Ontario and Ottawa have revealed a multi-billion-dollar initiative to reduce municipal housing development charges, aiming to stimulate new construction projects throughout the province. Prime Minister Mark Carney and Premier Doug Ford made the joint announcement alongside Toronto Mayor Olivia Chow in Etobicoke. The federal and provincial governments will each allocate $4.4 billion for housing-related infrastructure investments over the next decade.
As per Carney, the agreement will slash development charges by 50% for a three-year period. These charges are utilized by municipalities to finance infrastructure supporting housing developments, such as roads, sewers, and water systems. The excessive growth of municipal development fees in recent years has escalated the expenses of home construction, hindering the creation of essential housing supply, a concern underscored by Carney during the announcement.
The majority of the $8.8 billion in funding will assist in covering infrastructure expenses for municipalities that reduce development charges. Municipalities are also required to contribute to the cost reductions. Ford emphasized that it is now the responsibility of municipalities to actively participate in this initiative to benefit their communities financially and facilitate increased home construction across Ontario.
Ontario will collaborate with municipalities and partners to compile a list of infrastructure projects for approval. This funding arrangement marks the initial phase of the federal government’s Build Communities Strong Fund, designed to aid municipalities in halving development fees over the next three years.
Following the recent announcement, Ford’s government is set to eliminate the Harmonized Sales Tax (HST) temporarily for purchasers of new homes valued up to $1 million. This tax relief measure will be effective from April 1, 2026, to March 31, 2027. Additionally, an existing HST rebate for first-time buyers of new homes valued up to $1 million, introduced by the provincial and federal governments last year, remains in place.
The combined effect of the eliminated HST and reduced development charges could potentially lower the cost of a new home by up to $200,000, as disclosed by Carney. The Ontario government had initially aimed to construct an additional 1.5 million homes in the province by 2031, a target that has since been revised due to challenges in meeting it on schedule.
Ottawa recently announced a $1.7 billion allocation to all provinces and territories to enhance housing supply as they deem appropriate. This move was met with mixed reactions, with critics expressing skepticism about the effectiveness and affordability of the proposed tax cuts and their impact on housing availability.
At the recent news conference, Ford and Chow presented a united front following disagreements over Ford’s proposal to take control of city-owned land at Billy Bishop airport. Despite opposition from Chow and city council, the federal government has shown support for the province’s plan. Additionally, plans were unveiled for a new transit line serving the waterfront east of Union Station, benefiting over 150,000 individuals in the area.