CMHC Says Cutting Development Charges Could Make 14% More Housing Projects Viable

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For many Canadian housing projects, the biggest obstacle is not demand. It is the math. Before a shovel hits the ground, developers must calculate land costs, construction costs, financing, expected rents or sale prices, and the long list of fees attached to new housing. If the numbers do not work, the project often sits on the shelf.

CMHC’s latest analysis puts a sharper spotlight on development charges, the municipal fees used to help pay for growth-related infrastructure such as roads, sewers, water systems, parks, and transit. The agency says reducing or eliminating these charges could make more projects financially viable, with gains of up to 14% in some cities. The finding does not mean one policy can fix Canada’s housing shortage on its own, but it does show how sensitive new construction can be when costs are already stretched.

The 14% Figure Is About Viability, Not an Automatic Building Boom

CMHC’s headline number is powerful because it speaks to a practical question: which projects actually get built? A housing proposal can look promising on paper, but if the expected revenue does not exceed land, construction, financing, taxes, and fees by enough to justify the risk, lenders and builders may walk away. CMHC’s modelling suggests that when development charges are sharply reduced or removed, some of those borderline projects become financially feasible.

That distinction matters. A project becoming viable does not guarantee immediate construction, because builders still need financing, approvals, trades, buyers, renters, and confidence in the market. But viability is the first gate. In a city where many projects are barely missing their target returns, even one major cost reduction can move a proposal from “not now” to “possible.” That is why CMHC’s 14% figure has landed as more than a technical modelling result. It points to a lever governments can actually pull.

Development Charges Are a Hidden Cost in New Homes

Development charges are often invisible to homebuyers, but they can be very real in the final price of a new unit. Municipalities use them to recover some of the cost of infrastructure required by growth. That can include pipes, roads, community facilities, and other services that make new housing possible. In theory, the idea is simple: growth should help pay for growth.

The problem is that these charges can become large enough to affect whether housing gets built at all. CMHC’s earlier data showed wide differences between municipalities, with some apartment charges far higher than others. For a family looking at a new condo or townhome, the fee may never appear as a separate line item. But it can still be baked into the sale price or rent. For a builder, it is an upfront cost that arrives before a project earns a dollar.

Small Cuts May Not Be Enough to Change Decisions

One of the more important findings in CMHC’s analysis is that modest reductions do not necessarily produce dramatic results. The agency found that reducing development charges by 10% to 20% only slightly improved project viability in the selected markets studied. That is a useful reality check for governments hoping to announce small fee relief and see a major housing response.

For developers, a small reduction may help, but it may not overcome the bigger forces weighing on a project. Construction costs remain elevated, financing costs can still be restrictive, and pre-sale demand has weakened in some ownership markets. A builder facing a thin margin might appreciate a small reduction, but the project may still fail to meet lender or investor requirements. CMHC’s modelling suggests the real supply impact comes from deeper reductions, especially in cities where charges are already high.

Bigger Reductions Produce More Meaningful Gains

CMHC found that larger cuts have a much stronger effect. In Toronto and Vancouver, reducing development charges by roughly half was estimated to increase viable projects by about 5%. Eliminating most or all of the charges pushed the gain closer to 10% in those cities. Burnaby showed an even stronger response, with viability rising by nearly 14% under near-elimination.

That pattern makes sense because large fees can become a make-or-break cost. A project that is already close to working may not need every expense to fall; it may just need one major line item to shrink enough to make the return acceptable. In expensive urban markets, where land and construction costs already leave little room for error, development charges can be the final weight that tips the pro forma in the wrong direction.

High-Fee Cities Stand to See the Biggest Response

CMHC’s analysis shows that the impact of development charge cuts varies widely by municipality. Burnaby, Toronto, and Vancouver respond more strongly because their development charges are relatively high. Ottawa, by contrast, sees a much smaller improvement because its charges are lower and therefore less likely to be the main reason a project fails.

This is an important policy lesson. A national or provincial promise to “cut fees” may sound simple, but housing markets are local. A fee reduction in one city could meaningfully change construction economics, while the same percentage cut elsewhere might barely matter. The most effective approach may be targeted, focusing on markets where charges are high enough to distort building decisions. A one-size-fits-all approach risks spending public money where it has the weakest supply impact.

Toronto Shows the Scale of the Opportunity

Toronto is the clearest example of why the CMHC finding matters. The agency estimated that eliminating development charges could support roughly 10,000 to 16,250 more units annually in the city, depending on market conditions. A 50% reduction was simulated to generate about 4,900 to 7,650 additional units annually. Those are not small numbers in a city where affordability pressure has shaped politics, household decisions, and migration patterns for years.

The human side of that math is easy to understand. More viable projects can mean more rental apartments, more condos, and more options for households trying to stay near jobs, schools, transit, or family. It would not instantly make Toronto affordable, but it could reduce the number of projects stuck in limbo. In a city with long timelines and expensive land, turning stalled proposals into buildable ones can have an outsized effect.

Ottawa Shows Why the Policy Has Limits

Ottawa provides the counterexample. CMHC estimated that a 50% to 60% reduction in development charges would increase viable projects by only about 1.3%, while eliminating most or all charges would raise viability by about 3%. That does not mean fee reductions are useless in Ottawa. It means development charges are not the same kind of bottleneck there as they may be in higher-fee markets.

This matters because governments need to be careful about treating development charges as the single villain in the housing crisis. In some places, the bigger constraint may be zoning, approvals, land availability, financing, labour shortages, or weak buyer demand. Ottawa’s result suggests that lower charges can coexist with housing development without causing the same level of distortion seen in higher-cost markets. It also supports CMHC’s broader message: development charge reform can help, but it is not a standalone cure.

Buyers and Renters Can End Up Carrying the Cost

Development charges are formally paid by developers, but CMHC’s research suggests the cost often gets passed on to new homebuyers, especially when demand is strong. That pass-through can also influence the wider market. If new homes become more expensive, existing homeowners may be able to ask more for nearby properties, even though those older homes did not directly incur the charge.

For renters, the relationship can be less direct but still important. A rental builder facing high upfront fees must make the project work through future rents, financing terms, or lower land costs. If none of those adjust enough, the building may not proceed. That can reduce rental supply later, even if the immediate rental market looks softer. In cities where vacancy rates have been tight for years, fewer projects moving forward today can become a rent problem tomorrow.

Municipalities Still Need to Pay for Growth

The difficult part is that development charges exist for a reason. New housing needs water, wastewater capacity, roads, transit connections, parks, and community infrastructure. If charges are reduced or eliminated, municipalities still need another way to fund those services. That could mean higher property taxes, utility fees, senior-government transfers, borrowing, or delayed infrastructure projects.

This is why the policy debate can become tense. Builders argue that high upfront charges suppress supply and worsen affordability. Municipalities argue that growth comes with real infrastructure costs that cannot simply disappear. Both points can be true. The strongest version of development charge reform is not just cutting fees and hoping for the best. It is replacing a heavy upfront cost with a more balanced funding model that does not punish new housing while still paying for the infrastructure communities need.

Ontario’s New Program Shows the Debate Is Already Moving

The timing of CMHC’s analysis is notable because Ontario and the federal government have opened applications for a development charge reduction program tied to housing-enabling infrastructure. The program is designed to support municipalities that substantially reduce development charges while receiving funding for projects such as roads, water systems, wastewater systems, and transit.

That kind of structure reflects the central trade-off in the CMHC research. Cutting development charges may improve project viability, but municipalities need support if they are expected to give up a major revenue source. A program that offsets some lost fee revenue could make reductions more politically and financially realistic. The test will be whether the money reaches the municipalities where cuts would actually unlock the most housing, rather than simply subsidizing reductions that would have little effect on building decisions.

The Construction Pipeline Is Already Under Pressure

CMHC’s Spring 2026 Housing Supply Report warned that construction project viability is under increasing strain. The report pointed to high costs, land scarcity, weaker condominium pre-sales, and pressure on rental construction. In other words, the development charge debate is happening at a moment when the broader housing pipeline is already fragile.

That makes the issue more urgent. Housing supply can look fine in the short term if buildings started years ago are now being completed. But construction works on a long delay. If too many projects are cancelled or postponed today, the shortage shows up later when fewer units are delivered. Development charge reform is therefore not only about today’s prices. It is about preventing a future gap caused by projects that looked possible but never cleared the financial hurdle.

Land-Use Rules Still Matter Just as Much

CMHC has also warned that land-use regulations strongly affect housing affordability and supply. Strict zoning, slow approvals, and uncertain permitting can raise costs and reduce how many homes are built. Cutting development charges may help the financial side, but it cannot fully compensate for a system that makes it difficult to build enough homes in the right places.

This is where the housing debate often becomes practical rather than ideological. A builder may be willing to construct a mid-rise near transit, but if zoning allows only a lower-density form, the project may not work. A city may reduce fees, but if approvals take years, carrying costs can wipe out the benefit. The most effective affordability strategy likely combines fee reform with faster approvals, more flexible zoning, and better infrastructure planning.

Canada Needs More Than One Lever

CMHC has estimated that Canada needs a much faster pace of housing construction to restore affordability to pre-pandemic levels. Its newer supply-gap work suggests annual starts would need to nearly double over the next decade, reaching roughly 430,000 to 480,000 units per year. That scale is far beyond what development charge reform alone can deliver.

Still, housing supply is not solved by one giant reform. It is built through many smaller changes that collectively make more projects possible. Lower upfront charges, faster approvals, better zoning, modular construction, improved labour productivity, infrastructure funding, and stable financing all matter. CMHC’s 14% finding should be understood in that context. It identifies a meaningful lever, not a magic switch.

The Real Question Is Who Pays Upfront

At the heart of the development charge debate is a simple but uncomfortable question: who should pay for growth, and when? Current systems often load a large share of infrastructure cost onto new housing at the moment it is built. That protects existing taxpayers from some immediate costs, but it can also make new homes more expensive and reduce the number of projects that proceed.

A more balanced model may spread infrastructure costs across a broader base, especially when new housing benefits the wider economy. More homes can support labour mobility, local businesses, schools, transit, and future tax revenue. CMHC’s latest analysis does not argue that municipalities should ignore infrastructure costs. It suggests that pushing too much cost onto new housing can backfire. If Canada wants more homes, the financial system around building those homes may need to become less front-loaded, more transparent, and more consistent across cities.

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