In a move deemed sharply strategic and loudly cheered, the city of Toronto has chosen to freeze the year-over-year increase in Development Charges (DCs) for 2025 and 2026. The city’s intent is obvious: a one-year freeze on the increase. However, the voices from the housing industry and the heavyweight lobby want to continue to face the reality: the city’s base DCs are already among the highest in North America.
Development Charges are the mandatory upfront taxes a builder must pay before any shovel work is done on a new project. The idea is simple: a new project should pay for the big-ticket items associated with a growing city. However, the city has increasingly come to rely on DCs as a significant revenue source. As a consequence, the DCs have increased to the point where they jeopardize the viability of many middle-range housing projects.
Even with the 2025 and 2026 indexing freeze, the numbers remain daunting. For 2026, the final figures look like this: a builder wishing to develop an average single-family or semi-detached home in the city will be looking at an upfront DC cost ranging from $130,000 to $180,600 per home. High-rise projects are not immune; a typical high-rise condo will cost a builder $130,200.
The sting of such high rates hurts the common buyer. New data released by the Canada Mortgage and Housing Corporation reveals that municipal development costs can reach as much as 16% of the sticker price of a brand-new home in Toronto. So when a young family spends $800,000 on a condo, much of their mortgage payments are going to pay off the upfront municipal tax burden on the city. This makes the housing market tough enough as it is.
The construction sector has yet to sound the alarm on the indexing freeze until 2026. Large construction organizations admit that the freeze on automatic inflationary rate hikes provides a bit of much-needed financial security to builders. However, the solution to the problem is a fundamental overhaul of the current rates and a reduction in the rates to stimulate a housing boom in Toronto. Until then, the association explains that affordable housing projects will not make financial sense since Toronto requires an upfront municipal tax burden of $130,000 per condo.
With the 2026 building season beginning, City Hall is in a tricky financial situation. If the city lowers development costs to stimulate a housing boom, it will either have to raise property taxes on homes or pause other much-needed infrastructure projects.