Ottawa and Ford Government Put $1 Billion Behind Municipalities That Don’t Charge Development Fees

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Ontario communities that have chosen not to levy development charges are getting a new route to major infrastructure funding. Ottawa and Premier Doug Ford’s government are jointly committing $1 billion to municipalities that do not collect the fees normally used to help pay for growth-related infrastructure.

The money is aimed at a practical obstacle in the housing push: homes cannot be added at scale when local roads, bridges, water mains and wastewater systems lack capacity. The new funding stream gives smaller, rural and northern communities in particular a chance to finance those projects without first imposing development charges on builders. It also marks another expansion of the much larger federal-provincial effort to reshape how Ontario pays for housing growth, while raising an important question about whether governments can lower upfront building costs without leaving municipalities short of infrastructure money.

The $1 Billion Is Split Evenly Between Ottawa and Queen’s Park

The new Non-Development Charge Municipalities Stream will be financed equally by the two senior governments. Ontario is committing $500 million through its Municipal Housing Infrastructure Program, while the federal government is providing another $500 million through the provincial and territorial stream of the Build Communities Strong Fund. Ottawa’s contribution is subject to a bilateral funding agreement under that federal program.

For municipal officials, the significance is not simply the size of the announcement. The program recognizes communities that were poorly positioned to benefit from policies built around reducing development charges because they never collected those charges in the first place. Applications are scheduled to open on October 29, 2026, with additional intakes expected later. Rather than requiring a municipality to introduce a fee and then reduce it, the new stream is designed to finance the infrastructure directly. That creates a different route into Ontario’s housing strategy for towns where growth may be slower but replacing a water line, rebuilding a bridge or expanding servicing can still determine whether a housing proposal is possible.

Smaller and Northern Communities Had a Different Funding Problem

Development charges are most commonly associated with faster-growing municipalities that need developers to contribute toward infrastructure demanded by new neighbourhoods. Communities without the charges face the same physical realities of growth but lack that particular source of revenue. The federal-provincial announcement points to high construction costs, aging assets and infrastructure backlogs as pressures affecting these municipalities even when population growth is more modest.

Northern Ontario illustrates the scale of the distinction. The Northwestern Ontario Municipal Association said none of its 37 member municipalities collects development charges. Yet those communities still maintain roads, bridges and water systems and may need to expand them before additional housing can proceed. A small municipality considering a subdivision cannot simply approve houses on paper if its water treatment system has no spare capacity or the road serving the site requires reconstruction. The $1-billion stream is therefore less about rewarding municipalities for keeping fees at zero than about acknowledging that a policy designed around cutting existing development charges would otherwise leave many rural, northern and smaller communities outside the main funding framework.

Housing Construction Often Begins With Pipes and Roads, Not Foundations

Housing announcements naturally focus on the number of homes that could eventually appear, but municipal infrastructure usually has to come first. A subdivision needs road access and water capacity. Apartment development may depend on larger sewer pipes or treatment facilities. Existing infrastructure can also need reinforcement when a community adds density. The new stream explicitly allows funding for critical assets such as roads, bridges and water systems intended to enable housing growth while also protecting existing housing.

Research from the Federation of Canadian Municipalities shows how large those underlying costs can become. Using Statistics Canada infrastructure values and construction-cost adjustments, FCM estimated in 2023 that supporting a dwelling required an average of roughly $107,000 in municipally owned capital infrastructure. That national estimate varied heavily by housing type and location and was not a price tag for every new Ontario home, but it illustrates why municipal infrastructure financing matters. An available parcel of land does not automatically represent buildable housing capacity. If an aging wastewater system cannot accept another neighbourhood, the bottleneck can remain even when zoning and construction financing are ready.

The Program Fills a Gap in the Larger $8.8-Billion Housing Deal

The $1-billion announcement is one part of the Canada-Ontario Partnership to Build unveiled in March 2026. Its central housing-infrastructure component commits a combined $8.8 billion over 10 years, cost-matched by Ottawa and Ontario. A major part of that initiative targets municipalities that already levy development charges and are willing to substantially reduce them for residential construction.

Under the Development Charge Reduction Program, participating municipalities generally commit to reductions of 30 to 50 per cent, or more, for at least three years. The Association of Municipalities of Ontario reported that the application-based program was available to more than 200 municipalities that levy the charges. Toronto provides an early example of the approach. In June, the city secured up to $1.5 billion over 10 years after committing to reductions ranging from 40 to 60 per cent between 2026 and 2029, depending on housing type. The new Non-DC Stream effectively creates the counterpart for communities where there is no development-charge rate to cut, making the broader partnership accessible to municipalities operating under a different local financing model.

Development Charges Can Be Big Enough to Change Whether Projects Work

The political case for reducing development charges has strengthened as the fees have climbed in some Ontario markets. CMHC reported in June 2026 that development charges can add tens of thousands of dollars to a home and, in some cities, account for roughly 8 to 16 per cent of a new home’s price. Its standardized data showed striking variations: charges on a two-bedroom apartment were around $40,000 in Ottawa compared with approximately $122,000 in Markham, while charges for detached homes exceeded $180,000 in Toronto.

CMHC’s modelling also found that the effect of fee reductions depends heavily on the market. Cutting development charges by roughly 50 to 60 per cent increased the share of viable projects by about 5.3 per cent in Toronto but only about 1.3 per cent in Ottawa. Eliminating the charges produced larger modelled gains, although CMHC emphasized that development-charge reform alone cannot solve the housing shortage. That distinction matters for the new $1-billion stream. In municipalities already charging nothing, Ottawa and Ontario cannot unlock construction by cutting the fee further. The potential benefit instead comes from paying for the infrastructure that might otherwise prevent development from proceeding.

Eliminating Fees Does Not Eliminate the Cost of Growth

Development charges can raise housing costs, but the infrastructure they finance does not disappear when a charge is reduced or eliminated. Municipalities use these revenues for capital needs associated with growth, including water, wastewater, roads, transit and other services. CMHC has warned that removing development charges creates a municipal funding gap that eventually has to be addressed through another source.

That is the central fiscal tension behind Ontario’s changing approach. If a municipality collects a large fee from a new development, part of the cost can ultimately be reflected in new-home prices or rents. If the fee disappears without replacement funding, infrastructure costs can instead put pressure on property taxes, municipal borrowing, grants or other revenues. The $1-billion Non-DC Stream sidesteps part of that problem for eligible communities because senior governments are contributing directly toward infrastructure rather than asking those municipalities to create a new development charge. It does not make infrastructure free; it changes who finances a portion of it. That distinction will matter when taxpayers assess whether the program produces enough housing and infrastructure capacity to justify the public investment.

Ontario Is Building on a Much Larger Municipal Infrastructure Push

The province has been expanding infrastructure funding alongside its efforts to increase housing construction. Ontario raised the Municipal Housing Infrastructure Program to $4 billion in August 2025. By the August 2026 announcement, the government said projects supported through MHIP had helped enable approximately 800,000 new homes and protect infrastructure serving roughly 375,000 existing homes. Those figures describe housing capacity associated with supported infrastructure rather than 800,000 completed homes.

That difference is important when evaluating the new $1 billion. A water-treatment expansion can create capacity for thousands of future units without producing those units immediately. Builders still need land, financing, approvals, labour and buyers or renters before homes reach completion. CMHC’s 2026 outlook also described Ontario as facing a structural housing shortage while builders contend with input costs, financing conditions and weak demand for some forms of new ownership housing. Infrastructure funding can remove an important bottleneck, but it is one part of a longer development chain. The program’s performance will therefore depend not only on how much money is allocated but on whether funded projects correspond to realistic, near-term opportunities for additional housing.

The Next Test Is Which Municipal Projects Actually Receive the Money

The most important details will emerge once municipalities begin applying. The August announcement sets October 29 as the opening date for the first intake and says more intakes will be announced later. It also confirms that eligible projects can involve critical infrastructure such as roads, bridges and water systems. What ultimately matters, however, is how effectively governments direct the money toward projects where infrastructure is the genuine constraint holding back housing.

Several measurements will be worth watching as awards are announced: how much goes to rural and northern municipalities, how many housing units funded infrastructure is expected to enable, how quickly construction begins, and whether projects expand capacity rather than simply replace aging assets. Replacement work can still be essential for protecting existing homes and community services, but it produces a different housing outcome than installing infrastructure for a large new neighbourhood. The program also offers a broader test of the federal-provincial strategy. Ontario is now supporting municipalities that cut development charges and municipalities that never levied them. If both approaches produce more serviced land and viable projects, infrastructure financing may prove just as important to housing policy as zoning and fee reform.

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