Development charges in Ontario and “growth pays for growth”

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| Published , updated May 2, 2024

The council of a municipality may by by-law impose development charges against land to pay for increased capital costs required because of increased needs for services arising from development of the area to which the by-law applies.  1997, c. 27, s. 2 (1)

Subsection 2(1) of the Development Charges Act (DCA), 1997

What are development charges?

Development charges (DC), also known as impact fees in some jurisdictions, are a one-time, upfront fee charged by municipalities and paid for by developers for each new unit they build. Residential housing units are typically charged on a per-dwelling unit basis, while non-residential developments are charged a fee per square foot of gross floor area.

They are charged to cover the initial capital costs of expanding the capital infrastructure (roads, water, sewers, etc.) to provide these services to new developments and were initially implemented to combat NIMBYism:

Development charges evolved from post-1945 subdivision agreements and were initially accepted by most developers as a mechanism for enhancing the likelihood that current residents in a municipality would agree to new development. They now add as much as $90,000 to the cost of a new house in some parts of the Greater Toronto Area.

Dr. Andrew Sancton, Centre for Urban Policy and Local Governance (2021)

In 2017, 197 out of 444 municipal governments collected about $2.3B in development charge revenue, while collecting approximately $21B in property tax.

The community benefit is just one of 3 optional charges that municipalities can charge on development:

  • Development Charges
  • Community Benefit Charges
  • Cash-in-lieu of Parkland

“Growth pays for growth”

Growth (new homes, stores and other buildings) often requires the extension or expansion of municipal services (water lines, transit, but also police, transit and childcare) and DCs are the primary revenue tool municipalities in Ontario use to pay for these projects.

“Growth pays for growth” is a slogan often repeated by municipal members of council in Ontario and used to justify DCs. It is a guiding principle indicating an intent to make buyers of new homes pay for the cost of expanding municipal services to their location, rather than making existing homeowners (and voter base) pay for it through increased property taxes and user fees. It is related to the principle of “benefiter pays”, meaning infrastructure costs should be paid by those who will use and benefit from the installation of the services.

They are popular in municipal politics because they can be presented as a substitute for increasing property taxes – a strong incentive.

The philosophy behind them, logically speaking, is reasonable. New housing developments should pay the “true” price of the costs that they inflict on society in terms of infrastructure needs—roads, sewers, sidewalks, lighting, water, transit, parks, and so on—but also, perhaps, for municipal services such as policing, firefighting, public health, and schools.

Mario Polèse, City Journal

While this is the slogan, in practice, growth-related costs aren’t necessarily 100% covered by DCs:

Since 1989 the DCA has been amended several times (1997, 2015), resulting in an overall lower level of cost recovery for municipalities. Growth-related costs have shifted from the development that created the costs to existing property tax and ratepayers.

Municipal Finance Officers’ Association of Ontario Submission to the Ministry of Municipal Affairs and Housing, 2019

According to a 2010 study by Watson & Associates: Long-term Fiscal Impact Assessment of Growth: 2011-2021 for the Town of Milton, after taking into consideration the various DC restrictions introduced in 1997, DCs only paid for approximately 80% of the cost of growth-related capital in Milton.

While a key principle is growth pays for growth consistent with the Province’s statements on the matter, GFTs have not fully covered the cost of growth in the past, nor are they expected to in the future. Legislative changes introduced through Bill 108 and 197 result in some positive changes to DCs; however, certain restrictions remain, such as the historical service level cap that does not allow for full recovery of growth-related costs. When growth does not pay for growth, the gap is funded by other funding sources, such as increases in property tax to support debt funding or addressed by reducing the level of services.

City of Toronto Chief Financial Officer and Treasurer, and Chief Planner and Executive Director, City Planning, 2022

What can development charges be used to pay for?

DCs received by a municipality must be placed into separate reserve funds for each service and may only be used for the purpose for which they are collected.

Section 2 (4) of the DCA lists the services that municipalities may cover the cost of expansion for using DCs:

  1. Water supply services, including distribution and treatment services
  2. Wastewater services, including sewers and treatment services
  3. Storm water drainage and control services
  4. Services related to a highway
  5. Electrical power services
  6. Transit services other than the Toronto-York subway extension
  7. Waste diversion services
  8. Policing services
  9. Fire protection services
  10. Ambulance services
  11. Library Services
  12. Long-term care services
  13. Parks and recreation services (but not the acquisition of land for parks)
  14. Public health services
  15. Childcare and early years services
  16. Housing services
  17. Provincial Offences Act services, including by-law enforcement services and municipally administered court services.
  18. Services related to emergency preparedness
  19. Services related to airports, but only in the Regional Municipality of Waterloo
  20. Additional services as prescribed

Section 43 of the DCA requires a municipality’s Treasurer to provide an annual statement each Reserve Fund, including opening and closing balances of the reserve funds and of the transactions relating to the funds. It must be posted the municipality’s website. For example, here is the City of Belleville’s Annual Treasurer’s Statement of Reserve Funds for Development Charges 2022.

Some of it goes to housing-related infrastructure, while some goes to things like $144 million soccer facilities in Kitchener including a full FIFA-sized indoor turf soccer field, where over $100M came from development charges:

Worth noting is that Kitchener has higher development charges for suburbs than for infill development.

What services cannot be included in development charges?

Municipal services cannot be funded from DCs (i.e. cultural, tourism, cemeteries, general administration, etc.). Costs for those services must be paid from the tax base or other funding mechanisms.

A development charge by-law may not impose development charges with respect to local services described in clauses 59 (2) (a) and (b)

Section 2 (5) of the DCA

(a) local services, related to a plan of subdivision or within the area to which the plan relates, to be installed or paid for by the owner as a condition of approval under section 51 of the Planning Act;

(b) local services to be installed or paid for by the owner as a condition of approval under section 53 of the Planning Act.  1997, c. 27, s. 59 (2).

What developments are exempt from these charges?

Section 4 of the DCA exempts the following types of development from DCs:

  • Industrial building expansion – No DCs for up to 50% expansion of floor area
  • Upper/lower tier governments and school boards

Added by Bill 23, More Homes Built Faster Act, 2022:

  • Section 2 (3.2) Residential units in existing houses – Second or third residential units (accessory dwelling units) within or ancillary to all new or existing residential buildings
  • Non-profit housing
  • Affordable rental/owned units
  • Attainable units
  • Inclusionary zoning residential units
  • Section 2 (3.1) Residential units in existing rental residential buildings – For rental residential buildings with four or more residential units, the creation of the greater of one unit or 1% of the existing residential units are exempt.
  • Discount, rental housing development
    • 25% discount for 3+ bedrooms
    • 20% reduction for 2 bedrooms
    • 15% reduction for all other rental units
  • University in Ontario that receives operating funds from the Ontario government as per the Ministry of Training, Colleges and Universities Act.

How much are development charges?

DCs are included in the cost of a new home and have represented between 5 to 7% of the cost of a new single-family home according to the Association of Municipalities Ontario, while the CMHC found them to be 2% to 13% in Toronto in 2022.

Historically, they’ve been around that proportion of the cost of a home in municipalities across Ontario:

Select municipalities, 1996 to 2010

Development charges are only a portion of total government charges

They are only one of the fees on a home’s construction, with some municipalities having up to 10 different charges:

Total government charges can account for more than 20% of the construction costs of a dwelling unit in some major Canadian cities. Include sales taxes on the purchase of a new home (13% HST in Ontario – 5% federal and 8% provincial) and the portion the government’s portion can amount to 31% of the purchase price of a new home in Ontario, according to a report by the Canadian Centre for Economic Analysis on behalf of the Civil Construction Alliance of Ontario (RCCAO).

Charges for single detached units have increased much faster than inflation and construction prices over the last 20 years

Over a 20 year period between 2004 and 2024, an analysis of 27 municipalities in Ontario found that all of them increased their development charges for single detached units more than the rate of inflation in Canada (54%) and the increase the Non-residential Building Construction Price Index (144%), which many municipalities have since indexed their development charges to.

Some municipalities increased their charges by as much as 800%:

Municipality2nd Gen (2003 to 2005)3rd Gen (2008 to 2010)20132024Regional MunicipalitySchool BoardsTotalIndexedFrom 2004 to 2013 (%)From 2013 to 2024 (%)From 2004 to 2024 (%)
Vaughan7,92212,28412,71572,24973112842781539Yes, Yes61%468%812%
Greater Sudbury2,4503,07914,82922,162N/A-0Yes505%49%805%
Markham7,17010,17422,35761041731128427142580Yes, Yes212%173%751%
Whitby7,72210,20812,05849,25466,14957355735Yes, Yes56%308%538%
Oshawa6,2326,9207,25635,59166,14957355735Yes, Yes16%391%471%
Kitchener (Suburban)5,6349,8879,66224,65839,75241974197Yes, Yes71%155%338%
Richmond Hill7,00211,65412,15229,11073112842781539Yes, Yes74%140%318%
Ottawa (inside Greenbelt)10,56615,44616,44743,494N/A3,4200Yes56%164%312%
Waterloo City5,75013,37211,75320,57239,75248874887Yes104%75%258%
Index (NRBCPI)64.186.791156.242%71%144%
Inflation (Canada)18%30%54%


Data for 2nd gen (2003 to 2005), 3rd gen (2008 to 2010) and 2013 from a 2013 report by Municipal Finance Officers’ Association of Ontario, which was in turn based on information contained in current municipal background studies. MFOA has been a proponent of development charges.

It does not include fees applied by regional municipalities and school boards or other fees such as Community Benefits Charges or Cash-in-lieu of Parkland.

Here is the change from 2009 to 2021 according to a report prepared by Altus Group for BILD:

Housing prices in Ontario have increased 336% between January 2005 and March 2024 (average of 6.24% per year), while inflation increased around 50% in that same time period (2.18% per year on average):

Example: London, ON

For example, in 2004 the development charges for a single-detached home in London, ON were $5,152. The charges would cost $7,932.87 if adjusting for the inflation of 53.8% between then and 2024 (2.18% per year on average). However, they’ve gone up over 800% in that same time period:

A detached home in London, ON which cost $168,000 in 2004, (~$250,000 adjusted for inflation) sold for $665,000 in September 2023 – a 266% increase. Interest rates are roughly the same now as they were then, so the price increase isn’t due of low interest rates (anecdotal example from this thread by Dr. Mike Moffatt). According to the Benchmark Price, prices have increased by 400%.

Regional Municipalities and school boards may also impose their own development charges

Education/school boards

Section 257.54 of the Ontario Education Act allows school boards to establish development charges on land undergoing residential and non-residential development. The school boards are responsible for setting and imposing education development charges (EDC).  The revenue collected is used to purchase land for new schools and to pay for site preparation costs. The municipality is responsible for the collection of the education development charges on behalf of the local school boards at building permit issuance.

Regional Municipalities

The DCA allows municipalities, including regional municipalities to impose development charges to pay for increased capital costs required because of increased needs for services arising from development of the area to which the by-law applies.

For example, the Region of Durham’s Regional Residential and Non-residential Development Charges bylaw was passed on June 14, 2023, applying uniform development charges against all lands within the boundaries of the Region that are developed for residential and non-residential uses.

Charges on single detached homes are often lower than on apartments, incentivizing single detached homes

Government charges in Vancouver and Toronto for single-detached homes are much lower than for denser housing types such as row homes and condominiums. In a context in which many municipalities have implemented policies to increase density, it may seem surprising that the least dense housing type is also the one whose total cost is least affected by government charges:

Development charges might make more sense if higher fees were charged for suburban single family developments and lower/no fee was charged for dense apartments (to reflect the fact that low density is way more expensive than high density). However, single family homes are generally charged the lowest development fees per square foot while denser construction is charged higher fees.

However, that isn’t always the case. In 2013, to steer growth and encourage greater density, the City of Ottawa levied a lower development charge ($16,447 per Single Detached Unit) for development within the inner boundary of the city’s designated Greenbelt than areas beyond the outer boundary of the Greenbelt ($24,650 per Single Detached Unit) and still does in 2024, but by a smaller margin.

Approaches determining charges vary considerably between municipalities

Municipalities define different categories, including:

  • Areas
    • Greenfield/infill
    • Urban/rural
    • Named areas (eg. Chemong East)
  • Unit types: single detached, duplex/triplex, apartments, etc.
MunicipalityCharges for Single DetachedIndexed?Varies
Belleville$20,671 to $29,907YesUrban/rural, 4 unit types
Peterborough$49,952 to $58,481Yes9 areas, 3 unit types
Hamilton$61,758 to $72,566Yes2 areas, 5 unit types
Prince Edward County$12,097Yes1 area, 10 unit types
Guelph$55,219Yes1 area, 5 unit types
Toronto$91,333Yesrental/non-rental, 6 unit types
Quinte West$15,010Yes1 area, 4 unit types

Many municipalities across the province have indexed their development charges to a measure of inflation reported by Statistics Canada. For many it is the Statistics Canada Non-residential Building Construction Price Index for Ottawa-Gatineau or for Toronto, as appropriate (table 18-10-0276-02, formerly 18-10-0135-01, formerly CANSIM 327-0058) as defined by O. Reg. 82/98.



Prince Edward County


GTA charges higher than in other Canadian cities, US

A 2019 study for BILD showed that development charges in the Greater Toronto Area for low-rise housing are on average more than 3 times higher per unit than in 6 comparable US metropolitan areas, and roughly 1.75-times higher than in the other Canadian cities. For high-rise developments the average per unit charges in the GTA are roughly 50% higher than in the US areas, and roughly 30% higher than in the other Canadian urban areas.

Municipal development charge deferral programs

In Belleville, Development Charge deferrals available include:

  • Rental housing (that is for-profit), and institutional development. Payable in 6 instalments beginning from the date of issuance of an occupancy permit or occupancy of the building, whichever is earlier
  • Non-profit housing development. Payable in 21 instalments beginning from the date of issuance of an occupancy permit or occupancy of the building, whichever is earlier.
  • Developers that belong to the Quinte Home Builders Association. Contact the City at 613-968-6481 for details

The Montréal model

Montreal does not charge developers impact/development fees. Instead, growth-related infrastructure is still largely financed through municipal borrowing (long term debt) that is paid back by property taxes paid by all property-owners in the municipality. Quebec municipalities are some of the most indebted in Canada.

The city’s housing stock stands out in North America for its strong presence of row houses, duplexes, triplexes, and low-rise apartment blocks—what urbanists call elsewhere the “missing middle.” The middle is certainly missing in Toronto, its market skewed toward the two extremes: single, detached houses and high-rise apartment towers.

Montreal’s housing stock is visibly more affordable. The percentage of owner households spending more than 30 percent of their income on shelter costs was 20 percent in Montreal, compared with 27 percent in Toronto (16 percent and 27 percent, respectively, at the metro level). The equivalent figures for renters were 37 percent and 47 percent (city) and 36 percent and 47 percent (metro area).

How One City Makes Housing Affordable – Mario Polèse, City Journal

What is an alternative to development charges?

Instead of charging new homebuyer’s, municipalities could take out long-term debt to pay for the expansion of services. Interest rates may fluctuate, but municipal rates are generally lower and more stable than the mortgage rates homeowners must pay to, in part, pay for the cost of development charges.

How using debt instead of development charges would impact Ontario municipalities

Halton Region had the highest development charges in 2020 and raised $258M. If the $258M was instead financed at 2.5% over 20 years, the average property tax increase would be 1.8%. Expanding the concept to the $2.23 billion collected by Ontario municipalities in 2018, the average property tax increase over the whole province would be 0.7%.

Interest rates can obviously go up or down, most likely up, given the current low rates. If the worry is the potential increase in municipal capital borrowing rates, we should have similar concerns about the exposure of new homebuyers to increased mortgage rates (which are higher than municipal borrowing rates) and monthly payments, a substantial portion of which often goes to paying the cost of development charges.

Reassessing the Case for Development Charges in Canadian Municipalities – Centre for Urban Policy and Local Governance at Western University (2021)

How are development charges determined in Ontario?

Municipalities must prepare a Development Charges Background Study which informs the calculation of the development charges.

Before passing a development charge by-law, the council shall complete a development charge background study.

Section 10 of the DCA

The study looks at the anticipated residential and non-residential growth over the next five years.

Section 10 and Section 5 of the DCA require the development charge background study to consider:

  • Forecast of the amount, type and location of development, for which development charges can be imposed
  • For each service to which the development charge by-law would relate, the
    • Increase in the need for service attributable to the anticipated development
    • Average historical level of service over the previous 10 years for each eligible service area (i.e. parks, recreation, roads, libraries, waste diversion, etc.). This historical level of service forms a cap that new cannot be exceeded through development charges.
    • Capital costs necessary to provide the increased services must be estimated, including:
      • Costs to acquire land or an interest in land, including a leasehold interest, except in relation to such services as are prescribed for the purposes of this paragraph.
      • Costs to improve land.
      • Costs to acquire, lease, construct or improve buildings and structures.
      • Costs to acquire, lease, construct or improve facilities
      • Interest on money borrowed to pay for costs described in paragraphs 1 to 4.  1997, c. 27, s. 5 (3); 2020, c. 18, Sched. 3, s. 2; 2022, c. 21, Sched. 3, s. 5 (3, 4).
    • Long term capital and operating costs for capital infrastructure required for the service
  • Consideration of the use of more than one development charge by-law to reflect different needs for services in different areas
  • Asset Management Plan

Rates vary by:

  • Municipality based on service levels, cost of living
  • Development type based on their expected need of different municipal services

Example Background Studies

Municipality exemption examples

Municipalities may set their own exemptions in their development charges by-law. They must cover the exempted development charges through other funding sources. For example, in Prince Edward County, the exemptions are covered through the property tax base.


Peterborough’s Development Charges Bylaw (second part) collects charges to cover:

  • General government
  • Library services
  • Recreation
  • Parks
  • Affordable housing
  • Fire services
  • Police services
  • Public works
  • Transit services
  • Waste management
  • Roads & Other City-wide Engineering
  • Sewage treatment

Exempts charges for the following developments:

  • Hospitals under the Public Hospitals Act
  • Place of worship, cemetery or burial ground
  • Trent University or Sir Sandford Fleming College
  • Farm building (eg. barn)
  • Commercial Core Sub-Area and the Waterfront Commercial Sub-Area of the Central Area, as depicted on Schedule J of the Official Plan of the City
  • Redevelopment in Central Area, as depicted on Schedule J of the Official Plan of the City, and which exists as of January 1, 2005
  • 15+ apartment units in Central Area
  • Mixed-used development (15+ apartment units and 1,000 sqm of commercial floor area) in Central Area. Each additional 67 square metres of commercial gross floor area beyond the initial 1,000 square metres must be matched with a residential unit to be eligible for exemption.

Prince Edward County

Prince Edward County’s Development Charges Bylaws collect charges to cover:

  • Services related to a highway
  • Fire protection services (Rossmore Station #5 expansion)
  • Parks and recreation services (Wellington and District Community Centre)
  • Library services (Picton library expansion; expansion of e-books and e-digital audiobooks)
  • Long-term care services
  • Ambulance services
  • Water
  • Wastewater
  • Waste diversion

Has specific charges for the Wellington Urban Serviced Area:

  • Water
  • Wastewater

Exempts charges for the following developments:

  • Temporary buildings and structures

Doesn’t collect charges on the following eligible developments:

  • Policing services
  • Public health services
  • Childcare and early years services
  • Housing services
  • Provincial Offences Acts services
  • Services related to emergency preparedness
  • Storm water drainage and control services
  • Transits services


Belleville’s Development Charges Bylaw collects charges to cover:

  • Roads and related services
  • Parks and recreation services
  • Library services
  • Fire services
  • Police services
  • Ambulance services
  • Protection services
  • Social housing services
  • Water services
  • Wastewater services

Exemptions for the following developments:

  • Municipally-owned lands used for purpose of a municipality, local board thereof, or board of education; private schools as defined in the Education Act
  • College of applied arts and technology developments pursuant to the Ministry of Training, Colleges and Universities Act, not including student residences
  • Place of worship classified as exempt from taxation under Section 3 of the Assessment Act
  • Hospitals under the Public Hospitals Act
  • Private schools as defined by the Education Act
  • Accessory use or structure not exceeding ten square meters of nonresidential floor area
  • Non-residential farm building (barn)
  • Commercial development in Belleville Downtown Improvement Area (BDIA)
  • Creating or adding commercial accessory use or structure less than 10 square metres of floor area

A 50% reduction for development charges is provided for:

  • Residential development located within the City’s Central Business District (CBD). In addition, commercial development charges are waived for commercial development within the Belleville Downtown Improvement Area (BDIA).
  • Affordable rental housing apartments with a minimum of 6 units being built outside of the Central Business District.

Development charge reserve funds

DCs received by a municipality must be placed into separate reserve funds for each service for which they are collected and may only be used for the purpose for which they are collected.

The Treasurer of the municipality must provide an annual statement about each Reserve Fund which must be posted the municipality’s website. For example, here is the City of Belleville’s Annual Treasurer’s Statement of Reserve Funds for Development Charges 2022.

A municipality that has passed a development charge by-law shall establish a separate reserve fund for each service to which the development charge relates.

Section 33 of the Development Charges Act

The municipality shall pay each development charge it collects into the reserve fund or funds to which the charge relates.

Section 34

The money in a reserve fund established for a service may be spent only for capital costs determined under paragraphs 2 to 7 of subsection 5 (1).

Section 35

In 2011, municipalities collected $1.3B in development charges and had $2.7B in obligatory reserves funds. In 2017, 197 out of 444 municipal governments collected about $2.3B in development charge revenue and at the end of 2019, had $3.25B held in reserve funds. $839M of the increase was from increases in Toronto’s reserves.

Requirement to spend or allocate monies in water reserve funds

(2) Beginning in 2023 and in each calendar year thereafter, a municipality shall spend or allocate at least 60 per cent of the monies that are in a reserve fund for the following services at the beginning of the year:

1.  Water supply services, including distribution and treatment services.

2.  Waste water services, including sewers and treatment services.

3.  Services related to a highway as defined in subsection 1 (1) of the Municipal Act, 2001 or subsection 3 (1) of the City of Toronto Act, 2006, as the case may be. 2022, c. 21, Sched. 3, s. 10.

Proponents of development charges

As a rule, urban planners, environmentalists, and municipal administrators favor [development charges] —the first two groups, historically wary of developers, because they see the fees as a means of controlling development; and the third group because the fees are a rich source of revenue.

Mario Polèse, City Journal

Institute on Municipal Finance and Governance (IMFG)

New infrastructure like bridges, traffic lights, water lines typically indivisible – it is either built or it isn’t – and they often need to be built in advance, well before houses are constructed.

Since growth-related capital works create excess capacity upfront while growth generates revenue only after it materializes, the cost of these works is front-ended, whereas cost recovery from growth is back-ended. This timing mismatch means growth generates insufficient
revenue over the growth horizon to recover corresponding growth-related capital costs, and the shortfall is shifted to existing ratepayers in the form of higher user fees and property taxes, causing:

  1. Reduced service levels and growth: Existing ratepayers respond to inflated user fees and property taxes with demands to reduce municipal services below efficient levels. Reduced municipal services depress property values and discourage growth. Growth is depressed even further as municipalities respond by slowing or halting development approvals.
  2. Diminished fiscal capacity: The shifting of growth-related capital costs to existing ratepayers imposes secondary inefficiencies on municipalities in the form of diminished fiscal capacity and an increased risk of debt regulation violations, credit downgrading, or even financial insolvency. These effects increase borrowing costs, further diminishing service levels and growth.
  3. Increased service congestion: If a municipality tries to mitigate the nonconcurrence externality by investing in growth-related capital works after the associated growth occurs (which is feasible for services other than water and sewage systems), existing and new ratepayers experience increased service congestion. Although such congestion is a non-monetary cost, it is a cost nonetheless, and one largely borne by existing ratepayers.
Adam Found, Institute on Municipal Finance and Governance at the University of Toronto, 2019

Municipal administrators

No, these fees do not add to the price of a new home — the market determines housing prices. No, there is no guarantee that reducing these fees will make developers build more housing or make it more affordable – Bill 23 does not require them to. Yes, developers will still make a profit.

City of Mississauga, The Truth about Municipal Fees: What You Need to Know about Parkland and Development Charges
  1. Development charges are not a root cause of the affordable housing and supply challenge in Ontario. Even further to the point, DCs only apply to only a small part of the housing market – new homes. DCs represent between 5 – 7% of the cost of a new home.
  2. A reduction in development charge collections will increase the cost of public services for all residents. This will increase pressure from taxpayers to constrain growth and to constrain demands on the already stretched property tax dollar.
  3. Municipal governments and current property taxpayers do not have means to subsidize developers in building new homes. Changes that reduced development charges has never resulted in reduced housing prices.
The Importance of Development Charges – Association of Municipalities Ontario (2019)

New development should pay for the growth-related infrastructure, services and facilities needed to support the new population and
employment. Changes to provincial legislation should maintain municipal revenues – that is, the City should not be worse off as a result of the new legislative requirements.

City of Toronto Chief Financial Officer and Treasurer, and Chief Planner and Executive Director, City Planning, 2022

Provincial legislation should consistently allow municipalities to recover the full cost of infrastructure related to development. As noted above, amendments to the DCA since 1989 have reduced municipalities’ overall ability to recover growth related costs. This means that existing taxpayers must pay the cost of infrastructure for new communities. The mechanisms to permit cost recovery should be efficient, as any accompanying administrative burden can result in slower provision of requisite infrastructure and services, thereby slowing housing development.

Municipal Finance Officers’ Association of Ontario Submission to the Ministry of Municipal Affairs and Housing, 2019

The establishment of house prices is primarily based on demand and supply conditions in the housing market, not by development costs. Demand arises from dynamics like population growth, local employment opportunities, transit and infrastructure investments, and neighbourhood amenities. Supply is determined by the characteristics of planned developments, as well as the characteristics and performance of resale homes in the secondary market.

A developer’s decision to purchase or develop real estate is based on whether a project is ‘feasible’ or ‘viable’ from the developer’s perspective. Developers determine this by calculating the Residual Land Value (RLV) of a given project. The RLV lets the developer know how much they can pay for a potential parcel of land given their specific redevelopment plans.

Market pricing may drop due to demand and supply conditions. Development costs may rise due to general inflation or increased fees. A developer’s profit expectation may increase, based on other investment opportunities. Such changes to the inputs would reduce the RLV (the amount the developer is willing to pay for land) and could impact project viability. However, a change in development costs will not result in a change in the market price of the development, because these two parts of the equation are not dependent on each other.

The Effect of Development Related Costs on Housing Affordability – City of Mississauga (2019)

Critical analysis of development charges

The addition of new community amenities and infrastructure can improve the quality of life for existing residents as well as new ones. For example, Kitchener’s new multi-purpose indoor recreation facility. In addition, more population may mean more businesses and services too choose from (here in Belleville we’re still waiting for a Costco).

Proponents of the fees often fail to consider the potential benefits of growth experienced by all residents which “include growth in retail sales and sales tax collection, expanded employment opportunities, increased disposable income, and diversity in housing choices” (Bauman and Ethier, 1987: 51–52).

Reassessing the Case for Development Charges in Canadian Municipalities – Centre for Urban Policy and Local Governance at Western University (2021)

Proponents of the slogan “growth should pay for growth” are in support of this outcome because they believe that growth-related infrastructure costs can be fairly separated from other local infrastructure costs and that current residents have no moral responsibility for such costs. Much of this report has been devoted to showing the shortcomings of such a view.

Reassessing the Case for Development Charges in Canadian Municipalities – Centre for Urban Policy and Local Governance at Western University (2021)

Developers push for adjustments to how they are determined

A study of 16 GTA municipalities by Altus Group on behalf of Building Industry and Land Development Association (BILD) found that:

Municipal charges for low-rise housing amount to $53 per square foot, while charges for high-rise housing amount to $99 per square foot – municipal charges are nearly 2-times higher for high-density housing. This relationship is evident in every municipality studied, with the ratio of high-rise charges ranging from 1.5 to 2.4-times the charges per square foot levied on low-rise development. These ratios would be even higher if the costs associated with inclusionary zoning were included, as that initiative is currently applied to high-density housing only

Higher municipal charges (like escalating construction costs or other costs) increase the price ‘floor’ that units need to be sold at to be feasible for the developing landowner or home builder. If fewer units can sell at prices that cover increased costs, fewer units will get built

This puts at risk municipal objectives for increased infill and intensification and could hinder utilization of public infrastructure
investments in urbanized areas, such as major transit station areas, or transit corridors.

Municipal Benchmarking Study, 2nd Edition (2022)

Developers push for decreases to development charges

Growth is currently paying for a lot more than it costs. WE HBA supports the concept that growth should pay for growth, but clearly, new home buyers are being disproportionately targeted for service and infrastructure that benefit all. These taxes cannot be looked at in isolation. Much like cigarettes and alcohol, housing is being treated as a “sin” tax with upwards of a quarter of the price of a new home going to the government through a cumulative sum of different taxes by all three levels of government. 

West End Home Builders’ Association, 2023

Developers point to unspent municipal development reserve funds

A report commissioned by Altus Group Economic Consulting for Building Industry and Land Development Association (BILD) New Homeowner Money in the Government’s Bank: How Unspent Municipal Reserves are Impacting Building Livable, Affordable Communities in the GTA (2021) indicated that more than $5B in development charges and fees was sitting in Ontario municipal reserve funds – with the City of Toronto accounting for more than $2.6B alone.

The BILD study asserts that municipalities who maintain large reserve fund balances are impacting housing affordability and falling behind in providing community amenities and infrastructure, like roads, parkland, recreation space and libraries.

Densification could reduce development charges and property taxes

When new housing is built, developers have borne the majority of the initial costs of providing the needed additional service infrastructure through DCs, but the municipal government is responsible for the ongoing operation, maintenance and replacement of this infrastructure, which is paid for in the capital budget by property taxes, provincial grants, and other funding sources.

Once the infrastructure is in the ground, municipalities are forever responsible for operating, maintaining and replacing it. Growing in more compact ways, relying more on intensifying existing urban areas and creating dense, mixed-use new communities can reduce long-term financial commitments and ensure better fiscal health now and for generations to come.

Greenbelt Foundation

Residential development in urban areas (infill) is more cost efficient than adding new subdivisions

A 2021 report for the City of Ottawa found that to serve new low-density homes built on undeveloped land it costs $465 per capita, per year more than the City receives back in property taxes and water bills, while high-density infill development (eg. apartment buildings) pays for itself and produces a surplus of $606 per capita, per year.

Intensification via development in higher-density urban areas is, on average, the most cost-efficient for the [City of Ottawa], while urban greenfield development and low density rural development are likely costing the City more than is returned in taxes and service rate fees.

A key reason is that urban development is more dense so requires less infrastructure per household. Moreover, urban properties typically have higher real-estate value, so taxes are higher.

Comparative Municipal Fiscal Impact Analysis for the City of Ottawa by Henson Consulting (2021) a brief update to the 2013 in-depth report (summary)

Densification reduces per capita costs

Densification reduces per capita costs. It’s way cheaper for a municipal water and sewer system to serve one 200 unit apartment than 200 single family homes. Replacing single family homes with apartments would allow water rates to be decreased even after borrowing money to upgrade infrastructure. The lower the amount of local infrastructure required by new development, the lower the annual replacement costs.

Municipalities don’t always take into account the long-term financial impacts of their growth decisions, contributing to urban sprawl and higher ongoing operating and maintenance costs. This can lead to higher property taxes to pay for existing infrastructure and the justification of higher development charges to pay for future infrastructure.

Denser development drives per capita costs down in a big way:

  • Much of the cost of water utilities is maintaining the pipes. However, a thicker pipe doesn’t really need more maintenance than a thinner pipe. The driving cost of maintenance is the distance of the pipe. And because single family homes are much more spread out, they cost way more in pipe maintenance.
  • Utilities can lose up to 33% to 50% of the water to leaks in the water mains. The amount of water leaked is proportional to the amount of pipe in the ground. Denser development means less pipe per person. Which means less water leaked per person. Which means less water supply needed per person.
  • Energy usage per capita
  • Road surface and vehicle miles traveled per capita (sprawling suburbs have a lot more road surface than apartment buildings)
  • Number of fire stations needed to get 15 minute response per capita goes down.
  • Almost every city service is massively cheaper per capita in dense areas than sparse areas.

If the fees really did exist to pay for the impact of development, the fee schedule would be flipped.

Regulatory timeline

  • Pre-1980s – Provincial and federal governments paid for infrastructure upgrades.
  • 1989 – Development Charges Act (DCA) introduced in Ontario, allowing municipalities to recover 100% of growth-related capital costs.
  • 1997 – DCA updated to remove eligible services which would have growth-related expenditures, including parkland acquisition, corporate administrative space, arts and entertainment facilities, computer equipment, vehicles and equipment with a useful life of six years or less, and hospitals. This shifted the cost of expansion of these services to existing homeowners.
  • 2015 – Allowed for greater recovery of growth-related transit costs and waste diversion costs, but the provision of landfill sites and services, as well as the provision of facilities and services for the incineration of waste remained ineligible. Further, municipalities were faced with an unfavourable adjustment to the cash-in-lieu for parkland ratio and an inability to collect voluntary payments.
  • 2019 – More Homes, More Choice Act (Bill 108) – List of ineligible services in DCA replaced with list of services eligible for inclusion in a DC bylaw. Exemption for second dwelling units, exclusion of landfills and waste incineration, DCs for rental and non-profit housing could be paid in annual installments over 6 and 21 years, respectively.
  • 2019 – Plan to Build Ontario Together Act (Bill 138) – Removal of instalment payments for commercial and industrial developments that were originally included in Bill 108.
  • 2020 – COVID-19 Economic Recovery Act (Bill 197) – List of DC eligible services expanded.
  • 2020 – Better for People, Smarter for Business Act (Bill 213) – University lands made exempt from DCs in the Ministry of Training, Colleges and Universities Act.
  • 2022 – More Homes for Everyone Act (Bill 109) – Requires municipalities to publish the statement of the Treasurer about each Development Charges Reserve Fund, including opening and closing balances of each year, the current year’s distribution of the DC proceeds, any financing transfers and the interest earned on the fund.

2022 – More Homes Built Faster Act (Bill 23)

Had significant impacts on the way municipalities plan, process and fund development. Changes to the Development Charges Act include:

  • Additional statutory exemptions:
    1. Up to two additional residential units within or ancillary to all new or existing dwellings
    2. Affordable rental/owned units
    3. Attainable unit
    4. Non-profit housing
    5. Inclusionary zoning residential units
    6. Certain residential units in existing rental residential buildings
  • Removal of “Housing” as an eligible service area
  • Removal of studies (including the development charge background study) as eligible capital costs
  • Extending the period over which the average historical level of service must be assessed from 10 to 15 years
  • Requiring that all by-laws passed after June 1, 2022 must be phased in relative to the maximum charge over the first five years the by-law is in force, as follows:
    1. Year 1 – 80% of the maximum charge
    2. Year 2 – 85% of the maximum charge 
    3. Year 3 – 90% of the maximum charge 
    4. Year 4 – 95% of the maximum charge; and 
    5. Year 5 to expiry – 100% of the maximum charge 
  • Development charge by-laws currently expire a maximum of five years after they come into force. This period would be extended to 10 years.
  • Discounts for rental housing dependent on the number of bedrooms in the units being created
  • A maximum interest rate would be prescribed at prime plus 1% for the purposes of mandatory installment payments and charges calculated at planning application submission
  • Requirement to allocate or at least 60% of monies in a reserve fund at the beginning of each year for water, wastewater, and services related to a highway.

2023 – Affordable Homes and Good Jobs Act (Bill 134)

Updates the definition of affordable residential unit from 80% of the average market rent/purchase price to the lesser of:

  • The income-based affordable rent/purchase price for the residential unit set out in the Affordable Residential Units bulletin, as identified by the Minister of Municipal Affairs and Housing in accordance with subsection (5), and
  • the average market rent/90% of the average purchase price identified for the residential unit set out in the Affordable Residential Units bulletin.

The income-based affordable purchase price applicable to a residential unit is based on:

  1. the income of a household that, in the Minister’s opinion, is at the 60th percentile of gross annual incomes for households in the applicable local municipality; and
  2. the purchase price that, in the Minister’s opinion, would result in annual accommodation costs equal to 30 per cent of the income of the household referred to in clause (a).

However, they have not yet published the Affordable Residential Units bulletin describing the price in each geographic market that would meet the definitions and get the rate cut.

Ontario is giving municipalities more powers to raise dev charges.

April 2024 – Federal government requires 3-year freeze on development charges for municipalities with a population greater than 300,000 to unlock $5B in infrastructure funding

The $5B is for agreements with provinces and territories to support long-term infrastructure priorities through the Canada Housing Infrastructure Fund, part of Budget 2024. Several strings were attached to that funding, including a 3-year freeze on increasing development charges from April 2, 2024 levels for municipalities with a population greater than 300,000.

April 2024 – Cutting Red Tape to Build More Homes Act (Bill 185)


  • Allow Development Charge Background Study costs to be recovered by DCs, reversing the change made in 2022 – More Homes Built Faster Act (Bill 23)
  • Reduce the time DCs are frozen after complete application or site plan approval from 2 years to 18 months. Failure to obtain a first building permit within that period will result in losing the “frozen” rates.
  • Repeal mandatory phase-in of DCs, reversing the change introduced in 2022 – More Homes Built Faster Act (Bill 23)


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