Reassessing the Case for Development Charges in Canadian Municipalities

“Growth should pay for growth.” This slogan—the common justification for development charges—is rarely challenged in municipal circles. The principle that those who cause new urban growth should pay for the infrastructure associated with it has generally been taken for granted, at least for the last few decades. Development charges evolved from post-1945 subdivision agreements and were initially accepted by most developers as a mechanism for enhancing the likelihood that current residents in a municipality would agree to new development. They now add as much as $90,000 to the cost of a new house in some parts of the Greater Toronto Area. If we are serious about attempting to lower the cost of housing in our prosperous cities, it is time to consider reverting to the past practice of having municipalities pay for the cost of new infrastructure associated with development. Such a policy—still largely in place in metropolitan Montreal—would lead to increased levels of municipal borrowing and modest increases in property taxes in some places. This report explores the origins of development charges in the United States and Canada, examines how they have been assessed in the academic literature, and looks at some of the alternatives as experienced in other countries. Prescriptions for future policy are cautious because other countries seem to be increasingly adopting similar charges and reducing them where they exist in Canada could lead to injustice for recent home buyers and other possible unintended consequences.https://ir.lib.uwo.ca/urbancentre-reports/1007/thumbnail.jp