Ontario and Ottawa have unveiled a multi-billion-dollar initiative aimed at reducing municipal housing development charges to promote new construction projects across the province. Prime Minister Mark Carney and Premier Doug Ford made the announcement on Monday, revealing that both the federal and provincial governments will allocate $4.4 billion each for housing-related infrastructure investments over the next decade.
During a joint press conference in Etobicoke, Carney, alongside Ford and Toronto Mayor Olivia Chow, disclosed that the deal will halve development charges for a period of three years. Development charges are fees imposed by municipalities to fund infrastructure essential for housing, such as roads, sewers, and water systems.
The excessive growth of municipal development fees in recent years has inflated homebuilding costs, hindering the much-needed expansion of housing supply, as emphasized by Carney. The majority of the $8.8 billion funding will assist municipalities in covering infrastructure expenses upon reducing development charges. Municipalities are also expected to contribute towards the cost reductions.
Ford emphasized that it is now the responsibility of municipalities to take action. He urged them to collaborate in order to receive the necessary infrastructure support, which would lead to significant cost savings for local taxpayers and facilitate increased construction activities across Ontario.
Ontario will collaborate with municipalities and partners to present a list of infrastructure projects for approval. This funding initiative, the first to be announced under the federal government’s Build Communities Strong Fund, aims to enable municipalities to slash development fees by 50% over the next three years.
This strategic move comes on the heels of the recent announcement by Ford’s government to temporarily eliminate the Harmonized Sales Tax (HST) for purchasers of new homes as part of the newly introduced budget. The 13% tax exemption will apply to new homes valued up to $1 million for the period spanning April 1, 2026, to March 31, 2027.
In addition to the existing HST rebate for first-time homebuyers of new homes valued up to $1 million, jointly introduced by the provincial and federal governments last year, the scrapped HST combined with reduced development charges could potentially reduce the cost of new homes by up to $200,000, according to Carney.
The Ford government had set a target in 2022 to construct an additional 1.5 million homes in the province by 2031. However, acknowledging the challenges, the province has now labeled this target as a soft goal. Meanwhile, Ottawa recently earmarked $1.7 billion to support all provinces and territories in boosting housing supply.
In response to the announcement, Liberal MPP and housing critic, Adil Shamji, criticized the timing of Ford’s commitment to lowering development charges, stating that it comes too late. On the other hand, Conservative MP and housing critic, Scott Aitchison, expressed skepticism about the initiative’s effectiveness, highlighting the lack of guarantees and accountability in building homes.
Ricardo Tranjan from the Canadian Centre for Policy Alternatives raised questions about the impact of the proposed tax cuts on affordability and housing supply. The uncertainty surrounding the outcomes and specifics of the initiative leaves room for further analysis.
At the press conference, Ford and Chow, who had been at odds over Ford’s plan to take over city-owned land at Billy Bishop airport, appeared together, signaling a united front. Despite the recent opposition from Chow and the city council against the takeover, Ford asserted that the federal government supports the province’s plan for the airport.
Additionally, plans were revealed for a new transit line serving the waterfront east of Union Station, including the Port Lands, which is expected to benefit over 150,000 individuals.