Development Charges: Fact vs. Fiction

Exploring the realities of development charges

FICTION: “Development charges and other government fees and taxes do not impact housing affordability.”

FACT: Government fees and taxes, which are mostly development charges, contribute to approximately 30% of the cost of a new home.

FICTION: “Only developers pay development charges.”

FACT: Development charges are costs passed on to potential homebuyers, often adding hundreds of thousands of dollars to the final cost of a new home, contributing materially to the rising cost of housing across the province.

FICTION: “Everyone in the community benefits from development charges.”

FACT: Development charges often go towards infrastructure that new homeowners who pay for them do not benefit from. (For example, a new park on the other side of town or maintenance of an existing cemetery.)

FICTION: “The development charge rate for a single unit never exceeds $100,000.”

FACT: In some municipalities, development charges exceed $200,000 per unit.

FICTION: “Municipalities need to continually raise development charges to be able to afford infrastructure development.”

FACT: Municipalities have billions of dollars in development charge reserves that go unspent year to-year. Moreover, they can fund infrastructure and acquire land without relying on development charges.

FICTION: “Municipal governments have not raised development charges during the provincial housing crisis.”

FACT: Development charges have gone up an average of $42,000 for low-rise developments and $32,000 per unit for high-rise developments since 2022 alone!

FICTION: “Municipal governments ensure development charge increases are reasonable.”

FACT: Development charges increased an average of 327% in the Greater Toronto Area since 2009, when the Great Recession upended the global housing market.

FICTION: “Development charges and their use is strictly regulated.”

FACT: Instead of spending development charges, municipalities can simply allocate them toward future projects, according to the Development Charges Act. Municipalities regularly do this, allowing them to keep billions in reserves. Moreover, municipalities have no limits when it comes to raising development charges annually and have the discretion to value their own assets (i.e., land) used as the basis for calculating development charges.

FICTION: “Municipalities are incentivized to use land efficiently.”

FACT: Municipalities inflate land value to collect more development charges. Land value inflation has resulted in $3.5 billion to $7 billion in development charges over collection, directly affecting the cost of housing.

FICTION: “Developers are against all development charges.”

FACT: Developers are against the unpredictability of development charges and development charges being used to inflate land value in municipalities.

Source: The State of DC's in Ontario, Keleher Planning & Economic Consulting