As Canada’s housing industry continues to grapple with affordability pressures, record-low new home sales, supply constraints and slow policy implementation, there comes a rare silver lining in the form of a massive opportunity to make lasting change to how we fund growth in Ontario.

Announced in the fall federal budget, the government has earmarked $12.2 billion over 10 years, and is seeking matching contributions from provinces, to lower development charges by up to 50 per cent. Governments should seize this moment to deliver long-lasting structural reform to the development charges (DCs) system in Ontario and create a reformed mechanism that permanently lowers costs, ensuring future generations of new homebuyers have access to more affordable housing.

GTA DCs especially significant

Development charges have been with us in Ontario for more than three decades, and in that time, we have seen a huge escalation in the price of new homes, as well as DC rates. Those two factors are not unrelated. Development charges are municipal and regional charges applied to the cost of a new home upfront to pay for municipal and regional services and infrastructure. They are just one of the municipal fees and charges added to new homes and now range between $95,000 and $163,000 per single-family home, depending on the Greater Toronto Area (GTA) municipality.

For new-home owners in high-land value areas such as the GTA, the charges are especially significant. In the GTA, DCs have increased on average by a shocking 327 per cent since 2009, with some areas, such as the City of Toronto, seeing a rise of more than 1,000 per cent during that same period.

Interestingly, Ontario is only one of two provinces in Canada that widely use DCs, and is an oddity in North America for their use. This, and the federal and provincial governments present focus on reducing development charges, provides us the opportunity to consider how we might do things differently and in doing so, introduce a system that results in permanently lower DCs, not simply lower DCs for three, five or 10 years.

So, what could some of those systemic changes look like?

First, some infrastructure currently funded through DCs could be shifted to higher orders of government. Transit is an obvious example.

In the GTA, most municipalities embed a significant transit cost within their DCs. Brampton’s transit portion exceeds $14,000 per single-family home, most York Region municipalities exceed $21,000 and the City of Toronto’s is $54,000. However, new transit infrastructure and equipment benefits entire communities, not just new-home owners, so re-orienting these infrastructure and equipment costs (not operating costs) to higher orders of government would effectively spread the cost over the entire tax base and materially lower housing costs.

Structural changes needed

Second, there are services that really should not be upfronted and should instead be spread over a 20- to 25-year period of use for the new home. Water and wastewater infrastructure immediately come to mind here – this is how it’s done in Quebec (where housing costs are materially lower than Ontario) and vast swaths of the United States.

The Ontario government has been actively exploring this for some time and in a paper developed by Keleher Planning & Economic Consulting Inc (KPEC) for BILD and the Ontario Home Builders’ Association in 2025, it is estimated that this change could lower DCs by 25 to 30 per cent. Instead of paying upfront with a DC that is rolled into the price of a home and ultimately a mortgage, the cost of water and wastewater infrastructure is paid for with a smaller annual or monthly charge on the utility bill or tax bill of a new home, until the cost of the infrastructure is recouped.

Existing homes are not impacted as the charge applied to new homes is on a go-forward basis. Spreading the cost also results in a lower cost to the homeowner versus a lump sum that is incorporated into a mortgage.

Lastly, how do you control or reduce the remaining costs? If the first two changes are implemented, then the DCs that are left are those suited for the municipal level of government (roads, libraries, community centres and emergency services). Controlling and lowering those costs are about incremental improvements to the Development Charges Act to standardize approaches, better define calculation methodologies, increase accountability, and encourage municipalities to lower costs. Ontario is making progress on that front, but more work remains.

These structural changes would have a dramatic effect on the market and would result in proportional reductions of 50 per cent or greater for nearly all municipalities while ensuring funds are present to support infrastructure and growth. This makes housing projects more viable to support growth and housing more attainable for future generations of Ontarians.

Governments have a historic opportunity to strategically change the trajectory of the DC system – it is time they seize this moment to protect generations of future new homebuyers and safeguard the industry for years to come.