Ontario’s housing crisis has many causes, but one factor has become impossible to ignore: the soaring cost of government-imposed fees that are added to the price of every new home.
For years, development charges (DCs) have climbed relentlessly, making housing less affordable, slowing construction activity and undermining the financial viability of projects that communities desperately need.
That is why the Residential Construction Council of Ontario (RESCON) is welcoming the decision by the federal and Ontario governments to move forward with the new Development Charge Reduction Program (DCRP).
It is one of the most significant housing affordability measures introduced in years and will help remove a major barrier to new home construction across the province.
The program, announced as part of the Canada-Ontario Partnership to Build, will provide up to $8.8 billion in federal and provincial funding over the next decade for housing-enabling infrastructure. Municipalities that agree to reduce DCs on all residential housing types by 30 to 50 per cent or more, and maintain those reductions for at least three years, will be prioritized for funding.
In practical terms, the program offers municipalities a powerful incentive. Cities can lower DCs that have become a significant burden on homebuyers and receive financial support for critical infrastructure such as roads, water systems, sewers and other services needed to accommodate growth.
The importance of this initiative cannot be overstated. It is good the governments are acting on runaway DCs in notable jurisdictions.
DCs were originally intended as a tool to help municipalities pay for growth-related infrastructure. Over time, however, they have evolved into one of the largest costs embedded in the price of a new home. In some Ontario municipalities, development charges have increased by more than 5,000 per cent over the past several decades. In many communities, these charges can add up to $200,000 to the cost of a new home before a shovel even enters the ground.
Those costs do not disappear. They are passed directly to buyers.
For young families trying to enter the housing market, the exorbitant add-ons have become yet another obstacle to homeownership. They push mortgage requirements higher, increase monthly payments and place new homes beyond the reach of many middle-class households.
RESCON has long argued DCs have become an affordability challenge that far exceeds the ability of homebuyers to absorb them. Our assessment reflects a growing consensus among economists, builders and housing experts who recognize that reducing unnecessary costs is essential if Ontario hopes to restore housing affordability.
The DCRP is particularly important because it addresses a structural problem rather than offering a temporary fix.
Unlike demand-side measures that may stimulate purchasing activity without increasing supply, reducing DCs directly improves project economics. Builders evaluating whether to proceed with new housing developments often face razor-thin margins amid high interest rates, elevated construction costs and economic uncertainty.
Excessive DCs can be the difference between a project moving ahead or remaining on the drawing board.
The potential impact extends beyond housing affordability.
The residential construction industry supports hundreds of thousands of well-paying jobs across a broad network of trades, suppliers, manufacturers and professional services. When housing projects stall, the consequences ripple throughout the economy. Construction workers lose opportunities, suppliers see declining orders and municipalities miss out on future tax revenue generated by new development.
The DCRP helps to protect these jobs while stimulating economic growth. Equally important is the way the program balances municipal concerns.
Some municipalities have resisted reducing DCs because they rely on the revenue to fund infrastructure investments. The DCRP addresses that concern by replacing a portion of the lost revenue with federal and provincial funding. Municipalities that participate can continue investing in growth-supporting infrastructure without forcing homebuyers to shoulder the entire burden.
The application-based nature of the program also encourages municipalities to compete for funding by demonstrating meaningful reductions in DCs and identifying housing-supportive infrastructure projects that can unlock new housing supply. Housing-enabling projects that facilitate the construction of significant numbers of homes will receive priority consideration.
The DCRP complements Ontario’s enhanced HST rebate program, which can save purchasers of new homes up to $130,000. Together, these measures tackle two major cost components of housing and provide meaningful incentives for both builders and buyers. It will be interesting to see how many municipalities apply by today’s deadline.
There is no single solution to Ontario’s housing shortage. Increasing supply will require action on approvals, zoning, labour availability, infrastructure investment and financing. Yet reducing DCs addresses one of the most immediate and measurable costs embedded in housing prices.
For municipalities, the program is an opportunity to lower housing costs, stimulate construction activity and support infrastructure development. For buyers, it offers hope that the dream of homeownership may become more attainable. Most importantly, though, it demonstrates that all levels of government can work together to tackle the housing challenge.
Richard Lyall is president of RESCON. He has represented the building industry in Ontario since 1991. Contact him at [email protected].
