Municipalities are navigating a complex web of financial pressures in 2025. With inflation remaining a significant challenge, the strain on municipal tax levies (or tax rates) has intensified, leaving many residents concerned about the rising cost of living. To address these fiscal pressures without overburdening taxpayers, one effective strategy is to broaden the tax base by increasing housing development. Expanding the housing supply offers a dual advantage: It alleviates the housing shortage while bolstering municipal revenues.

Greater affordability and choice

Expanding housing supply does more than provide shelter. It creates opportunities for greater affordability and choice, enabling residents to settle in communities that align with their preferences and needs. Additionally, this expansion distributes municipal costs across a larger pool of taxpayers, reducing the strain on existing residents. For instance, over the past year, approximately 880,000 jobs across Canada were supported by the new housing and renovation industry, highlighting how housing development contributes not only to municipal revenue but also to the broader economy.

Across Ontario, city and town councils are weighing difficult decisions regarding property tax increases to fund rising operational and capital costs for essential services. Many municipalities are adopting an innovative solution: Driving growth in the city’s tax assessment through new developments. By welcoming more taxpayers, municipalities can generate the necessary revenue to sustain services while minimizing the financial impact on current residents. Residential construction – a significant driver of job creation – has been instrumental in regions such as the Hamilton Census Metropolitan Area (CMA), where nearly 17,000 well-paying jobs are supported by the sector, contributing close to $4 billion to the local economy.

Fiscal challenges and critical need

Strategic development, particularly high-density housing, significantly enhances land’s tax productivity. This long-term revenue stream is becoming a cornerstone for municipalities aiming to balance budgets. Take, for example, a vacant downtown lot. The tax revenue generated from such a property is negligible compared to that of a multi-unit residential building developed on the same site. Encouraging such transformations addresses both fiscal challenges and the critical need for housing. It also illustrates how the housing and renovation industry supports employment across Canada, where it remains a leading source of job creation. Smart municipalities are even looking at using new tools such as Community Improvement Plans to incentivize new development through financial breaks on things such as development charges.

Housing affordability hinges on an interconnected market. Increasing supply across all price points creates a ripple effect, making housing more accessible at every level. Through a process called filtering, new housing options allow higher-income residents to move up the market, freeing up more affordable units for others. This demonstrates the importance of fostering market-driven solutions alongside affordable housing initiatives to improve overall accessibility.

Progressive municipalities recognize the urgency of reducing barriers to housing development. By prioritizing these efforts, they can tackle the twin challenges of affordability and financial sustainability, setting the stage for a thriving future. In 2025, the need for action is clear: Building more housing is not just about growth – it’s about ensuring a resilient and equitable community for all.