, payment of DCs was due upon a building permit being issued. This means builders will not have to finance the cost of DCs while the home is being built.

However, there are other outstanding payments which are still due at the building permitting stage. More specifically, the payment of educational development charges, park land dedication and community benefits charges are still due during upon building permit issuance.

Admirably, the federal and Ontario governments have announced the elimination of sales taxes on new housing up to $1 million for first-time buyers as well as decreases on a sliding scale for first-time buyers of homes purchased between $1 and $1.5 million. First-time buyers account for roughly 35 per cent of new home purchases so this will have a positive effect.

But governments must now put DCs squarely in the crosshairs. The fees have exploded over the years.

CMHC recently piloted a project to collect information on development charges in 30 municipalities across the country and found they amount to a significant financial burden on development.

The level of charges per unit varied extensively. For a condo with two or more units, the DCs in 2025 varied from $55,566 in Burnaby, B.C., to $130,200 in Toronto. For a single-detached home, CMHC found that DCs varied from $111,629 in Burlington to about $180,600 in the City of Toronto.

We cannot continue with such exorbitant fees. We are in a housing crisis that is only going to get worse. Governments need to step in and create conditions to lower the DCs on new housing.

A report done recently for RESCON by the Missing Middle Initiative at the University of Ottawa found that housing starts in the first nine months of this year in 34 Ontario municipalities have plummeted from the same period in the previous three years. Job losses continue to grow.

Sales have all but dried up. Starts are low. And many developers are pausing or canceling projects altogether.

Housing starts were down 34 per cent in the municipalities surveyed, with condos taking a beating. Only 54 new condos were sold in Toronto in October – down from 145 in October 2024.

According to the analysis, the reduction in housing starts translated into 35,377 fewer person-years of employment over the first nine months of this year, compared to the same period in the previous three years.

Tackling the excessive tax burden associated with building and buying a new home would help kick-start the residential construction industry. Lowering DCs would be a positive first step.

Time is of the essence. We can’t waste it.