Toronto is set to receive a $1.5-billion funding package from the federal and Ontario governments aimed at reducing housing construction costs and encouraging the development of more homes across the city.
The agreement, announced jointly by the two levels of government, will allow Toronto to significantly reduce development charges — municipal fees imposed on new residential projects to help finance infrastructure such as transit systems, water facilities and road improvements. Builders and housing advocates have long argued that these charges ultimately raise the cost of homes and rents for consumers.
Under the new program, development charges will be reduced by 40 to 60 per cent over the next three years, depending on the type of housing. The reductions could lower costs by as much as $83,000 per unit, providing a major incentive for builders and potentially making new housing more affordable.
Mayor Olivia Chow welcomed the agreement, saying it would help create more homes and support jobs. The proposal is expected to receive approval from Toronto City Council.
The largest reductions—up to 60 per cent—will apply to family-sized homes, including single and semi-detached houses, apartments with two or more bedrooms, rental units and multiplex developments. One-bedroom and bachelor units will receive a 40 per cent reduction.
Development charges in Toronto have risen sharply in recent years. Fees for single-family homes have climbed from just over $41,000 in 2018 to nearly $140,000 today, while charges for two-bedroom condominium units have increased from approximately $25,000 to around $80,000.
To offset the loss of municipal revenue, the federal and provincial governments will provide funding over the next decade to support infrastructure projects that would otherwise have been financed through development charges. Planned investments include new TTC buses, upgraded signalling on Line 2, water main improvements in the Lower Don Lands and South Leslieville, and several road expansion projects.
The announcement comes alongside another housing affordability initiative introduced by the federal and provincial governments, which eliminates HST on newly built homes priced up to $1.5 million, potentially providing savings of up to $130,000 per home.
The funding package, however, includes conditions. Toronto must contribute at least 10 per cent toward the infrastructure costs, and the money will be released gradually over ten years based on construction progress. If housing targets are not met, the province may reduce or withhold some of the funding.
Infrastructure projects covered under the agreement must begin construction by July 2030 and be completed by October 2035.
Officials hope the combined measures will revive housing construction, improve affordability and address Toronto’s ongoing housing shortage by reducing the costs associated with building new homes.