Government Charges on Residential Development in Canada

CMHC’s Housing Market Insight Report: Government Charges on Residential Development in Canada's Largest Metropolitan Areas explores how government charges impact construction costs within and across Canada’s largest metropolitan areas: Vancouver, Toronto, and Montréal.

Housing supply is a key issue in Canada’s housing affordability crisis

Housing affordability is a complex, multi-faceted issue. It can’t be solved with one solution. But, we can look at different problems and solutions one at a time to gain a better understanding of the challenges. This can help advance holistic approaches to addressing housing affordability.

This Housing Market Insight report, Government Charges on Residential Development in Canada's Largest Metropolitan Areas, builds on our understanding of government charges and input costs associated with producing new housing.

There are several costs — like land and construction — associated with producing new housing. Some input costs are the fees levied by governments. The collection and administration of such fees introduce 2 main challenges:

1. These fees add a direct cost to the production of housing.
2. Government fees may add complexity and uncertainty to the development process as construction timelines hinge upon the successful collection of fees.

This insight examines the number, complexity and cost of government fees for 6 development scenarios in Vancouver, Toronto and Montréal. These census metropolitan areas have seen the highest housing demand and affordability pressures in Canada — especially Toronto and Vancouver, where affordability challenges have been ongoing.

Understanding cost variations across municipalities, dwelling types and tenures may identify examples of policies that result in housing being supplied at a lower cost.

This understanding may result in lower fees and simpler processes that reduce risk and uncertainty in the development process. The findings or practices uncovered in this insight may inform policy makers and be adapted to other jurisdictions.

Housing price reflects the equilibrium of supply and demand

In this study, we focused on the supply side. This means all input costs involved in developing the housing unit were examined. These input costs can be broadly categorized as follows:

• land costs
• hard construction costs
• soft construction costs
• developer profit
• government charges

Defining government charges on new development

Government charges for new development have a variety of purposes.

Some are designed to recover the cost of providing services to the new building — like water and sewer — while others are used to raise revenue for broader amenities or public goods in the community.

In this report, government charges are broadly categorized as follows:

• warranty fees
• municipal fees
• development charges
• density payments
• permit fees

These charges vary by jurisdiction and should not be considered an exhaustive list.

These charges represent one of the few channels for municipalities to raise revenues.

Lowering input costs — specifically government charges — would require broader changes by municipalities to maintain the current level of municipal services.

Highlights from our analysis include:

• The number and magnitude of government charges on residential development vary substantially by municipality. This signals differences in processes and approaches across centres and presents an opportunity to identify best practices.
• At the upper end, government charges can represent more than 20% of the cost of building a home in major Canadian cities. Charges were found to be highest in the City of Vancouver and the City of Toronto and lowest in the City of Montréal.
• A larger number of government charges was associated with a longer development approval timeline. The primary implication of a longer timeline is the slower provision of new housing supply to market and the people needing it.
• Once a subdivision agreement is registered, the single-detached home tends to be the housing type subject to the lowest government fees. This seems to run contrary to densification efforts being pursued by municipalities, which are necessary to increase housing supply within existing urban areas.

Explore all the findings in this Housing Market Insight.

Download the report (PDF)