A $200,000 difference in municipal fees separate the cost of building a single-family home in
Toronto
from one in Atlantic Canada — a disparity a new Senate report says is worsening
affordability
.
According to
Out of Reach: Unlocking Canada’s housing affordability crisis
, released this week by the Standing Senate Committee on Banking, Commerce and the Economy, the average level of municipal fees embedded in a single-family home in Toronto is roughly $200,000. In comparison, fees in Moncton and Charlottetown are less than $10,000.
The committee argues that wide variations in municipal charges, combined with lengthy approval timelines and outdated federal tax policy, are inflating
home prices
and constraining supply in many of Canada’s largest markets.
The costs do more than raise sticker prices.
Housing
economist Mike Moffat said they can also determine whether projects move ahead at all. “Those costs end up getting passed along to home buyers and renters,” he said. “If people are not able to afford that price, the home doesn’t get built.”
The result is a dynamic that both raises prices and lowers
housing supply
.
At the centre of the issue are development charges — levies imposed by municipalities to pay for growth-related infrastructure and services. In Ontario, development charges cover a wide range of services, from roads and transit to water systems and emergency services.
While municipalities argue the charges are needed to fund growth-related infrastructure, economists say builders have limited ability to absorb them without jeopardizing project financing.
From an economic standpoint, Moffat said there is “only so low that margins on new housing can get before financial institutions refuse to lend developers money on projects.” Because builders must demonstrate profitability to secure financing, he said, “those costs do end up getting eaten up by home buyers or renters.”
The precise extent of that pass-through is difficult to measure, however, in part because of gaps in data. “Canada has awful data when it comes to development charges,” Moffat said, noting that municipalities set fees in different ways, making comparisons difficult.
The lack of standardized data has left policymakers relying more on theory than evidence when assessing how fees affect prices and supply.
Approval delays are another major contributor to high housing costs, the Senate report found. Depending on the municipality, development applications can take anywhere from five to 31 months to be approved. In parts of the Greater Toronto Area, the full development process — from initial consultations to completed homes — can stretch as long as 11 years.
Long timelines increase both risk and cost for builders. Projects become riskier when developers don’t know whether approvals will be granted, or on what terms. The process itself also carries direct financial consequences. Legal work, repeated design changes and interest costs on land financing all add up, Moffat said, pushing developers to pursue only projects with returns high enough to justify the uncertainty.
While there is more tracking of approval times than development charges, the clearest impact is on costs. Shortening timelines would reduce those costs, Moffat said, and the savings would “flow through to renters and buyers,” even if the direct effect on total supply is harder to isolate.
To address affordability pressures, the Senate recommends expanding the federal GST/HST New Housing Rebate and indexing it to inflation. The current rebate applies only to homes valued at up to $350,000 and has not been updated since it was introduced in 1991, when most new homes qualified. In many urban markets today, new construction prices far exceed that threshold.
In the short term, expanding the rebate could have a measurable impact on the price of new homes. “In Ontario, assuming the province matched the change, it would reduce the price of a home by about 10 to 15 per cent,” Moffat said.
Over the longer term, however, the effect may be less straightforward. Without parallel supply-side reforms, he warned, there is “a legitimate concern” that the benefit could be absorbed elsewhere in the system. “If you don’t couple it with other supply changes,” he said, “over time, a lot of that benefit gets captured by landowners rather than buyers.”
When fees, taxes and approval timelines are considered together, no single factor stands out across all markets. “They both matter,” said Moffat, noting that the balance varies by city.
Still, he argued, approval delays may offer the clearest efficiency gains. Unlike development charges, which redistribute costs, lengthy approval processes impose costs on both builders and municipalities. “Approval timelines are often pure waste,” he said. “They cost everybody.”
• Email: shcampbell@postmedia.com