Cutting development fees would make dozens of housing projects across the country more economically viable at a time when Canada is looking to boost construction, the country’s housing authority says.
Development fees, which municipalities collect from developers to pay for the new infrastructure such as roads, water and transit needed for these projects, are particularly popular in Ontario and British Columbia and can vary widely.
According to the Canada Mortgage and Housing Corp. (CMHC), for example, a two-bedroom apartment in Ottawa charges $39,600 to build, while Markham charges $121,500.
Assuming that the average new construction in 2024 was 55 units in Ottawa and 246 units in Markham, a developer could face upfront fees of $2.2 million and $29.9 million, respectively, for a build.
Therefore, developers face a real hurdle when it comes to getting their projects off the ground.
But cutting fees in half would increase the number of viable projects in Toronto and Vancouver by about five per cent, according to CMHC. A comprehensive cut would increase that figure to about 10 percent.
“Reducing development costs can improve the profitability of housing projects, particularly in communities where they are highest, but significant supply gains require significant reductions and are only part of the solution,” CMHC chief economist Mathieu Laberge said in a news release.
“Improving affordability requires a broader approach, including improved land use regulation and greater scale and innovation to increase productivity in the construction industry.”
Aside from stalling projects, development fees also impact housing affordability.
CMHC said that development fees are passed on to homebuyers and that the price increases are often greater than the development fees themselves. The higher prices for new construction can also drive up prices for existing properties on the market.
However, high construction costs can be a double-edged sword as they can drive down the price of undeveloped land and help reduce property taxes.
CMHC estimates that Canada will need to double its annual housing starts to 430,000 to 480,000 new units by 2035 to meet demand.
In April, Canada stood at 256,777 housing starts in 2026.
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Today’s Posthaste was written by Ben Cousins with additional reporting from staff at the Financial Post and Bloomberg.
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