Development charges are one of the few costs in a housing project that local government controls directly. They are also one of the hardest for builders to underwrite, because they're paid early, they've risen quickly, and they vary widely between municipalities. Ontario's new Development Charge Reduction Program (DCRP) tries to change that trade-off with money rather than mandates.
The basic deal
The program comes out of the Canada-Ontario Partnership to Build, announced on March 30, 2026. It offers up to $8.8 billion in federal and provincial capital funding over ten years for housing-enabling infrastructure. To qualify, a municipality has to cut its residential development charges.[1]
The key terms in the program guidelines:[1]
- Size of cut. Rates in effect on March 30, 2026 must fall by 30% to 50% or more.
- Scope. The cut has to apply to all residential development types across the whole municipality, including area-specific charges.
- Duration. The reduction must be maintained for three years.
- Cost-sharing. Municipalities fund at least 10% of each approved infrastructure project. The province and federal government cover the rest.
- Timing. Applications closed June 19, 2026. Transfer payment agreements had to be signed before August 15, 2026. Funded projects must start by July 31, 2030 and finish by October 31, 2035.
Municipalities could choose how to reach the target, either by cutting charges for some services or by applying the same percentage across all of them. Deeper cuts and bigger municipal contributions were eligible for more funding.[1] The province also extended eligibility to municipalities that had already cut charges before March 30.[1]
The first agreements
On August 26, the two governments announced the first large municipal agreements.
Vaughan will receive up to $697.2 million. In return it is cutting residential development charges by 50% from March 30, 2026 to March 31, 2029. For qualifying residential projects that meet specified construction milestones, it is eliminating charges altogether from February 25, 2026 to October 31, 2027.[2]
Hamilton will receive $572 million for eliminating development charges on all residential development from March 30, 2026 to March 31, 2029. The province estimates that removing the charges cuts the cost of a new home in Hamilton by up to $100,442.[3]
Toronto made a separate arrangement earlier. The federal government says it provided the City with $1.5 billion through the same partnership to cut residential development charges by 40% to 60%.[4]
What it means for rental pro formas
For purpose-built rental, development charges hit at the worst time: before construction, when the project is carrying land and soft costs with no income. A lower charge improves a project in three ways:
- Lower total cost. It reduces the amount that has to be financed or covered by equity.
- Less carry. A smaller upfront payment means less interest during construction and lease-up.
- Better feasibility at current rents. In markets where rents have flattened, a cost cut is one of the few levers that can make a marginal project work.
Many Ontario municipalities already offered rental-specific deferrals or discounts before this program, so the net change for a given rental project depends on what it was paying before. Underwriters will need to check each municipality's by-law rather than assume a headline percentage.
The three-year window
The reductions are temporary by design. For a rental project to benefit, the timing of its building permit relative to each municipality's window matters. The guidelines say municipalities must make sure developments that get permits after March 30, 2026 receive the benefit of the reductions.[1] Projects that slip past the end of a window could face the old rates.
That creates an incentive to move approved projects to permit quickly, which is the point. It also adds a new item to schedule risk: a delay that pushes a permit past a deadline now has a direct cost.
What it doesn't cover
The program is about municipal development charges. It doesn't, on its own, change other upfront costs such as education development charges, which school boards levy under separate rules, parkland requirements or permit fees. In two-tier regions, the lower-tier and upper-tier municipalities set their own charges, so a builder's total saving depends on what each level commits to.
The bigger question
The program asks municipalities to give up revenue now in exchange for infrastructure money over a decade. Its success will depend on two things that won't be clear for a while: whether lower charges actually bring forward housing starts within three years, and whether municipalities can fund growth-related infrastructure once the reductions expire. For builders, the near-term effect is simpler. In the municipalities that have signed on, one of the largest soft costs in a project just got smaller, for a limited time.
Sources
[1] Development Charge Reduction Program: Program Guidelines, Ontario Ministry of Municipal Affairs and Housing (June 1, 2026): https://www.ontario.ca/files/2026-06/mmah-dcrp-application-guidelines-and-faq-en-2026-06-01.pdf
[2] Ontario and Canada Making Homes More Affordable in Vaughan, Ontario Newsroom (Aug. 26, 2026): https://news.ontario.ca/en/release/1007939/ontario-and-canada-making-homes-more-affordable-in-vaughan
[3] Ontario and Canada Making Homes More Affordable in Hamilton, Ontario Newsroom (Aug. 26, 2026): https://news.ontario.ca/en/release/1007944/ontario_and_canada_making_homes_more_affordable_in_hamilton
[4] Government of Canada and City of Toronto partner to build thousands of new rental homes, Prime Minister of Canada (Aug. 5, 2026): https://www.pm.gc.ca/en/news/news-releases/2026/08/05/government-canada-and-city-toronto-build-thousands-new-rental-homes