Toronto's Landmark Three-Government Partnership: Development Charges Could Be Reduced by Up to 50%

The News at a Glance

On March 30, 2026, the City of Toronto joined the Government of Canada and the Province of Ontario to announce a landmark multi-billion-dollar deal to reduce development charges on new housing across Toronto and build the Waterfront East Transit. The announcement has two major components.

Component One: Development Charges Could Be Reduced by Up to 50 Per Cent. As part of the announcement, the federal and provincial governments will fund a reduction in development charges by up to 50 per cent by supporting housing-enabling infrastructure. The City will work with the province to put forward a list of growth-enabling projects to be supported by intergovernmental funding, enabling a reduction in development charges collected without impacting delivery of critical infrastructure.

Component Two: $1-Billion Investment in the Waterfront East Transit. The announcement also provides critical funding for the Waterfront East Transit from the provincial and federal governments, alongside the City's $1-billion investment, to connect across the eastern waterfront to the Port Lands with a new Waterfront East line. According to the City, this historic three-way partnership will serve more than 150,000 people with more than 50,000 daily trips and is expected to enable more than 75,000 housing units. The project is expected to create more than 100,000 jobs and generate more than $13.2 billion in economic value, delivering lasting economic impact locally, provincially and nationally.

What is a Development Charge?

Official definition (City of Toronto):

Development charges are fees imposed on land development and redevelopment projects to help pay for the capital costs of infrastructure that is needed to service new development.

Six Existing Measures the City Has Already Taken

This announcement builds on bold steps the City has already taken to reduce development charges and fees on new housing for Torontonians. The City has invested more than $760 million to reduce development charges and incentivize housing, including:

1. Eliminating development charges for 6,128 purpose-built rental housing units
2. Providing a 15 per cent property tax reduction for new multi-residential units
3. Freezing development charges rates at 2024 levels
4. Deferring development charges payments for condo units (pre-Bill 17)
5. Ending the City's conditional permit policy, allowing developments to receive the development charges rate frozen at time of planning application
6. Exempting developments with up to six units, plus a garden/laneway suite, from development charges and other fees to support the construction of all housing types

What This Means for Different Groups

For Small Developers and Builders (Direct Beneficiaries). Exempting projects with up to six units changes the economics of small-scale multi-unit construction — duplexes, triplexes, fourplexes, and sixplexes. Many of these projects have struggled to be financially viable because development charges spread across a small number of units made them difficult to underwrite. Under the new policy, projects that were once marginal may now move forward.

For Garden Suite and Laneway Suite Businesses (Indirect Beneficiaries). With development charges removed from these accessory dwelling units, construction costs will drop meaningfully. Renovation contractors, light-frame builders, and modular construction firms are well-positioned to see increased demand.

For Homebuyers and Renters (Ultimate Beneficiaries). Development charge reductions should, in theory, flow through to lower housing prices and rents. In practice, however, the outcome depends on market conditions — if supply continues to lag demand, developers may retain part of the savings as margin rather than passing the full reduction along to buyers.

For Existing Homeowners (Indirectly Affected). The 15 per cent property tax reduction applies only to new multi-residential units. It does not extend to existing detached homes or resale condos, so current homeowners will not see a reduction in their property tax bill as a result of this measure.

For the Rental Market. Eliminating development charges for 6,128 purpose-built rental units will encourage more purpose-built rental projects to advance. Given Canada's persistent rental housing supply shortage, this is a positive signal.

What to Watch Going Forward

This is a framework-level announcement rather than a fully implemented policy. Several questions remain to be answered:

1. The specific funding commitments and timelines from the federal and provincial governments. The March 30 announcement referenced “up to 50 per cent” but did not specify dollar amounts, schedules, or which projects will qualify.
2. The City Council's implementing legislation. Municipal-level reductions will still require Council to pass the corresponding by-law amendments.
3. Procurement and groundbreaking timelines for the Waterfront East Transit. A $1-billion project carries a long supply chain, and the construction start date is worth tracking.
4. The real-world pass-through effect. How much of the development charge savings ultimately translates into lower housing prices, lower rents, or higher housing starts will only become clear once the data is in.

Follow CCCA (Canada China Construction Association) for first-hand updates on the construction industry.