Build CanadaToronto
www.buildcanada.com/toronto/memos/remove-the-tax-blocking-new-housing

Remove the Tax Blocking New Housing

Adrian Rocca

Adrian Rocca

August 9, 2026

All Toronto Memos

Remove the Tax Blocking New Housing

Adrian Rocca

Adrian Rocca

August 9, 2026

Key Messages
01

New housing construction in Toronto has stalled: total starts fell 45 per cent in two years and are now the lowest of Canada's seven large metros per capita [11]. Too few starts means constrained supply which keeps rents and prices high for every household in the city.

02

Development charges and the associated community benefits and parkland fees are a major reason projects no longer start. The development charge is only the largest line in a wider stack — with the community benefits charge, the alternative parkland rate and permit and application fees, government charges reach roughly 30 per cent of the cost of a new home [13].

03

The growth infrastructure these taxes are intended to fund can be financed without levying large upfront taxes on each project. The City already has proven mechanisms with its existing debenture programs [6][12] that it can turn to.

Complete the City’s 40–60% development-charge cuts with a two-year, 100% waiver of residential development charges, the community benefits charge and the alternative parkland rate. Instead finance growth infrastructure the way the City already finances everything else durable: debentures, at municipal borrowing rates, repaid from the incremental tax base new homes create.

Summary

Toronto’s growth charges are levied once, upfront, on the first buyer of a new home. In June 2025 rates were $137,846 on a single or semi-detached unit 1 — among the highest on the continent 7. And that figure is the development charge alone; the community benefits charge, the alternative parkland rate and permit fees sit on top of it 13. CMHC finds these charges are passed directly into new-home prices when demand is strong and stop projects from starting outright when demand is weak 3. Toronto is now in the second situation: condominium starts fell 60 per cent in the first half of 2025, and total starts fell 45 per cent in two years 11. This lack of new supply keeps rents high across the whole city. The June 23, 2026 Canada–Ontario Partnership to Build pays Toronto to cut development charges 40 to 60 per cent through 2029 2. The City should finish the job that this partnership started, waive the remaining residential charges for two years and finance growth infrastructure through its existing debenture programs repaid from incremental property taxes 6. The permanence of the approach should be decided based on the measured record within 24 months.

The Recommendation

Toronto should stop collecting residential development charges, the community benefits charge and the alternative parkland rate for a fixed two-year term. Today, these taxes create a six-figure sum that pushes up the price of homes that do get built and stops many more from starting — constraining supply and keeping both home prices and rents high.

The theory of the tax is to pay for the transit, watermains and parks that will serve every occupant of that home for a century 1,5, but this is a poor mechanism to finance infrastructure with generations of beneficiaries. Instead the City should use the mechanisms that are already available to finance durable assets: borrow long, and repay from the tax base that growth creates.

Following the two-year term the effects of the policy can then be measured to determine the long-term approach.

Development charges persisted and grew because they are invisible to most Torontonians — folded into a mortgage and paid down over decades without the buyer ever seeing the line item 3. That invisibility allowed the charge to grow roughly ten-fold over two decades. Even after the Partnership to Build cuts of 40 to 60 per cent, it remains about four and a half times above its 2009 level 1,2 — far beyond any change in the cost of the infrastructure it funds.

Removing these taxes is entirely within the City’s jurisdiction. The DC by-law, the CBC by-law and the parkland dedication rate are Council’s to amend within the provincial frameworks 5; the City already exempts developments of up to six units from DCs 9. The financing mechanism needs no new machinery — Toronto runs an established debenture program, including the first Social Debenture framework in Canada’s public sector, whose eligible categories already include basic infrastructure: water, sewers and transit 6.

This approach not only improves the immediate cost of housing but offers a mechanism with significantly better cost and risk of capital. Today charges fall due before a project has any revenue, so developers finance them inside the project’s capital stack — commingled with total development cost and priced at development-capital rates that run several multiples of municipal borrowing costs. The City, by contrast, borrowed at coupons of 3.5 to 4.5 per cent across its 2025 and 2026 debenture issues 12. Moving growth-infrastructure funding from the most expensive capital in the system to some of the cheapest removes a deadweight loss: the same infrastructure gets built at a fraction of the financing cost, and the burden of carrying it no longer sits on the marginal project deciding whether to start.

The Problem

Toronto is not starting enough homes. Condominium starts fell 60 per cent in the first half of 2025 from a year earlier, rental starts also declined, and the year ended with 26,087 total starts — down 45 per cent from the 2023 record of 47,428, and the lowest per-capita starts among Canada’s seven large metros 11. CMHC identifies high construction costs and development charges among the primary barriers to project viability 11. When projects proceed, the charges pass into new-home prices 3; when they cannot, the homes are never built — and the missing supply keeps rents and prices high across the entire market, for renters as much as for buyers.

On June 23, 2026, the City made some progress on the issue with the Canada–Ontario Partnership to Build: up to $1.5 billion in exchange for cutting DCs 60 per cent on singles, semis and multi-bedroom apartments and 40 per cent on one-bedroom and bachelor units, from 2026 through 2029, subject to Council approval and held for at least three years 2. The City estimates the program will unlock more than 44,000 homes and deliver about $1.95 billion in relief 2. Yet even after the cuts, the largest charge still lands at about $55,000 per single or semi — and the community benefits charge, the alternative parkland rate and permit fees are untouched on top of that — and the reduction is temporary, funded only to 2029 2.

The cut is too small to restart building. CMHC measures Toronto’s development charges at 8.2 per cent of the price of a new two-bedroom apartment, the highest share in Canada 16. The Partnership cuts that charge by 40 per cent on a one-bedroom, which takes about 3.5 per cent off the cost of building it 2,16. Rents on new purpose-built buildings, counted after the free months landlords now give away, are down about 8 per cent in two years, and vacancy has reached 6.8 per cent 15. A 3.5 per cent saving cannot rescue a building that has lost twice that in revenue. Waiving the rest of the development charge, with the community benefits charge and the parkland rate, is worth three to four times as much — CMHC puts all government charges at about 15 per cent of the cost of building a Toronto high-rise 17.

Implementation

Waive the remaining charges, for a fixed term, with instruments attached. City Council should direct the Chief Financial Officer and Treasurer, with the Chief Planner and Executive Director, City Planning, and the City Solicitor, to bring forward amendments implementing a 100 per cent waiver of residential development charges, the community benefits charge and the alternative parkland dedication rate for a two-year term — completing the Partnership’s 40–60 per cent reductions 2 — with uptake metrics (applications, permits, starts by unit type) published quarterly, and transition rules for applications already in the pipeline so no project is repriced twice mid-stream. Route the package through the Executive Committee to the Council elected October 26, 2026, aligned with the 2027 budget process.

Finance growth through the debenture program, repaid by growth. City Council should direct the Chief Financial Officer and Treasurer to structure new growth-infrastructure borrowing under the City’s existing debenture and Social Debenture authority 6, sized within the debt-service ceiling, drawing first on the accumulated parkland reserve balances during the waiver term 14 and sizing new issuance to the residual, with repayment planned from incremental property-tax revenue from new units plus the existing Partnership backfill 2, and to report the structure and its first-year performance to the Executive Committee.

Set the sunset-and-decide clock. City Council should direct the Chief Financial Officer and Treasurer to report to the Executive Committee at least two quarters before the waiver expires, with the measured record — the supply response, existing and predicted fiscal position, and whether the incremental assessment is on track to cover the debenture service — and a recommendation. If the results are sound the waiver should become permanent through a further by-law. If not it will lapse.

Risks and objections. The strongest objection to this approach is the principle that growth should pay for growth — the principle that development charges are intended to support. However, this financing model keeps to that principle and changes only the timing and the payer of record: growth still pays, over the asset’s life, through the incremental taxes every occupant of the new home remits — rather than in one capitalized sum extracted from the first buyer 3. The sunset clause means that this principle is tested with a new approach, not abandoned.

Sources

Share

Other HOUSING Memos

Amar Varma

Make it Possible to Build in Toronto As Of Right

Amar Varma

Amar Varma

Finish the Sixplex Permission

Amar Varma