Development Charges: Who Bears the Cost?

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CMHC’s research into development charges shows important trade-offs and affordability implications.

Development charges are fees that cities and regions ask developers to pay when they build new homes. These fees help pay for things like roads, water, sewers and parks.

Over several years, many cities in Canada have raised these fees at a very fast rate. This makes building new homes more expensive, which affects housing affordability.

But who pays for these charges? Our research shows:

New homebuyers usually pay for the development charge, especially when demand is high.
- When development charges go up, the price of new homes goes up, sometimes by even more than the charge itself.
Prices of existing homes also increase.
- Those selling existing homes can ask for higher prices if new homes nearby are more expensive, even though the development charge only applies to new homes.
Development charges can replace higher property taxes or other fees, which may lower costs for people who already own homes.
- Relying too much on these charges can mean cities have fewer ways to pay for new infrastructure, putting more costs on new homeowners instead of existing ones.

This research shows there are important trade-offs and affordability implications from development charges.