Ford government, feds to cut development charges on new homes in half to stimulate new builds

Prime Minister Mark Carney and Ontario Premier Doug Ford announced a deal Monday to cut municipal development charges (DC) on new homes across the province by up to 50 per cent in a bid to stimulate new building.

The agreement was announced at an event in the Toronto area. It follows another agreement announced by the federal and provincial governments last week to lift the 13 per cent HST on up to $1 million of the cost of a newly built home. 

Development charges levied by municipalities can push up the expense of building a dwelling by tens of thousands of dollars. They are seen as major impediments to the federal government’s drive to cut housing prices, especially for those entering the market for the first time. 

But municipalities depend on these charges, in part, to offset the cost of infrastructure like new roads, watermains, sewage lines and ongoing services, such as garbage collection and policing. Cutting these fees can force communities to find other ways, such as property tax increases, to make up the funding shortfall. 

Prime Minister Carney announced that federal funding to reduce the charges will come through the Build Communities Strong Fund, announced in the federal budget last November, to direct $51 billion over 10 years towards local infrastructure. It includes a stream that provides matching funds to provinces and territories that help municipalities reduce development charges.

“Development charges… become over time a major hurdle in this housing market. In recent years they’ve been growing at an unsustainable rate, increasing the cost of every new home, compressing margins for builders and they’ve been stalling new builds. Because of the historic agreement with Ontario, development charges across this province are reduced by half for three years. And while we reduce by half, we’re still building the essential infrastructure,” said Carney.

“Through the Build Community Strong Fund, Canada will invest $4.4 billion over 10 years matched by Ontario, a total of $8.8 billion, to build a housing enabling infrastructure and reduce those development charges. This is going to lower the upfront costs and create certainty for builders to build the affordable homes that Ontarians can buy and rent.”

Carney added that he believes this partnership will “catalyze” housing starts in Ontario, support over 21,000 jobs in the skilled trades and boost Ontario’s GDP by over $2.7 billion.

“In doing so, it’s going to help unfreeze the condo market in the GTA and make sure it’s on the right track to provide the housing that Ontarians need at prices they can afford.”

Premier Ford had aimed for Ontario to build 1.5 million homes over the next decade, but the pace of new home building starts in Ontario has frustrated both levels of government. Sluggish starts have forced the province to revise downward its projection for the coming year.

Ford said this new agreement will help lower taxes and fees that make new homes more expensive and will get more shovels in the ground across the province, keeping the “dream of home ownership alive.”

“Funding will be prioritized for municipalities that agree to cut DCs by up to 50 per cent as well as municipalities that have already lowered DCs in recent months,” he said.

“So to all my 444 mayors and people in the municipalities, if you don’t cut DCs, you aren’t’ getting any money. But if you do we will be there to support you.”

The Association of Municipalities of Ontario last year warned in a report that property taxes on homeowners would have to rise by 20 per cent, on average, to fully replace revenue from development charges. 

“By eliminating DCs, the cost of building new infrastructure doesn’t disappear; it just shifts from new homeowners to existing taxpayers through higher property taxes,” the report said.

Toronto Mayor Olivia Chow however reiterated that the partnership will help put “thousands of shovels in the ground this construction season.”

“The city is ready, home builders are ready, our program is in place and there is absolutely no time to waste,” she said.

New transit lines coming from the GHTA and Golden Horseshoe

Carney also announced an agreement with the Province and the City of Toronto to build the Waterfront East LRT, connecting Union Station to the Portlands. The line is expected to provide service to more than 150,000 people.

“It’s a project that itself will enable another 75,000 housing units,” said Carney.

Mayor Chow called the line the “critical missing piece needed to unlock the eastern waterfront.”

“This rapid transit line is expected to create 100,000 jobs, generate more than $13 billion in economic growth for Toronto, for Ontario and for Canada,” she said. “Toronto is ready. Let’s build.”

In addition, Carney said the federal government will partner with the Province on what he called “GO 2.0” to build multiple GO lines, enabling expanded two way, all-day service to Milton and Kitchener. Dozens of new stations will be built and connections will be added to existing transit lines across the Golden Horseshoe.

Carney also said the federal government will “intensify our collaboration” on the Alto High Speed Rail line – Canada’s first high speed rail project connecting Toronto and Quebec City.

“While we build major infrastructure we’re also accelerating local infrastructure projects that have frankly stalled too long. Working with the Province, we’re going to unlock the Ontario Line, the Eglinton Crosstown west extension, the Scarborough subway extension, the Yonge north subway extension and the Hamilton LRT,” added Carney.

“As we build these transformational projects, they will be subject to our Buy Canada and Buy Ontario policies so that Ontario tax dollars support Ontario workers – that’s a message to the architects and engineers – we have to make sure we buy Ontario or Canadian,” added Ford.

With files from Dilshad Burman