As any good rowing crew knows, a team must pull together if it hopes to successfully cross the finish line. It is no different with the housing supply and affordability crisis we are facing. Governments at all levels must work in unison with the construction industry to tackle the problem.
Presently, the system is out of whack. The tax burden on new housing is too high and the cost of building and buying a new home is higher than what most ordinary working people can afford.
People are leaving cities like Toronto because the price of a home is out of their range. Taxes, fees and levies, including development charges (DCs), are a significant reason for the exodus.
DCs are one-time fees that municipalities collect from developers for new construction to help fund infrastructure and services such as roads, water, sewers, parks, transit and police. However, the funds are increasingly being used for other projects, including daycares and schools.
It has been nearly four years since the Ontario Housing Supply Task Force report recommended action to stem exorbitant DCs, but the problem has not been addressed.
Rising fees worsen affordability as reserves grow
Municipalities are now taxing new housing billions of dollars a year. Research by the Canadian Centre for Economic Analysis found that 36 per cent of the cost of a new home stems from taxes, fees and levies such as DCs. Builders cannot deliver new housing that buyers can afford.
Over the years, the fees have increased substantially, worsening affordability. Data from the Canada Mortgage and Housing Corporation (CMHC) shows DCs alone can add more than $100,000 to some new units in cities with the highest fees.
Toronto has the most expensive charges. An average condo in the city faces $130,200 in costs, while the average detached home includes about $180,600 in municipal development charges — roughly nine per cent of the total cost of a detached home in Toronto.
While municipalities argue they need the funds, it seems odd that so much is sitting in reserve accounts. The City of Toronto, for example, has $2.8 billion in DCs sitting in reserve, a new report shows, and much of that is earmarked for projects that benefit the entire region, including $1.4 billion for subway improvements. New homeowners should not be footing the bill for that.
Some policy moves help, but development charges remain the biggest hurdle
This is not to say there has been no progress.
The federal government has said it will try to reduce DCs substantially, although industry stakeholders are still waiting for concrete action.
In Ontario, the government has passed Bill 17, which pushes back payment of DCs until occupancy. Previously, the payments were due when a building permit was issued, forcing builders to finance DCs while a project was still under construction.
The Ontario Large Municipalities Chief Building Officials and the Ontario Building Officials Association have produced an FAQ guide to help the industry understand Bill 17.
The federal and Ontario governments have also announced the elimination of sales tax on new housing up to $1 million for first-time buyers, as well as reductions on a sliding scale for purchases between $1 million and $1.5 million. First-time buyers account for roughly 35 per cent of new home purchases, so the change is expected to have a positive effect.
But governments must put DCs squarely in the crosshairs.
Economic consequences are mounting as housing starts fall
The new home and condo market has been taking a pummelling. At a housing summit hosted by RESCON, speakers warned there is a risk of losing almost 100,000 construction jobs in Ontario. The economic impact would be devastating, resulting in a $10-billion hit to the province.
In 2023, the latest year for which complete data is available, the construction industry contributed $59.1 billion to Ontario’s GDP, accounting for 6.8 per cent of the province’s total. That year, the sector employed 596,000 people, about 7.5 per cent of Ontario’s workforce. If the residential construction industry falters, so does Ontario’s economy.
A recent report for RESCON by the Missing Middle Initiative at the University of Ottawa found that housing starts in the Greater Toronto Area and the Greater Golden Horseshoe in the first nine months of 2025 were down 34 per cent compared with the same period in the previous three years, while industry job losses continue to grow.
We can no longer sit on our hands and hope the industry will bounce back. Governments at all levels must pick up the pace and adopt strategies to lower DCs. There is simply too much at stake.
Richard Lyall is president of the Residential Construction Council of Ontario (RESCON). He has represented the building industry in Ontario since 1991. Contact him at [email protected].
