Three-government deal aims to boost Toronto housing supply and cut builder costs
The City of Toronto secured up to $1.5 billion in federal and provincial infrastructure funding, under the Canada-Ontario Partnership to Build, enabling Toronto development charge reductions of 40 to 60% across most residential unit types through 2029.
Housing advocates say the move could shift the calculus for stalled projects in Canada's most expensive city.
The funding flows from the Development Charge Reduction Program (DCRP), a 10-year mechanism anchored by a combined $8.8 billion commitment from Ottawa and Queen's Park.
The federal-provincial framework was designed to backstop municipal budgets as local councils reduced development charges by up to 50% for three years and Toronto committed to exceeding that floor.
The province estimates the cuts, combined with the temporary removal of the full HST on new homes, will reduce building costs by more than $200,000 per unit in Toronto, with development charge reductions alone trimming approximately $83,000 from the construction of a new single or semi-detached home.
"People should be able to afford a home in our city," Mayor Olivia Chow said at the announcement.
"Today's announcement will make that easier while creating tens of thousands of good jobs in Toronto. Through our strong partnership with the Provincial and Federal government, we're reducing the cost of building new homes and ensuring the City can keep investing in the infrastructure we need to support communities. This funding will help create more homes for Torontonians and support growth across our city."
For mortgage brokers advising clients on new construction, the DCRP marks the most concrete action yet on a cost layer that has long complicated project financing in the GTA.
Canada Mortgage and Housing Corporation (CMHC) found development charges could represent 8 to 16% of a new condo's price in Ontario and up to 9% of the cost of a single-detached home in Toronto.
The Toronto Regional Real Estate Board (TRREB), which has consistently advocated for lower upfront development costs, welcomed the deal as the kind of leadership needed to address the province's housing-supply crunch.
"Development charges are among the largest government-imposed costs built into the price of new housing in Ontario and can account for up to 20% of a home's purchase price," said Daniel Steinfeld, TRREB president.
"Homebuyers and renters ultimately bear those costs, and they have contributed to worsening affordability and slower housing construction across the Greater Golden Horseshoe."
Earlier CMHC modelling on what policy levers could unlock Toronto housing supply suggested that reductions at the scale Toronto has now committed to could improve project viability by roughly 10% across the city's constrained market.
Purpose-built rentals get a second boost
The announcement also triggers Phase 2 of Toronto's Purpose-Built Rental Housing Incentives program, which provides an indefinite deferral of development charges for rental projects committing a minimum of 20% affordable units.
The first phase, launched in fall 2024, supported more than 8,000 rental homes, including more than 2,000 affordable homes.
The new phase targets up to 10,000 additional rental homes, with a minimum of 2,000 affordable units, with shovel-ready projects reviewed on a rolling basis.
Whether savings reach buyers is another matter
Not all observers are confident the reductions will translate directly to lower prices. Matthew O'Neil of Connolly Capital, a Toronto-based mortgage broker who spoke to Canadian Mortgage Professional when the Carney-Ford development charge framework was first announced in March 2026, flagged the risk that builders could absorb the relief without passing it through to purchasers.
"In theory, if the builders are paying less in development charges, they should pass on those savings to the consumer," O'Neil said, "but builders could decide to say, 'We're saving on development fees, but we're not passing those savings off.' They have every right to do so, but then they're not going to sell any homes because it's still too expensive."
The Toronto deal is substantially larger than earlier experiments in the region. Vaughan's temporary elimination of residential development charges for eligible projects in early 2026 drew industry attention as a proof-of-concept. However, Toronto's program eclipses it in both dollar terms and projected housing output, with $1.5 billion in infrastructure support over 10 years underpinning reductions that apply citywide and across all residential unit types.
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