Development charges are out of control and new home buyers are paying the price
By Richard Lyall
for Real Estate Magazine
June 12, 2026
There have been recent upticks, but we’re still not building enough homes to meet set targets. Regulatory red tape, exorbitant taxes, fees and development charges are the main reasons.
Canada requires up to 4.8 million new homes by 2035 but is only building 250,000 to 260,000 units a year, which will result in a significant deficit. Ontario is projecting 64,800 total new builds this year - far short of the pace needed to meet the target of 1.5-million homes over a decade.
Meantime, investment in residential construction is also declining across Canada. Data from Statistics Canada shows that the nation’s real estate sector saw $22.6 billion invested in building construction in March, a drop of $304.6 million, or 1.3 per cent, compared with February.
An analysis from Canada Mortgage and Housing Corporation highlights that government regulations and red tape have slowed the industry’s response to changes in housing demand. In other words, the bureaucracy has gummed up the system and made it difficult to build.
Alarmingly, the report found that housing starts in Canada could have been nearly 30 per cent higher from 2006 to 2024, and home prices close to 10 per cent lower, if the Canadian housing industry had been as responsive as the U.S. sector. Regulatory conditions, along with economic and demographic structural factors, are singled out as the reasons for the decline.
Canada has tighter rules when it comes to land use compared with the U.S. which makes it more difficult to add new housing supply quickly. This puts the housing crisis in perspective and explains why - when it comes to new home supply - Canada is one of the worst-performing developed countries.
The good news in all of this is that the solution to unravelling this Gordian Knot lies within our control.
For years, the RESCON team and its allies have been advocating for change to cut bureaucracy, speeding up, simplifying and digitizing the approvals system, and cutting taxes, fees and levies like development charges (DCs) on new housing, as they only add to the cost of a new home.
We have driven cutting-edge research, done by the Canadian Centre for Economic Analysis (CANCEA) in 2024, that showed 36 per cent of the cost of new housing in Ontario is due to government-imposed taxes, fees and levies - a 16-per-cent increase from 2021 when the average rate was 31 per cent.
Another report done by CANCEA showed that if the HST was cut for three years on new housing in Ontario, the government would still have net positive revenue, more than 25,000 residential construction jobs would be preserved, and $3.9 billion revenue would be generated for the economy.
Response has been favourable from some political leaders and government bodies. Others, not so much. Some jurisdictions are also tackling the problem while others have their heads in the sand. Helpful policies have also been announced but we are still waiting for them to be implemented.
For example, it has been more than a year since the HST rebate was first announced and the regulations are still not available.
In our opinion, the temporary HST rebates that have been announced must become permanent. Out-of-control DCs must also be substantially reduced and offset with a new and fair government funding formula to pay for growth-related infrastructure. The present system is unfair and unfairly saddles new home buyers with the cost of funding public services.
Recently, we received some positive news with the announcement that the Ontario and federal governments are opening applications for the Development Charge Reduction Program that will deliver funding over 10 years to municipalities that reduce DCs for all residential types by 30 to 50 per cent or more and maintain them for at least three years.
The help can’t come soon enough.
In Toronto, for example, development charges alone have increased more than 1,000 per cent since 2009, rising from roughly $12,000 to nearly $138,000 for a single-detached home. The costs are embedded in the purchase price paid by buyers, many of whom are stretched financially.
The development approval process is still painfully slow. In the GTA, such approvals routinely take 14 to 25 months, nearly double the national average. Every month of delay adds carrying costs, financing risk and uncertainty that builders must recover through higher prices.
It is time for more action - and speedy implementation.
The decentralized nature of Canada presents a challenge as it leaves the door open for inaction. It is sometimes like the Wild West with one level of government pointing the finger at another. Instead of playing the blame game, though, it is time for governments to work together.
After all, there is strength in numbers.
Richard Lyall is president of the Residential Construction Council of Ontario (RESCON). He has represented the building industry in Ontario since 1991. Contact him at media@rescon.com.