Cutting development fees alone won't fix housing, CMHC warns
A federal analysis shows reducing municipal development charges could help, but the gains vary by city and won't reach pre-pandemic affordability levels on their own.
Slashing municipal development charges would not be enough on its own to make homes affordable again across Canada, according to a new analysis from Canada Mortgage and Housing Corp.
Development charges are fees cities impose on developers to pay for infrastructure supporting new builds. The federal government is spending billions of dollars to encourage municipalities to cut development fees in half to boost housing supply and improve affordability.
CMHC chief economist Mathieu Laberge published a report Wednesday showing that reducing or eliminating development charges could increase the number of viable projects—but the numbers vary significantly by city. "Reducing or even eliminating development charges wouldn't solve the housing crisis facing Canada," Laberge wrote. "While it may incent greater supply, the increase is not enough to reach pre-pandemic affordability levels in many cities."
Toronto would see a boost of more than 10 per cent to viable projects if development charges were cut by 90 to 100 per cent, with roughly five per cent increase from a 50 to 60 per cent reduction. Burnaby, B.C. would see the biggest bump—14 per cent following near-elimination of fees. Ottawa would only see a three per cent increase in viable projects in the same scenario.
Laberge said development fees have a place in some cities' fiscal plans, given their modest influence on housing supply. The finding signals that Ottawa and other municipalities need broader policy tools to address affordability—not just fee cuts.