Michael Lewis
Toronto city council has voted to freeze development charges on new home construction at the current level, foregoing a provincially mandated 4 per cent inflation indexing increase that was to come into effect on May 1.
Mayor Olivia Chow, who proposed the motion approved at city councilโs meeting Thursday, said the freeze aims to spur residential construction amid a 65 per cent plunge in Toronto housing starts in March compared to the previous year.
Actual annual single family and multi-unit starts were down 12.5 per cent nationally last month in centres with at least 10,000 people, according to the Canada Mortgage and Housing Corp. — even as all three levels of government say they are working to boost the supply of affordable housing to accommodate population growth.
Buildersโ associations say the slowdown is due to a confluence of factors –inflated building and financing costs, uncertainty created by U.S. tariffs — along with fees, taxes and charges that the Building Industry and Land Development Association [BILD] says add almost 25 per cent to the cost of building a home.
According to city data, developers pay nearly $138,000 in Toronto development charges on a non rental single or semi-detached home, with a report from BILD showing a 405 per cent jump in development charges for a one bedroom or bachelor apartment in Toronto between 2014 and 2024.
Revenue from the charges pays for municipal infrastructure led by transit, roads, water, parks and community centres. Development charges will help build the infrastructure to serve tens of thousands of new homes in new communities at Quayside, the Downsview airport lands, Golden Mile and East Harbour, the city says.
They will also fund Torontoโs one-third portion of the Eglinton East light-rail transit and Waterfront East light-rail transit lines.
But the city needs to respond to challenges in the housing market and the added cost of development charges, Mayor Chow said.
She noted that Toronto has already reduced or deferred development charges in two areas, the Rental Housing Supply Program that cuts the charges and property taxes to help build 7,000 new rental homes and the Multi-Unit Ownership Program that defers development charges for 3,000 condo units, a move expected to save builders nearly $19,000 per unit.
โUltimately, the extent to which we can lower or defer development charges will depend on how much funding for infrastructure we can secure from other orders of government,โ says a background report accompanying the development charge motion.
By holding the charges at the current rate, the city will forfeit about $12 million in revenue, according to chief financial officer Stephen Conforti. The freeze will remain in place until Toronto completes a development charge framework review.
City council is also urging the province to amend the Development Charges Act so cities can reallocate funds between infrastructure categories and to let municipalities alter or waive yearly indexing. As well, it is requesting provincial rebates for revenue lost due to development charge reductions โto expedite the completion of critical infrastructure projects.โ
Alexandra Sanita, the press secretary for Ontario Municipal Affairs and Housing Minister Rob Flack, in an email said the province is โworking with municipalities to give them the tools they need to build even more homes fast, including updating the development charge process.โ
The motion to halt this yearโs development charge increase passed in an eighteen to two vote, with University-Rosedale Coun. Dianne Saxe and Etobicoke Coun. Stephen Holyday the only dissenters.
โI’m going to propose something novel to council,โ Coun. Holyday told the meeting as he argued that the freeze is a subsidy to developers that shifts infrastructure costs to ratepayers.
โFor once, we should put the interests of the existing ratepayers first, instead of worrying about future residents or developers or other people.โ
Mayor Chow said the freeze is needed because โno one is building anything unless they get some support from us,โ suggesting that there is no lost revenue from the lack of a development charge rate increase if construction is not proceeding.
But she also reiterated her request that the province fulfill its commitment to compensate municipalities for its 2022 housing legislation Bill 23 that reduced development charges builders must pay for some construction categories including affordable housing.
The change left a $5 billion shortfall in funds for municipal infrastructure according to the Association of Municipalities of Ontario, with Toronto taking a $2 billion hit, then-mayor John Tory said at the time that must be made up through property tax hikes.
City council also adopted a motion asking staff to review remaining applications to the Purpose-Built Rental Housing Incentives program launched last fall and report on additional shovel-ready housing projects that could be eligible for property tax and development charge relief if funding is forthcoming from the province.
As well, council approved a motion that aims to address student affordable housing challenges as part of the larger HousingTO 2020-2030 Action Plan.