Ontario’s 50% reduction in housing development-cost charges [DCCs] for the next three years will spur many new projects, says a leading market analyst.

Adam Jacobs, Colliers’ head of Canadian research, told Connect that the move will have a more immediate impact than others designed to boost long-term supply in Ontario and across the country.

“How many times have you heard people say: ‘We’ve got to cut development charges?’ They’re too high. They’re driving prices up. They’re slowing construction,” said Jacobs in an interview.

“This is not a good situation. They never stop rising. So, I think it’s very much needed. It was just a very broad stroke.”

The three-year DCCs reduction is part of the new $8.8-billion Canada-Ontario Agreement. The province will cut housing DCCs by 50%. The Canadian commercial real estate industry has been calling for sharp DCC reductions for more than a decade.

Jacobs said the three-year DCCs reduction will be more beneficial than the one-year freeze on the provincial portion of the harmonized sales tax tied to new, qualified housing projects. The freeze will be in the form of expanded HST rebates.

The DCCs cut will also make it easier to build thousands of new units than the federal government’s Canada Builds Homes program, he added.

Part of the recently proposed Ontario budget, the HST freeze applies to new housing units. The entire 13% HST will be frozen on the total price of new homes valued up to $1.5 million, a maximum reduction of $130,000. Rebates will be reduced on a sliding scale for new homes valued between $1.5 million and $1.85 million. Homebuyers paying the maximum price will receive a $24,000 rebate.

Previously, the HST freeze only applied to new homes purchased by first-time homebuyers.

The federal government plans to share the cost of the HST freeze, which would also apply to new rental projects. But the freeze is subject to the passing of federal legislation, so it is not guaranteed.

The Builds Canada Homes program calls for half a million new residences to be built across the country over the next decade.

“I think [the DCCs cut is] going to move the needle more than a one-year removal of HST for new homes that papers off for higher prices,” said Adams. “That [HST freeze] certainly won’t hurt, but I don’t think it’s going to drastically change the market.

“A 50% cut in development charges, that’s pretty significant.”

Jacobs questioned whether the federal government has made much progress on boosting supply through Build Canada Homes after making the new agency a key part of its election plank in 2025.

“So, this is a shortcut in my mind,” said Jacobs. “Instead of the [federal] government finding a way to build 500,000 new homes a year [over the next decade], which we’re not on track to do, and was always going to be really hard, they said: ‘How about just immediately addressing something about affordability and the cost to the end user and bringing costs down that might achieve the same thing and be a lot faster and simpler?’

“I think [the three-year DCCs cut] was a pretty big and surprising change, just in the magnitude of it, and one that I think will actually impact the market more generally.”

He noted that housing starts and prices are quite uneven in different parts of the country.

Near-record prices and the pace of sales development do not pose a concern in some cities and regions; however, larger and more expensive markets are extremely challenged when it comes to getting new units built and sold, Jacobs added.

“As down as the Vancouver market is, you cannot imagine how down the market is here [in Toronto],” said Jacobs, who is based in the Ontario capital. “It’s just disastrous. And, I think this [situation in Ontario] is the biggest problem that [the federal and Ontario governments] are trying to fix.”

Although the 50% Ontario DCCs reduction came as a shock, Jacobs said he would not be surprised if the federal government partners with other provinces and territories to curb such fees.

“I think the bigger, grander plan of restoring affordability, building more houses, has turned out to be quite difficult,” he said.

Pictured: Toronto

Photo: Shutterstock