A development charge is a fee paid by developers and builders to fund local growth-related infrastructure. Development charges take some of these growth-related costs off the property tax base, and instead charge those who directly trigger the spending.
A better way
Calgary has started to increase development charges for new homes, aiming to end a subsidy that adds up to $4,800 for each new home and an annual cost of $33 million for the city.
- Used exclusively to fund capital costs related to growth
- Charges can be structured to encourage sustainable growth through intensification, discouraging costly urban sprawl
- Some municipalities plan to increase development charges to better cover the full cost of growth
How does it work?
Development charges (also called capital cost charges, infrastructure charges or offsite levies) are collected as part of the approval process for a new development. They can apply to many different kinds of developments – residential, commercial, industrial and institutional. They are typically levied to cover some or all of the growth-related infrastructure costs resulting from the new development, such as water and sewage services, roads, street lights, parks, community facilities and libraries.
These charges help ensure developers, rather than existing taxpayers, pay for the infrastructure costs triggered by development. In addition, development charges are increasingly being used to support planning goals by providing incentives (and disincentives) for certain types of development and growth.
Who uses it now?
All provinces allow municipalities to levy some form of development charge. The rules surrounding how the charges are structured, and what costs they can cover, vary from province to province.
In Canada, development charges often don’t cover the full cost of infrastructure expansion that’s needed to service new developments. This leaves property tax revenues to make up the difference. Many municipalities are increasing their development charges to account for the full cost of growth, or altering how they charge to encourage certain types of development.
For example, Toronto recently increased development charges by 70 per cent to take into account $3.2 billion in expected growth-related costs. Vancouver’s charges include costs associated with expanded child care demand and replacement of affordable housing units lost by development. The town of Ajax, Ontario is one of many communities that has discounted development charges in its core to encourage intensification and build a more robust local property tax base over the long term.