OPINION: The federal-provincial Development Charge Reduction Program provides multiple benefits to municipalities 

The newly announced Development Charge Reduction Program aims to jump start housing projects, increase starts and protect employment in the homes sector by helping to reduce municipal development charges. Photo by Supplied

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For years, the building industry called upon every level of government to collaborate and take meaningful steps to reduce development charges in Ontario to lower the cost of building new homes. This would make housing projects more economically viable and, as a result, secure more jobs and economic activity.  

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With declining housing starts in Ontario and many housing projects stalled due to the high cost to build eroding economic viability, in March the provincial and federal government jointly announced the Development Charge Reduction Program (DCRP).    

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This program aims to jumpstart housing projects, increase starts and protect employment in the sector by using one of the most logical levers available – reducing municipal development charges.   

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Development charges, or DCs, are one-time fees developers and builders pay to municipalities to fund housing-supportive infrastructure and services – this includes things like roads, sewage, transit and parks. As is customary with all housing-related government costs across our economy, these fees are then included in the price tag of a new home and paid for by the new homebuyer.  

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The DCRP works like this. Municipalities had until June 19, 2026 to apply for federal/provincial funding through the program. Municipalities had to submit a list of infrastructure projects that normally would be majority funded by DCs, and for which they would like funding from higher orders of government.  

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To be eligible, municipalities had to commit to lower their DCs by 30 to 50 per cent for three years. The municipalities are also required to fund a minimum of 10 per cent of the submitted projects. If their DCRP submission was approved, the federal and provincial government would pay the balance. 

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On June 23, the City of Toronto was the first municipality in Ontario to announce funding granted under the provincial-federal governments’ DCRP. The city will receive $1.5 billion to lower DCs for a period of three-years.  

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In return, the City has committed to lowering its DCs by 40 to 60 percent – taking them from one of the highest cost jurisdictions in North America from a DC perspective to something significantly less than that and turning the DC rate clock back to sometime in the mid-2010s. 

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The benefits for municipalities to participate in the DCRP are numerous. 

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First – it will dramatically increase housing project economic viability in participating municipalities. This will result in increased housing starts, increased housing supply and more choice for consumers.  

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It is tempting for readers to judge this outcome based on current market conditions with elevated inventory and lower sales. Readers must remember that the development of new housing is a pipeline that takes years to deliver. So, what we are really talking about is supporting new projects now to deliver post-2029 which will protect against a lack of supply shock down the road.