Temporary Cuts to Residential Development Charges

Summary#

This motion lets Toronto sign a funding agreement with Ontario and Canada to cut residential development charges (DCs) for about three years. With $1.5 billion in federal‑provincial funding over 10 years, the City would reduce DCs by 40% to 60% for all residential projects, retroactive to March 30, 2026. The goal is to lower project costs, make more housing projects viable, and keep building needed infrastructure.

Key changes:

• Temporary DC cuts for all residential units: 40% off for studios/1‑bedrooms; 60% off for 2‑bedrooms and larger, dwelling rooms, singles, and semis.
• Authority for the City to execute a Transfer Payment Agreement and bring by‑law changes in July 2026 to implement the new DC rates.
• Launch of Phase 2 of the Purpose‑Built Rental (PBR) Incentives stream to support up to 10,000 new rental homes (at least 2,000 affordable), with full DC relief for eligible projects with 20% affordable units.
• Ongoing, rolling application process for PBR Phase 2, focused on shovel‑ready projects; incentives can be reallocated if projects stall.
• The $1.5B funds replace DC revenue for existing road, water/wastewater, and transit projects in the City’s 10‑Year Capital Plan; this is not new money for new projects.

What it means for you#

• Developers and home builders

  • DCs drop 40%–60% on all residential projects for about three years, backdated to March 30, 2026. No separate application is needed for these “as‑of‑right” cuts.
  • Larger, family‑sized units get the deeper 60% discount.
  • If your building permit was issued on or after March 30, 2026, you may receive retroactive DC relief; the City will confirm the process in July.
  • The City may set timelines (such as reaching occupancy within a set period) to ensure projects move ahead; details to come.

• Rental developers (projects with at least 20% affordable units)

  • You can apply to PBR Phase 2 for:
    • Full DC waivers for affordable units and indefinite DC deferrals for market rental units in approved projects.
    • A 15% property tax rate reduction for new market rental buildings (existing City policy).
    • For approved affordable units, exemptions from property taxes and certain fees (community benefits charges, parkland, building permits).
  • Rolling application, prioritizing shovel‑ready projects that can start construction within two years; you must show steady progress or incentives may be reallocated.
  • Minimum 40‑year affordability (target 99 years) using the City’s income‑based definition.

• Homebuyers and renters

  • You do not pay DCs directly, but the cuts lower developer costs. This could make more projects viable and increase housing supply, including family‑sized units. The motion does not guarantee lower prices or rents.

• Taxpayers

  • Federal and provincial funds replace part of the DC revenue that would have paid for existing growth‑related infrastructure. The City also offers long‑term tax reductions/exemptions for rental projects in PBR Phase 2, which lowers future City revenue.

• Timing

  • DC cuts apply from March 30, 2026, until three years after the agreement is signed (the City expects to execute by mid‑August 2026).
  • PBR Phase 2 applications will open after the transfer agreement is signed.

• What is unclear

  • How retroactive DC relief will be delivered.
  • Whether DC cuts will be spread evenly across all DC services or targeted to services receiving program funding.
  • Exact milestone rules (e.g., occupancy deadlines) to keep the discount.
  • Payment timing of federal‑provincial funds; the City is seeking certainty.

Expenses#

Estimated public cost: $1.5 billion in federal‑provincial funding over 10 years replaces City DC revenue; the City estimates an added $578 million in foregone revenues for PBR Phase 2.

• Federal‑provincial funding

  • $1.5B supports existing growth‑related projects (roads, water/wastewater, transit). It substitutes for DC revenue; it is not new capital for additional projects.
  • Projects must start by July 31, 2030, and finish by October 31, 2035.
  • The City is seeking clarity on payment timing and flexibility to substitute projects.

• City foregone revenues (PBR Phase 2), about $578.4M total:

  • Market rental (up to 8,000 units): DC deferrals ($158.0M) and 15% property tax reduction over 35 years ($163.2M).
  • Affordable rental (at least 2,000 units): DC exemptions ($39.5M), property tax exemptions over 40 years ($190.3M), and exemptions from community benefits charges, parkland, and building permit fees (~$27.5M).
  • These are primarily deferred or foregone revenues, not upfront cash spending.

• Administration and enforcement

  • The City will amend by‑laws, process retroactive relief, and manage PBR agreements. No publicly available information on administrative costs.

Proponents' View#

• The motion appears intended to lower development costs quickly, so more projects can proceed in a slow housing market.
• Deeper DC cuts for 2‑bedroom‑plus units could help produce more family‑sized homes and mixed‑income communities.
• Replacing DC revenue with federal‑provincial funding gives the City more certainty to keep building key infrastructure already in the 10‑Year Capital Plan.
• Pairing broad DC cuts with targeted PBR incentives could help projects that include affordable housing overcome unique financing and cost barriers.
• According to City materials, the DC cuts are expected to unlock an average of 6,250 additional units per year over three years (about 18,750 units), and combined development could support tens of thousands of direct and indirect jobs.
• A rolling, shovel‑ready focus for PBR Phase 2 is designed to move projects to construction faster.

Opponents' View#

• One concern is that the $1.5B does not add new infrastructure capacity; it replaces DC funding for existing planned projects.
• The DC cuts are temporary. It is unclear what happens to development activity when rates return to normal after the three‑year period; the City notes a need to plan for this.
• Funding/payment timing from other governments is not confirmed; the City may need to manage cash‑flow risks if funds arrive late.
• Retroactive DC relief and milestone enforcement add administrative complexity; program details are still pending.
• The City’s PBR Phase 2 relies on long‑term tax reductions and exemptions, which lower City revenues for decades; if development does not increase as expected, the foregone revenue may not be offset by higher overall activity.
• The motion does not guarantee lower home prices or rents; benefits depend on how much cost savings improve project viability and how the market responds.