Ontario’s infrastructure challenge is increasingly defined by delivery. The issue is no longer whether projects are planned or funded, but whether they can move forward in a way that is timely, predictable, and financially viable. Development charges sit at the centre of that equation.
Originally designed to fund growth-enabling infrastructure such as water, wastewater, and transportation systems, development charges remain a critical tool in supporting new housing and employment. Over time, however, their role has expanded. What was once a targeted mechanism tied closely to enabling growth has, in many cases, become a broader funding tool. That shift is beginning to affect how and whether projects proceed.
Rising Costs and Project Feasibility
In today’s market environment, upfront costs play a much larger role in determining project viability. Development charges are typically applied early in the development process, increasing capital requirements before construction begins. In some Ontario markets, they can account for between 8 and 16 percent of total unit value, materially affecting project economics.
These costs are also highly front-loaded, meaning they are incurred before revenue is generated, increasing financing risk and capital exposure at the earliest stages of a project. At the same time, variability across municipalities adds further complexity, particularly in regions like the Greater Toronto Area, where developers are navigating multiple jurisdictions with differing charge structures.
Market conditions have only amplified these pressures. Ontario recorded just 12,700 housing starts in the first quarter of 2025, the lowest level since 2009 and approximately 20 percent below the same period the previous year. As feasibility tightens, fixed costs such as development charges have a greater impact on whether projects proceed.
When those costs rise in this environment, projects do not adjust easily. They are delayed, scaled back, or cancelled altogether.
A Growing Disconnect in the System
Municipalities are facing increasing pressure to invest in infrastructure. Across Ontario, municipal infrastructure debt has reached approximately $25.7 billion, with roughly a quarter tied to water and wastewater systems. At the same time, municipalities are planning between $250 billion and $290 billion in capital investment over the next decade, including approximately $100 billion in growth-related infrastructure.
The need for sustained investment is clear. However, development charges have increasingly been used to fund a wider range of infrastructure beyond what is required to enable near-term growth.
This is reflected in how capital plans have evolved. In many cases, development charge frameworks now include longer-horizon or non-immediate infrastructure, even when those projects are not directly tied to unlocking current housing or employment. At the same time, more than $10 billion in development charge reserve funds remain unspent across Ontario, pointing to a mismatch between funds collected and infrastructure delivered.
The result is a growing disconnect. Costs are being loaded onto new development upfront, but the infrastructure required to support near-term delivery is not necessarily being brought forward any faster. As this gap widens, development charges begin to function less as a growth-enabling tool and more as a constraint on project feasibility.
Refocusing on Growth-Enabling Infrastructure
A more effective approach is not about reducing infrastructure investment, but about improving alignment between funding tools and delivery outcomes.
Development charges are most effective when they are closely tied to infrastructure that directly enables near-term growth. This includes water and wastewater servicing, trunk infrastructure, and transportation networks that are required to bring projects online.
Infrastructure that does not immediately unlock development can still be delivered, but through different mechanisms or timelines. Phasing projects, deferring non-essential works, or using alternative funding tools can help ensure that upfront costs remain aligned with what is required to support project viability.
There are already examples of municipalities taking steps in this direction. In high-growth communities, development charges have been reduced by removing projects that are unlikely to proceed in the near term or that primarily benefit existing residents. These adjustments demonstrate that it is possible to maintain infrastructure investment while improving feasibility conditions for new development.
Why This Matters for Delivery
Housing, economic growth, and population expansion all depend on infrastructure being delivered in a coordinated and timely way. In high-growth regions, water and wastewater servicing has increasingly become a limiting factor, effectively setting the pace at which new housing can move forward.
When upfront costs continue to rise without improving delivery timelines, the gap between planning and construction widens. Projects stall, timelines extend, and system-wide uncertainty increases for builders, investors, and municipalities alike.
Development charges are one piece of a broader system, but they play a critical role in determining whether projects move forward. Aligning them more closely with near-term delivery outcomes helps ensure they support, rather than slow, the pace of growth.
For Further Information
For more on infrastructure delivery, development charges, and project feasibility, please refer to the Vaughan Chamber of Commerce 2025 Infrastructure Report: https://vaughanchamber.ca/wp-content/uploads/Vaughan-Chamber-of-Commerce-Infrastructure-Report-2025.pdf