Changes to the Development Charges Act, 1997 to Enhance Municipalities’ Ability to Invest in Housing-Enabling Infrastructure

In December 2023, the government committed to consulting on potential changes to the development charges (DC) framework to enhance municipal ability to build housing-enabling infrastructure.

The Ministry of Municipal Affairs and Housing (MMAH) has consulted on DC proposals with municipal and industry subject matter experts, including the Association of Municipalities of Ontario and the City of Toronto, and is now seeking to make legislative amendments to the Development Charges Act, 1997 (DCA) as part of the government’s Spring 2024 Red Tape Reduction (RTR) bill (the proposed Cutting Red Tape to Build More Homes Act).

The proposed initiatives would cut red tape and support municipalities to build more housing faster to reach the government’s goal of building at least 1.5 million homes by 2031. It would speed up the construction of housing and respond to stakeholder feedback. 

MMAH is proposing the following changes to the DCA:

1. Repeal the mandatory five-year phase-in of DC rates

The More Homes Built Faster Act, 2022, introduced the mandatory phase-in of DC rates over five years for DC by-laws passed on or after January 1, 2022. DCs are discounted by 20% in Year 1, 15% in Year 2, 10% in Year 3, and 5% in Year 4, with the full DC rate applying in Year 5. 

MMAH is proposing to repeal the mandatory phase-in of DC rates to enable municipalities to recover more of the costs to build critical infrastructure that is needed to service new homes through DCs. The proposed change would apply to DC by-laws passed since January 1, 2022.

For municipalities that passed DC by-laws on or after November 28, 2022, that expressly incorporated the phase-in of DC rates, the proposal would empower them to amend their DC by-laws through a time-limited streamlined process (e.g., no requirement to redo the background study). A municipality choosing to amend its DC by-laws for this purpose would have 6 months to pass such an amending by-law. Afterwards it would still need to give notice of the DC by-law amendment. This is to ensure equitable treatment of municipalities levying DCs that may or may not have been impacted by this Bill 23 measure. Further, it would enable municipalities to continue to exercise their discretion to phase-in DCs to ease the impact of high DC rates on new housing developments.

Further, this proposal would not impact those developments where planning applications have been submitted and the DC rates have been frozen (i.e., locked).

2. Reinstate studies as an eligible capital cost for DCs

The More Homes Built Faster Act, 2022 removed the cost of studies as an eligible capital cost that municipalities could recover through DCs and as part of its transition rules, it enabled municipalities to continue to collect DCs to recover the cost of studies until they passed a new DC by-law.​

It is proposed that the cost of studies be reinstated as an eligible DC capital cost to enable municipalities to fund these costs to plan for growth appropriately (i.e., infrastructure requirements and financial plans).                

Similar to the DC rates phase-in proposal, given that a subset of DC levying municipalities would have been impacted by this measure, for DC by-laws passed on and after November 28, 2022, this proposal would empower the municipalities to reinstate the cost of studies as part of their DC rates through a time-limited streamlined process. This would be the same process, outlined above, for by-law amendments to eliminate the mandatory phase-in of its DC rates. This would ensure that municipalities levying DCs are treated equitably.

3. Streamlined Process for Extending DC By-Laws

The More Homes Built Faster Act, 2022 amended the requirement to update and replace a DC by-law from at least once every 5 years to at least once every 10 years.

In order to support municipalities in implementing previous changes to the DC framework and continuing to invest in housing-enabling infrastructure, it is proposed that municipalities could extend their existing DC by-laws using a streamlined process. This streamlined process would cut red tape by enabling a municipality to extend their existing DC by-law without having to prepare a new background study and undertake most of the procedural requirements associated with passing a new or amended DC by-law, but not change the DC rates.

Municipalities seeking to update DC rates would be subject to the regular DC by-law process.

4. Reduce the time limit on the DC freeze

Through the More Homes, More Choice Act, 2019, DCs were set (i.e., frozen/locked) when a site plan application (or zoning application if no site plan application was made) is submitted to the municipality. Once the application is approved, a time limit of two years applies to the frozen DCs.  

The proposal is to reduce the timeframe of the DC freeze period from two years to 18 months in order to encourage developers to more quickly obtain a building permit and get shovels in the ground. This is because the frozen DC rates would  be guaranteed for 18 months only following approval of the relevant planning application instead of the 2 years under the current framework.

These proposed changes would cut red tape and help to incent more housing development across the province by enhancing municipalities’ ability to fund the critical housing-enabling infrastructure needed for Ontario to reach its goal of building at least 1.5 million homes by 2031.