Slashing development fees is not a cure-all for housing affordability: CMHC

OTTAWA — Slashing municipal development charges could help spur building in some of Canada’s most expensive markets but those cuts wouldn’t be enough to fix the affordability gap on their own, according to a new analysis from the federal housing agency.

Development charges are fees cities impose on developers that are mainly used to pay for infrastructure that supports 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.

Cutting or eliminating costly development charges could go a long way toward filling the housing supply gap in the greater Toronto and Vancouver areas, said Canada Mortgage and Housing Corp. chief economist Mathieu Laberge.

Laberge published a report Wednesday that says reducing or eliminating development charges could increase the number of viable projects, but the numbers vary by city.

Targeting those fees is not a cure-all for Canada’s housing affordability woes, he found.

“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.”

In an interview with The Canadian Press, Laberge said slashing development fees could help to make the math work for projects in cities where high costs for financing or land are major barriers to getting shovels in the ground.

Toronto would see a boost of more than 10 per cent to the number of viable projects if development charges were cut by 90 to 100 per cent, the CMHC projections show. That increase moderates to roughly five per cent with a 50 to 60 per cent reduction in development charges.

Eliminating development charges entirely could lead to an extra 10,000 to 16,250 units annually in Toronto, the CMHC says. It estimates that number would fill up to half of the supply gap and reduce housing prices to 2019 affordability levels.

“All in all, development charges change this landscape and they have an impact on both the number of projects that are viable and the number of housing starts down the road,” Laberge said.

CMHC says Burnaby, B.C. would see the biggest bump from the near-elimination of development charges — a 14 per cent increase in viable projects.

In the same scenario, Ottawa would see only a three per cent increase in the number of viable projects.

Laberge said eliminating development fees can pose a fiscal challenge for cities, which rely on those levies to fund local infrastructure. He said those charges do have a place in some cities’ fiscal frameworks, given their modest influence on housing supply.

In recent years, governments have put development fees in their crosshairs as an obstacle to scaling up housing supply across the country.

Mohammad Hussain, spokesperson for the office of Housing Minister Gregor Robertson, said in a media statement Wednesday that the CMHC report affirms that targeting development charges can “reinvigorate housing supply in major cities across Canada.”

In March, the federal government announced plans to split costs with Ontario on a new $8.8-billion funding pool for infrastructure projects. In order to be eligible, municipalities have to cut development charges between 30 and 50 per cent for three years.

The applications portal for that fund opened on Monday. Municipalities must contribute a minimum of 10 per cent of the proposed project’s cost in order to be considered for funding.

Ottawa is working out deals with other provinces under the $51-billion Build Communities Strong Fund announced in Budget 2025.

Laberge pointed out in his report that the structure of development charges varies from city to city, making it hard for builders to compare project costs. The CMHC is working on a cross-Canada benchmark for development charges to address that gap.

“The lack of comparable information also created unrealistic expectations that reducing development charges alone could solve the housing crisis,” Laberge wrote in the report.

In the interview, Laberge said development charges are one tool governments can deploy to help lower the cost of building, but that should be done in concert with regulatory changes and efforts to cut red tape across the country.

“If there was a silver bullet to fix the housing situation we’re in, we’d know about it and we would be on our way to solve the current housing situation,” he said.

Hussain said reducing development charges is only part of the government’s strategy to address housing affordability.

“We have always been clear: addressing Canada’s decades long housing crisis will require multiple solutions across the housing ecosystem,” he said.

This report by The Canadian Press was first published June 3, 2026.

Craig Lord, The Canadian Press