Federal research report questions development charges' role in solving Canada's housing crisis

A new analysis from the C.D. Howe Institute challenges the widely held assumption that development charges — municipal fees levied on new construction to fund growth-related infrastructure — are an effective tool for balancing housing affordability with growth.

The report, "Growing Pains: Rethinking Development Charges in Canadian Municipalities," argues that development charges increase the cost of new housing and put upward pressure on housing prices more broadly. Author Andrew Sancton recommends governments gradually reduce their dependence on these charges over time, with the long-term goal of eliminating them entirely.

Development charges vary widely across Canada's growth regions. In many large municipalities in the Greater Toronto Area, charges commonly exceed $100,000 per new single-family home. In Metro Vancouver, development cost charges in some municipalities exceed $50,000. Calgary's development fees are around $10,000.

The principle underlying these charges — "growth should pay for growth" — rests on questionable assumptions, the report contends. It assumes benefits of growth-related infrastructure accrue mainly to new residents and that growth-related costs can be cleanly separated from other municipal expenditures. Both assumptions are difficult to sustain in practice.

Sanction proposes alternative financing approaches: greater municipal borrowing, water and wastewater user fees, and separate authorities dedicated to water systems that borrow funds and repay them through user fees over the project's life. These approaches, he argues, could spread infrastructure costs more fairly across those who benefit from growth while reducing barriers to housing supply.

The analysis also examines a March 2026 program in which Prime Minister Mark Carney and Premier Doug Ford announced federal and provincial funding for municipalities that reduce development charges by up to 50 percent. While the program signals growing recognition that charges hinder housing supply, Sancton raises questions about equity and complexity, particularly for recent homebuyers who have already paid high charges and now see future buyers benefit from reductions funded by public money.

An aging population will continue increasing spending on programs like Old Age Security, further constraining government fiscal capacity. Addressing the housing crisis requires rethinking not just the principle but the mechanics of growth financing.