CMHC Report Highlights Limitations of Cutting Development Fees for Housing Affordability
Cutting development fees alone won’t solve housing affordability, CMHC says
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A recent report by the Canada Mortgage and Housing Corporation (CMHC) indicates that merely reducing municipal development charges will not adequately resolve Canada's housing affordability crisis. While some cities may see an increase in viable housing projects, the overall impact remains insufficient to restore pre-pandemic affordability levels.
- 01Development charges are fees imposed by municipalities to fund infrastructure for new housing developments.
- 02The CMHC report suggests that cutting these fees alone won't solve the housing affordability crisis in Canada.
- 03Toronto could see a 10% increase in viable housing projects with a 90-100% reduction in development charges.
- 04Burnaby, B.C. might experience a 14% increase in viable projects with similar cuts, while Ottawa would see only a 3% increase.
- 05The report emphasizes that development fees play a role in municipal fiscal plans despite their limited impact on housing supply.
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The Canada Mortgage and Housing Corporation (CMHC) has released a report indicating that simply slashing municipal development charges will not be sufficient to address the housing affordability crisis in Canada. Development charges, which are fees levied by cities to fund infrastructure for new housing, are currently being targeted by the federal government, which is investing billions to encourage municipalities to reduce these fees by half. However, CMHC's chief economist, Mathieu Laberge, argues that while reducing or eliminating these charges may increase the number of viable housing projects, it is not a comprehensive solution. For instance, Toronto could see a more than 10% increase in viable projects with a 90-100% reduction in development charges, but this drops to about 5% with a 50-60% reduction. In contrast, Burnaby, B.C. could see a 14% increase, while Ottawa would experience only a 3% boost. Laberge stresses that development fees are still important for some cities' financial strategies, given their modest effect on overall housing supply.
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The findings suggest that while cutting development fees may lead to more housing projects, it will not sufficiently address the affordability crisis, affecting potential homebuyers across Canada.
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