Toronto city council has voted to freeze a planned increase to development charges — a key cost for home builders — in response to a deepening slowdown in housing construction across the city.
The decision comes as construction activity grinds to a near halt. In March, housing starts in Toronto fell 65 per cent year-over-year, according to federal data. New home sales remain sluggish as well, with March marking the sixth consecutive month of record lows, according to a new report from the Building Industry and Land Development Association.
Mayor Olivia Chow, who spearheaded the freeze, said the measure is necessary to keep the development sector afloat.
“No one is building anything unless they get some support from us,” she said Thursday.
Development charges — fees levied on builders to help pay for infrastructure like roads, water mains and community facilities — were set to rise by four per cent on May 1, 2025. The increase was intended to reflect rising construction costs.
Currently, developers pay nearly $140,000 in municipal taxes on a single-family home. Development charges for smaller units range from roughly $60,000 for a bachelor apartment to over $80,000 for a two-bedroom unit.
By halting the increase, the city expects to forgo about $12 million in revenue, according to chief financial officer Stephen Conforti. The freeze will remain in place until Toronto completes a broader review of its development charge framework, which launched in February.
Chow is also urging the province to give municipalities more flexibility under the Development Charges Act.
Presently, cities set a base charge every five or ten years and can index for inflation — but backing away from a scheduled increase, as Toronto is now doing, requires complex workarounds. Several GTA municipalities, including Mississauga, Vaughan and Burlington, have employed similar tactics.
The mayor wants the province to allow cities to make on-the-fly adjustments and to give them the authority to reallocate funds between infrastructure categories. Under current rules, development charge revenues must be used for specific purposes — such as libraries or parks — and cannot be shifted to other needs like transit or roads.
Ontario’s Municipal Affairs and Housing Minister Rob Flack is open to the idea.
In a statement, spokesperson Alexandra Sanita said the province is “working with municipalities to give them the tools they need to build even more homes fast, including updating the development charge process.”
The freeze is the latest in a string of efforts by the city to encourage construction.
Last month, council approved a deferral of development charges on 3,000 condo units — a move expected to save builders nearly $19,000 per unit. A similar program targeting rental housing, passed in November, is expected to help generate more than 8,000 new units.
City staff warned the ongoing construction slowdown could have “generational” consequences for housing supply in Toronto.
The motion passed with near-unanimous support. Only Coun. Diane Saxe (University-Rosedale) and Coun. Stephen Holyday (Etobicoke Centre) voted against it.
Holyday said he is concerned existing residents will be left to foot the bill for infrastructure that was previously paid for through taxes on new homes.
“I'm going to propose something novel to council,” Holyday said. “For once, we should put the interests of the existing ratepayers first, instead of worrying about future residents or developers or other people.”
