There’s a lot of talk about interest rates, zoning rules, and construction delays when we try to understand why Canadian homes cost so much. But there’s another, less-discussed factor quietly inflating prices: development charges. These fees levied by municipalities to help pay for infrastructure have grown so significantly that they’re now adding 8 to 16 per cent to the price of a new home, according to new analysis from the Canada Mortgage and Housing Corporation (CMHC).
That’s not pocket change. On a two-bedroom condo in Markham, Ont., development charges alone can hit $121,500 per unit. Even in Ottawa, among the lower-cost cities in the CMHC sample, the charge is roughly $39,600. For single-detached homes, the numbers are even more staggering: up to $180,600 in Toronto. These costs are built directly into the price of homes and ultimately passed on to buyers and renters.
Municipalities argue these fees are essential. After all, growing communities need upgraded water systems, roads, transit, parks, and emergency services. Someone has to pay for it. But the way development charges are structured today is neither fair nor efficient.
The CMHC report lays bare the wildly inconsistent and often inequitable landscape of these fees. Toronto’s development charges for high-rises are 15 to 16 times higher than Montreal’s, despite both being major urban centres with similar infrastructure demands. Even more troubling is the imbalance between housing types. Apartments and condos routinely pay far more than the infrastructure they actually use, effectively subsidizing lower-density suburban development.
As housing researcher Mike Moffat points out, many apartment projects pay millions in fees earmarked for parks or libraries even when those neighbourhoods already have ample facilities and no new ones are planned. Meanwhile, single-detached homes, which require more costly infrastructure per unit due to their spread-out nature, shoulder proportionally less.
This imbalance reinforces exactly the kind of housing patterns Canada can no longer afford. Lower-density developments demand longer roads, more pipes, and more expensive extensions of municipal services. Yet these are the developments that benefit most from the hidden subsidy created by higher-density housing paying disproportionately more.
Still, scrapping development charges altogether isn’t the answer. Municipalities rely on them because senior governments have downloaded responsibilities without providing stable funding. Removing these fees without replacing the revenue would only push cities deeper into financial crises.
The real solution is structural. Federal and provincial governments must step up, using tools like the Housing Accelerator Fund to relieve some of the financial pressure on municipalities but only in exchange for zoning reform and more housing density. Canadian cities have long restricted vast areas exclusively to single-family homes, choking supply and driving up prices. Opening the door to mid-sized apartments, multiplexes, and other forms of “missing middle” housing would dramatically lower the long-term cost of infrastructure by increasing density where services already exist.
Housing affordability isn’t just about building more homes it’s about building smarter. Development charges should reflect real infrastructure needs, not prop up outdated planning models. Until we align these fees with Canada’s housing and climate realities, they’ll continue acting as a hidden tax on the very homes we desperately need.
Canada can’t afford to let development charges remain an invisible force inflating the housing crisis. It’s time to rethink how we grow our cities and who really pays for it.
