A Plain-Language Guide to the Biggest Line Item Most Buyers Don't See Coming
Credit: Homeowner.ca
If you have bought or priced a new home in Ontario recently, you have probably seen a line item — sometimes buried deep in the agreement of purchase and sale — labelled "development charges." It might have been $40,000. It might have been $180,000. And you may not have fully understood what it was paying for, who set the amount, or why it could change before closing day.
Development charges are not new. Ontario municipalities have levied them since 1997, when the province passed the Development Charges Act to formalize how growing communities fund the roads, water systems, and community facilities that new homes require. The principle is simple: growth pays for growth. The execution is anything but.
In March 2026, development charges landed squarely in the national conversation when Canada and Ontario announced an $8.8-billion partnership aimed at cutting DCs by up to 50% for three years.
That announcement — combined with a separate move to eliminate HST on new homes up to $1 million — signals that policymakers now view development charges as one of the most significant levers affecting housing affordability. This guide explains what that means for you: what DCs actually are, how they are calculated, who ultimately pays them, and how to verify what you are being charged.
Development charges are one-time fees that Ontario municipalities impose on new development to recover the capital costs of infrastructure needed to serve that growth. They are authorized by provincial legislation — specifically, the Development Charges Act, 1997 — and can only be triggered by defined planning approvals such as the issuance of a building permit, the passing of a zoning by-law amendment, or the approval of a plan of subdivision.
That last point matters. DCs are not a general tax. They are not charged on existing homes. And they are not an ongoing annual fee. A development charge is assessed once, at a specific moment in a project's lifecycle, to fund a specific category of growth-related capital spending.
Homebuyers and even some real estate professionals frequently confuse development charges with two other municipal tools that can also appear on closing statements. Here is how they differ:
Ontario's provincial guidance on these tools clarifies that they are designed to work together without double-charging the same costs. A cost recovered through DCs cannot also be recovered through a CBC, and vice versa.
The Development Charges Act includes a "no additional levies" provision (s. 59.1) that prohibits municipalities from imposing growth-related charges outside the tools authorized by statute. If a closing statement includes a fee you cannot trace to DCs, parkland, CBCs, or another named Act, that is a question worth raising with your lawyer.
DCs are not a blank cheque for municipal spending. The Development Charges Act restricts them to capital costs for a defined list of eligible services — and explicitly excludes operating expenses.
The Act permits DCs to fund growth-related capital across a broad range of service categories: water supply and distribution (treatment plants, trunk mains, pumping stations), wastewater collection and treatment, roads and related infrastructure (arterial roads, traffic signals, grade separations), public transit (fleet expansion, stations, dedicated right-of-way), police and fire services (new stations, vehicles, and equipment for growing areas), parks and recreation (community centres, playing fields, trails), library services, paramedic services, and in some cases waste diversion and management facilities.
In practice, the balance varies dramatically between municipalities. In Toronto and Ottawa, roughly half of DC revenue is directed toward public transit and roads. In York Region, water and wastewater account for nearly 45% of DC collections. These differences reflect whether a community is growing through suburban expansion, where new pipes and roads dominate, or through urban intensification, where transit and community facilities carry more weight. The federal government's recent Bill C-26, which targets $1.7 billion toward housing-enabling infrastructure, is designed in part to offset exactly these costs so that municipalities can reduce DCs without gutting their capital plans.
DCs cannot fund day-to-day operating costs, council salaries, or general municipal administration. They are strictly a capital cost-recovery tool. York Region's 2025 reporting notes that DCs fund approximately two-thirds of the region's growth-related capital plan, underscoring how central this single revenue tool has become to building the infrastructure that new neighbourhoods depend on.
Development charge rates are not arbitrary. The Development Charges Act requires every municipality to complete a formal background study before it can pass or renew a DC by-law. That study must identify three things: how much growth is expected, what infrastructure that growth will need, and what the capital cost of providing that infrastructure will be.
A typical DC background study involves several steps:
Background studies must be made publicly available, and municipalities are required to hold at least one public meeting before passing a new DC by-law. The by-law itself has a maximum life of five years for residential DCs before it must be renewed with an updated study.
The result of this process is that DC rates reflect each municipality's unique combination of growth pace, infrastructure age, service ambitions, and existing capacity. A fast-growing suburban municipality building entirely new water and road networks from scratch will produce very different rates than a mature urban centre expanding through infill. With Ontario's housing start forecast recently revised downward, the growth assumptions underlying current DC rates face additional scrutiny.
Here is how 2025 rates compare across select Ontario and Canadian municipalities, based on CMHC's development charge data collection:
*Markham figure includes city-wide, York Region, GO Transit, and education DCs combined.
These figures are inclusive of both municipal and regional charges where applicable. The key takeaway: in many GTA municipalities, a single development charge now exceeds the median annual household income in Ontario.
Municipal DC rate schedules are public documents. You can find your municipality's current rates on their website — search for "development charge rates" or "DC by-law." Rates are typically broken down by dwelling type (single/semi, row, apartment) and sometimes by geographic area within the municipality.
Many Ontario municipalities index their DC rates periodically — often every six months — using construction cost indices published by Statistics Canada. The City of Oshawa, for example, indexes DCs on January 1 and July 1 each year.
This means the DC amount written into your purchase agreement today may not be the DC amount assessed when the builder pulls the building permit months or years later. For pre-construction buyers, this creates real budget uncertainty. Unless your agreement of purchase and sale explicitly caps DC adjustments, the difference flows to your closing statement.
Here is the part that trips up most buyers: development charges are technically assessed on the developer or builder, not the homebuyer. They are payable to the municipality, most commonly when a building permit is issued. But in practice, builders treat DCs as a project cost and pass them through to buyers — either baked into the listed purchase price or itemized as a separate closing adjustment.
The challenge for pre-construction buyers is timing. You sign a purchase agreement in year one. The builder applies for a building permit — and pays the DC — in year two or three. If DC rates have been indexed upward in the interim, the increase shows up on your Statement of Adjustments at closing.
Industry guides for Ontario pre-construction purchases estimate that total closing costs (including DCs, land transfer tax, HST adjustments, and legal fees) typically range from 1.5% to 4% of the purchase price. In municipalities with six-figure DCs, development charges alone can be the single largest closing adjustment — larger than land transfer tax, larger than the HST rebate clawback.
How far can a builder go in passing costs to buyers at closing? A 2025 Ontario Superior Court decision drew a sharp line.
In Bellisario v 2200 Bromsgrove Development Inc, forty buyers of a Mississauga townhouse project received Statements of Adjustments that included surprise charges ranging from roughly $62,000 to over $111,000 per unit — described as "site energization" and utility infrastructure costs. The court ruled that the developer could not use vague contract language to shift core construction costs onto buyers after the fact. Costs paid to the developer's own subcontractors are part of the cost of doing business, not a legitimate pass-through charge.
The ruling reinforced a key principle: if a fee is not clearly authorized by the contract, it cannot be enforced. Builders can pass through genuine third-party municipal charges (like DCs), but they cannot repackage their own costs under ambiguous labels.
If your Statement of Adjustments at closing includes charges you did not expect, do not assume they are valid. The Development Charges Act requires that subdivision approvals include a condition ensuring first purchasers are informed of all DCs related to the development at the time of transfer (s. 59(4)). You have a statutory right to know what you are being charged and why.
On March 30, 2026, Canada and Ontario announced a joint commitment that directly targets the development charge burden. The Ontario backgrounder on the partnership outlines the key elements:
This is the most significant policy intervention targeting development charges in Ontario's history. The federal government has also tabled separate legislation directing $1.7 billion to provinces for housing supply, with DC reductions as a central goal. For buyers, the combined effect means that DCs in participating municipalities could drop by tens of thousands of dollars — potentially $60,000 to $90,000 on a single-detached home in the GTA, based on current rates.
The DC reduction is not automatic and not yet in effect everywhere. It requires individual municipalities to commit to reductions and identify eligible infrastructure projects. If you are purchasing a new home in 2026 or 2027, ask your builder and your municipality whether they are participating in the program and when reduced rates will apply.
For deeper coverage of the announcement itself, see our reporting: Canada and Ontario Commit $8.8 Billion to Slash Development Charges in Half for Three Years.
Not every new home attracts the full DC rate. Ontario has introduced several exemption and discount mechanisms:
Through Bill 23, the More Homes Built Faster Act, 2022, the province amended the Development Charges Act to create exemptions and discounts for affordable residential units. These took effect on June 1, 2024. The province publishes an Affordable Residential Units Bulletin annually, setting market-based and income-based thresholds for purchase prices and rents that determine eligibility.
Units that meet the bulletin's affordability criteria can qualify for full or partial exemptions from DCs, community benefits charges, and parkland dedication requirements. Some municipalities, such as Niagara Region, have implemented full DC exemptions for units meeting affordable or attainable definitions.
Beyond the affordability thresholds, municipalities across Ontario offer a range of other DC relief mechanisms. Non-profit and social housing providers often qualify for full waivers or deferrals. Some municipalities exempt secondary suites and garden suites (such as basement apartments and laneway houses) to encourage gentle density. Recent legislative changes have also enabled DC deferrals or installment payments for purpose-built rental developments, and some municipalities offer DC reductions for development within designated brownfield or community improvement areas.
Whether you are buying pre-construction, purchasing a builder-inventory home, or building custom, here are the specific steps to verify what you are paying and why.
A development charge is a one-time fee imposed by an Ontario municipality on new development to recover the capital costs of growth-related infrastructure such as roads, water systems, transit, and community facilities. It is authorized by the Development Charges Act, 1997 and assessed when specific planning approvals — most commonly a building permit — are issued.
They vary widely by municipality and dwelling type. As of 2025, CMHC data shows DCs for a single-detached home range from roughly $81,700 in Ottawa to over $180,000 in Toronto and Markham. For a large apartment unit, the range is approximately $39,600 (Ottawa) to $130,200 (Toronto). These figures include both municipal and regional charges.
No. Development charges are a one-time fee assessed when a home is originally built. If you are purchasing a resale property, the DCs were paid (by the original builder or developer) at the time of construction. There is no DC exposure on a standard resale transaction.
It depends on the builder and the contract. Some builders include DCs in the listed price. Others list them as a separate closing cost on the Statement of Adjustments. Always ask the builder directly and review the Agreement of Purchase and Sale to confirm.
Yes. Many municipalities index DC rates every six or twelve months using construction cost indices. If your purchase agreement does not cap DC adjustments, the builder can pass through any increase between signing and building permit issuance. Negotiating a cap on DC adjustments is one of the most important steps a pre-construction buyer can take.
Development charges fund specific growth-related capital infrastructure (roads, water, transit, fire stations, etc.) and are calculated on a per-unit or per-area basis through a background study. Community benefits charges are a separate tool that funds capital costs not covered by DCs or parkland dedication, apply only to higher-density developments (10+ units, 5+ storeys), and are capped at 4% of land value.
It is the core policy rationale behind development charges: the infrastructure costs created by new development should be funded by that development, rather than being shifted entirely onto existing property taxpayers through general tax increases.
Legally, the builder or developer pays the DC to the municipality (usually at building permit issuance). Economically, the cost is almost always passed through to the buyer — either included in the purchase price or charged as a separate closing adjustment. CMHC's research confirms that new homebuyers generally bear the cost, especially when housing demand is strong.
Announced on March 30, 2026, it is a cost-matched infrastructure funding commitment from both the federal and Ontario governments. The goal is to reduce residential DCs by 30% to 50% in priority municipalities for three years, with infrastructure funding offsetting the revenue impact on municipalities. The program targets municipalities covering roughly 80% of Ontario's population.
Not necessarily. Individual municipalities must commit to reductions and identify eligible infrastructure projects. The timing and scope of reductions will vary. If you are buying in 2026 or 2027, ask your builder and municipality whether reduced rates are in effect for your project.
Builders can pass through genuine third-party municipal charges. However, the 2025 Ontario Superior Court decision in Bellisario v 2200 Bromsgrove Development Inc ruled that builders cannot use vague contract language to add construction costs disguised as pass-through charges at closing. If a fee is not clearly authorized by the purchase agreement, it cannot be enforced.
Yes. Ontario provides DC exemptions or discounts for units meeting provincial affordability thresholds (defined in the annual Affordable Residential Units Bulletin), as well as various municipal-level exemptions for non-profit housing, secondary suites, and in some cases purpose-built rental developments.
A background study includes growth forecasts (population, housing units, employment), an assessment of servicing needs for each eligible infrastructure category, capital cost estimates for the required projects, mandatory deductions (for existing capacity, grants, and benefit to existing residents), and the resulting per-unit rate calculation. These studies are public documents and must be completed before a municipality can pass or renew a DC by-law.
DC by-laws have a maximum five-year life for residential charges and must be renewed with an updated background study. Between renewals, many municipalities index rates every six or twelve months using construction cost statistics. Major rate changes typically coincide with new by-law adoptions following updated background studies.
Every Ontario municipality that levies DCs publishes its current rate schedule on its website. Search for "[your municipality] development charge rates." You can also find the underlying by-law and background study documents, which explain how the rates were calculated. CMHC's development charges data portal provides cross-municipality comparisons for select Ontario cities.
