We built this city on… Development charges, and it’s been rock and roll

Canada’s largest cities have been rapidly developing since the release of Starship’s billboard hit “We built this city” in 1985. In recent years, this development has been increasingly funded through the imposition of development charges, especially in Ontario. And it sure has been a rock and roll ride. CMHC’s research and market intelligence shows this cost may be passed on to homeowners and renters and can be a significant constraint to housing affordability.

New data collected by CMHC shows development charges account for a significant part of the cost of a new housing unit in some cities. Charges vary greatly across the country both in their magnitude and on how they are charged. Data also shows we can learn from other financing mechanisms used to fund municipal infrastructure. Development charges are one of several tools used to fund infrastructure for new development and redevelopments, including property taxes and utility fees.

Development charges have attracted significant attention from the public and policy makers in recent years. To add to the evidence base on development charges and to further understand how they affect housing outcomes, CMHC piloted a project to collect information on development charges across the country. This was done primarily through a machine learning tool that obtains the information directly from municipal websites.

This is the first time CMHC has collected data on new homes primarily through new technologies along with data validation by CMHC analysts.

A first iteration of this data is now available. It focuses on 30 municipalities in Ontario, British Columbia, Alberta and Quebec.

Elements of development charges that are comparable across all municipalities have been collected and reported. CMHC took this first step as part of the Modernizing Housing Data Initiative, which aims to modernize and enhance the collection and dissemination of housing data. We will learn from this initial release and update and expand this data on a regular basis.

Development charges are prevalent and uneven across the country

Across the municipalities covered by the pilot, development charges vary quite a lot. While the information is readily available from municipal websites, as reflected in our data, it still lacks transparency in that there is no common standard and consistency to present and compare effectively. This makes it difficult for homebuyers and developers to make informed decisions. CMHC’s data collection initiative on development charges is a first step in addressing this situation, and this article highlights some of these inconsistencies.

Many municipalities in Ontario and British Columbia impose charges on a wide range of housing unit types but the amount tends to be significantly higher in Ontario.

While most municipalities impose development charges on a per housing unit basis, some municipalities impose them on a per acre basis and sometimes also add an element of density. For example, Langley (BC) has the capacity to make development charges vary depending on the number of units per acre but an actual schedule of charges shows they don’t vary significantly based on density.

Our data also shows Alberta municipalities tend to charge on a per acre basis. For example, in Airdrie, the average charge (including the Community Facilities off-site levy) is just shy of $197,000 per acre for benefiting areas.

Meanwhile in Beaumont, the average is roughly $109,000 per acre for designated basins.

Except for Toronto and Maple Ridge (BC), most municipalities cited in this study did not delineate development charges based on tenure (that is, rental versus non-rental). However, many have enacted policies in recent years to either waive or defer charges on rental projects to encourage their development.

Development charges typically vary by scale of development with highest charges for single- or semi-detached homes and progressively lower charges for row homes, large apartments and small apartments. Provincial legislation may allow for or require development charge waivers or deferrals for non-profit and affordable housing.

In some cities charges may amount to a significant financial burden on development

Development charges vary extensively in terms of the actual amount charged. For a two-bedroom (or large, 700 or 750 sq ft) apartment, they varied from about $39,600 per unit in the City of Ottawa (Outside the Greenbelt) and $121,500 in the City of Markham – more than three times from one to the other (we excluded values equal to zero) (Figure 1).

The level of charges per unit represented 8.2% and 15.7% of the average new condo price in those markets, respectively. In 2024, the average new apartment building in Ottawa had 55 units compared to 246 units in Markham. Based on these averages, a developer in Ottawa would face approximately $2.2 million in upfront development charges. Meanwhile, a developer in Markham would pay around $29.9 million. This highlights the significant cost differences between the two cities and the burden imposed on developers.

For a single-detached home, development charges vary from around $125,000 in Pickering to about $180,600 in City of Toronto within the Greater Toronto Area (Figure 2). The level of charges per unit respectively represents 9.4% and 8.5% of the average single-detached home absorbed price 2024 in those markets, a significant amount for potential homebuyers.

In many cases, development charges are a combination of regional and municipal government levies, with upper and lower tier municipalities responsible for different services and infrastructure. The numbers shown above are inclusive of both municipal and regional development charges, whenever possible.

In some areas of Montreal, the amount of development charges is lower, at about $132 per square meter for sites within the catchment area of the Réseau Express Métropolitain (REM) stations. The municipality of Brossard is an exception, as both REM contributions and city-wide development charges apply. The REM contributions are earmarked for this transit-oriented project piloted by the financial arm of the Government of Quebec.

Eventually, much of these costs are at least partially passed on to homebuyers and renters. Given their magnitude, they can be a significant constraint to housing affordability. Their variability across markets may also mean they influence Canadians’ decisions about housing.

Development charges fund a wide array of municipal infrastructure

Development charges are levied for a wide array of municipal missions and infrastructure such as road and transit, water and sewage, parks and green spaces, and school land acquisition. It’s important to note that eligible categories and the process used to determine development charge rates are defined through provincial legislation.

Cities use development charges in significantly different ways. Some include charges for libraries, early learning and childcare facilities, police and fire department services. Even then, their use shows very little consistency across municipalities.

For example, in Toronto, about 50% of those collected are dedicated to public transit and roads. This is about the same in Ottawa. However, in Aurora (ON), this share is closer to 45% while in Langley (BC) it is about 25%.

In Langley (BC) and in the York Region (ON), water and sewage account for about 45% of development charges while this percentage is closer to 10% in Ottawa and Toronto. These trends may reflect the variety in infrastructure needs between communities. They may also reflect differences between municipalities that are growing primarily through intensification and those with a mix of new neighbourhoods and redevelopment.

Bottom line: Consistency will further fill the data gap

One of the main insights from CMHC’s data on development charges is, because of development charges, municipal finance is housing finance.

To encourage dialogue on municipal taxes in general and development charges and fees in particular, CMHC’s research team will give special attention to this topic starting with the questions below:

1. As a country, are we comfortable with the implications of using a “growth pays for growth” approach in municipal development financing? And what are the alternatives?
2. What can we learn from international experiences in municipal finance that may help sustain cities, address some of the constraints development charges impose on housing construction and foster an efficient and equitable municipal taxation system?

One key action to answer the questions above is to open the dialogue between governments, homeowners and developers on the impact of development charges on our collective ability to respond to housing needs across the country. Only with an open and transparent dialogue on these questions can we envision municipal fiscality to contribute to resolving our national housing crisis.

CMHC’s data collection on development charges is still in the early stages and will be improved over time as we regularly update, expand and refine our data with the help of our municipal partners. CMHC believes this is a step in the right direction to allow benchmarking and to identify options to fund municipal infrastructure. CMHC will also work with stakeholders to identify additional areas of research in municipal taxation and finance.

Ultimately, Canada must build its way out of this housing crisis while ensuring access to quality municipal infrastructure. By learning from these insights and fostering more consistency, all levels of government can shape policies that help Canadians access a home they can afford.

Contributors to this article: Lin Zhang, Vinay Bhardwaj, Gagandeep Singh, Ian Moore, Shima-Shohreh Tavassoli, John Baker, Sean Nash, Chris Zakher, Fancia He.