Toronto cuts development charges up to 60% in $1.5B deal

Toronto will cut development charges by 40 to 60% across most residential unit types through 2029 after securing up to $1.5 billion in federal and provincial infrastructure funding, a move that housing advocates say could change the economics of stalled projects in Canada’s most expensive city.

The funding comes through the Development Charge Reduction Program (DCRP), a 10-year mechanism backed by a combined $8.8 billion commitment from Ottawa and Queen's Park. Under the Canada-Ontario Partnership to Build, the federal-provincial framework was set up to protect municipal budgets as local councils reduced development charges by up to 50% for three years, with Toronto agreeing to go beyond that threshold.

Mayor Olivia Chow said the measure is aimed at both affordability and construction activity.

"People should be able to afford a home in our city", Mayor Olivia Chow said at the announcement.

"Today's announcement will make that easier while creating tens of thousands of good jobs in Toronto. Through our strong partnership with the Provincial and Federal government, we're reducing the cost of building new homes and ensuring the City can keep investing in the infrastructure we need to support communities. This funding will help create more homes for Torontonians and support growth across our city."

According to the province, the development charge cuts, together with the temporary removal of the full HST on new homes, will reduce building costs by more than $200,000 per unit in Toronto. Development charge reductions alone are expected to cut about $83,000 from the cost of building a new single or semi-detached home.

For the housing market, the charge reductions target a cost that has weighed on project financing in the Greater Toronto Area. Canada Mortgage and Housing Corporation (CMHC) found development charges could represent 8 to 16% of a new condo's price in Ontario and up to 9% of the cost of a single-detached home in Toronto.

The Toronto Regional Real Estate Board (TRREB), which has long pushed for lower upfront development costs, welcomed the agreement.

"Development charges are among the largest government-imposed costs built into the price of new housing in Ontario and can account for up to 20% of a home's purchase price", said Daniel Steinfeld, TRREB president.

"Homebuyers and renters ultimately bear those costs, and they have contributed to worsening affordability and slower housing construction across the Greater Golden Horseshoe."

CMHC modeling cited in the announcement suggested that reductions at the scale Toronto has now committed to could improve project viability by roughly 10% across the city’s constrained market.

Rental projects also get another incentive

The announcement also launches Phase 2 of Toronto's Purpose-Built Rental Housing Incentives program. The program offers an indefinite deferral of development charges for rental projects that commit at least 20% affordable units.

Phase 1, launched in fall 2024, supported more than 8,000 rental homes, including more than 2,000 affordable homes. The new phase is aimed at up to 10,000 additional rental homes, including a minimum of 2,000 affordable units, with shovel-ready projects reviewed on a rolling basis.

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Questions remain over whether buyers will see the savings

Not all observers expect the lower charges to automatically show up in home prices. Matthew O'Neil of Connolly Capital, a Toronto-based mortgage broker, previously pointed to the possibility that builders could keep the benefit rather than pass it on.

"In theory, if the builders are paying less in development charges, they should pass on those savings to the consumer", O'Neil said, "but builders could decide to say, 'We're saving on development fees, but we're not passing those savings off.' They have every right to do so, but then they're not going to sell any homes because it's still too expensive."

The Toronto agreement is larger than earlier development-charge experiments in the region. The article noted that Vaughan's temporary elimination of residential development charges for eligible projects in early 2026 drew industry attention as a proof-of-concept, but Toronto’s plan is broader in scale, with $1.5 billion in infrastructure support over 10 years backing reductions that apply citywide and across all residential unit types.

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