Senate Report Exposes Drastic Municipal Fee Disparities Across Canada
A newly released Senate report has uncovered staggering differences in municipal fees for new home construction across Canada, revealing a nearly $200,000 gap between Toronto and Atlantic Canadian cities that significantly impacts housing affordability and supply.
The $190,000 Divide: Toronto Versus Atlantic Canada
According to Out of Reach: Unlocking Canada's housing affordability crisis from the Standing Senate Committee on Banking, Commerce and the Economy, municipal fees embedded in a single-family home average approximately $200,000 in Toronto. In stark contrast, cities like Moncton and Charlottetown impose fees of less than $10,000 for comparable housing projects.
This dramatic discrepancy represents one of the most significant cost differentials in municipal charges nationwide, creating what housing experts describe as a structural barrier to affordable housing development in Canada's largest urban centers.
How Municipal Charges Impact Housing Markets
The Senate committee argues that these wide variations in municipal charges, combined with lengthy approval timelines and outdated federal tax policies, are artificially inflating home prices while simultaneously constraining housing supply in many of Canada's most expensive markets.
Housing economist Mike Moffat explains that these costs extend beyond simple price increases. "Those costs end up getting passed along to home buyers and renters," Moffat said. "If people are not able to afford that price, the home doesn't get built."
This creates a dual dynamic where municipal fees both raise final housing prices and reduce overall housing supply, particularly in markets where affordability is already stretched to its limits.
The Development Charge Dilemma
At the heart of this issue are development charges—specific levies imposed by municipalities to fund growth-related infrastructure and services. In Ontario, these charges cover a comprehensive range of necessities including:
- Road construction and maintenance
- Public transit expansion
- Water and sewage systems
- Emergency services infrastructure
- Parks and recreational facilities
While municipalities defend these charges as essential for funding infrastructure to support population growth, economists argue that builders have limited capacity to absorb such costs without jeopardizing project financing and viability.
Financial Constraints and Data Gaps
From an economic perspective, Moffat notes there is "only so low that margins on new housing can get before financial institutions refuse to lend developers money on projects." Since builders must demonstrate profitability to secure financing, these municipal costs ultimately transfer to home buyers and renters through higher prices.
However, measuring the precise extent of this cost pass-through remains challenging due to significant data limitations. "Canada has awful data when it comes to development charges," Moffat observed, noting that municipalities calculate and implement fees using different methodologies, making accurate comparisons difficult.
This lack of standardized data has forced policymakers to rely more on theoretical models than empirical evidence when assessing how municipal fees affect housing prices and supply dynamics.
Approval Delays Compound the Problem
The Senate report identifies approval delays as another major contributor to escalating housing costs. Depending on the municipality, development applications can require anywhere from five to thirty-one months for approval. In certain parts of the Greater Toronto Area, the complete development process—from initial consultations to finished homes—can extend up to eleven years.
These prolonged timelines introduce significant risk and additional costs for builders. Projects become substantially riskier when developers cannot predict whether approvals will be granted or under what specific conditions. The approval process itself generates direct financial consequences through:
- Legal and consulting fees
- Repeated design modifications and revisions
- Interest costs on land financing during extended waiting periods
- Administrative overhead for prolonged municipal engagement
These cumulative expenses pressure developers to pursue only projects with returns substantial enough to justify the uncertainty and extended timelines, further limiting the types of housing that get built in high-cost markets.
Regional Implications and Policy Considerations
The Senate findings highlight how municipal fee structures create fundamentally different housing market conditions across Canadian regions. While Atlantic Canadian cities maintain relatively modest development charges that support more affordable housing construction, major urban centers like Toronto face substantially higher barriers to new housing development.
This regional disparity raises important questions about how municipalities balance infrastructure funding needs with housing affordability goals, particularly as Canada continues to grapple with a nationwide housing crisis that affects both urban and rural communities.
