Ontario’s construction associations are praising the March 30 joint announcement from the federal government and the government of Ontario of an $8.8 billion investment to create the Build Communities Strong Fund. The fund will assist municipalities to build infrastructure to support new housing if they reduce development charges.

From The Building Industry and Land Development Association (BILD) and the Ontario Home Builders’ Association (OHBA):

BILD and the OHBA applaud the federal and provincial governments for their historic announcement today committing $8.8 billion over 10 years to lower development charges (DCs) across Ontario while ensuring municipalities have the funding necessary to support growth-related infrastructure. Lowering development charges will improve housing project viability, improve housing affordability and increase housing supply.

“The importance of today’s announcement to home building across Ontario cannot be overstated,” said Scott Andison, CEO of the OHBA. “In an environment where government fees, charges and taxes have historically added 25 to 30 percent to the cost of a new home, lowering development charges by as much as half will dramatically improve the viability of projects and enhance affordability.”

Development fees are levied by municipalities and regions on new homes in Ontario to offset the cost of new housing supportive infrastructure (i.e., water and waste water systems and transit), and services (fire, police and ambulance). Development charges range from tens of thousands of dollars in smaller municipalities to as much as $130,000 per single-family home in the GTA. These charges have increased by as much as 1,000 percent in the last decade and a half.

Under the announcement today, the provincial and federal government will provide matching funding into a program administered by the province. Municipalities will be able to apply to the program but must commit to lowering their development charges and updating their DCs background studies. It is anticipated that the program will result in the lowering of development charges by as much as 50 percent (variable by municipality) within three years.

“BILD and OHBA have long called for systemic and structural development charge reduction in the GTA and across the province,” said Dave Wilkes, president and CEO of BILD. “It is important to remember that it is impossible to build new housing without housing supportive infrastructure. The beauty of this program is that it will not only result in reductions to development charges, but it will also ensure that municipalities continue to have the funding required to put the necessary pipes in the ground and to build much needed transit. When viewed in conjunction with last week’s announcement on the reduction or elimination of the harmonized sales tax on new homes for a year, the actions of the federal and provincial government demonstrate an unparalleled level of commitment to building new housing in Ontario.”

BILD and OHBA have published numerous studies quantifying the impact of development charges on housing supply and affordability, measuring their increase over the past two decades and comparing Ontario’s DCs system to other jurisdictions.

From the Residential Construction Council of Ontario (RESCON):

RESCON is pleased that the federal and Ontario governments have joined forces and announced a landmark deal to support the reduction of development charges (DCs) and that the province has also tabled legislation to cut bureaucratic red tape which will enable projects to be built quicker.

“RESCON commends Prime Minister Mark Carney and Premier Doug Ford for working together on these vital initiatives as they will boost the residential construction sector and make new homes more affordable,” says RESCON president, Richard Lyall. “Combined with the measures the two governments announced last week to remove the HST on newly built homes, it will help to substantially bring down the tax burden for consumers and lift the industry at a critical time.”

DCs levied by municipalities can push up the expense of building a home by up to $200,000. They are particularly onerous for those entering the market for the first time.

A report prepared earlier for RESCON revealed that the tax burden now accounts for 36 percent of the purchase price of a new home. That means on a $1 million new home, $360,000 is taxes, fees and levies. DCs are a big part of that amount.

RESCON has advocated for Ontario and the feds to work on lowering the charges, as they have evolved from a relatively modest cost into one of the largest components in the price of a new home. In many parts of the GTA, DCs alone now add well over $150,000 to the cost of a typical family home. In a 25-year span, DCs in Toronto have risen by more than 5,000 percent – far outpacing inflation, which increased by just over 70 percent during the same period.

DCs are a regressive tax. They are levied upfront and embedded in the purchase price of a new home, meaning they disproportionately affect first-time buyers and young families.

“Development charges have been on a trajectory that is unsustainable and economically counterproductive. They significantly hike the price of a new home,” says Lyall. “The implications are profound. Middle-income families are increasingly priced out of home ownership. The measures taken today by the province and the feds will help move the needle.”

Meanwhile, new legislation called the Building Homes and Improving Transportation Infrastructure Act introduced today in the Legislature will reduce barriers to homebuilding, streamline approvals and make it easier and quicker to receive such things as site plan approvals.

As Housing Minister Rob Flack noted, delays add to the cost of housing. Simplifying planning and approval tools will help get the shovels for much-needed housing in the ground quicker and eliminate expenses which, in the end, will enable builders to build homes that people can afford.

“Homebuilding has stalled and the outlook for the industry is grim,” says Lyall. “The measures announced today by the two governments are a positive development for buyers and the industry. Addressing the housing crisis requires all levels of government to work toward the common goal of making new homes more affordable and speeding up construction.”

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