Toronto is receiving up to $1.5 billion from the federal and provincial governments in recognition of its plan to cut development charges by 40 to 60 per cent for more than three years, according to a City of Toronto news release.
The funding, announced Monday by the city, the Province of Ontario and the Government of Canada, flows through the Development Charge Reduction Program, which was unveiled by the two senior governments on March 30. The program helps municipalities lower development charges while continuing to pay for the infrastructure needed to support growth.
The city worked with the province to identify eligible housing-enabling infrastructure projects and secured $1.5 billion over 10 years. The money will support projects already approved through Toronto's 10-Year Capital Plan, including investments in transit capacity, water and wastewater infrastructure and road network expansion.
Development charge cuts exceed program requirements
Because the funding reduces Toronto's reliance on development charge revenues to cover existing capital investments, the city will implement reductions of 40 to 60 per cent between 2026 and 2029, depending on the unit type. That exceeds the program's requirement of a 30 to 50 per cent cut.
The reductions are intended to lower development costs, improve project viability and increase housing supply across the city.
In March, the province and Ottawa agreed to a cost-matched structure providing a combined $8.8 billion over 10 years for infrastructure investments in Ontario, with Canada's share flowing through the Build Communities Strong Fund. Funding under the partnership is prioritized for municipalities that reduce development charges for all residential types by 30 to 50 per cent or more and hold those reductions for at least three years.
New phase of rental housing incentives
With the added financial certainty, the city is launching a new phase of its Purpose-Built Rental Housing Incentives Stream using its own resources. The program offers an indefinite deferral of development charges for projects that include a minimum of 20 per cent affordable housing, aimed at accelerating the delivery of new purpose-built rental homes.
The first phase, launched in fall 2024, supported more than 8,000 rental homes, including more than 2,000 affordable homes. The second phase will support up to 10,000 new rental homes, with a minimum of 2,000 affordable rental homes.
The city says it will prioritize shovel-ready projects, with applications reviewed and approved on a rolling basis in the coming weeks and months.
Part of broader effort to lower building costs
Since 2024, Toronto has taken multiple targeted actions to reduce the cost of development and support housing supply by improving project viability, including targeted development charge relief along with property tax and fee waivers. Together, those measures have amounted to $1.2 billion in financial contributions by the city as of the first quarter of 2026, the release said.
The announcement builds on those efforts, according to the city, further supporting increased housing supply while maintaining investment in critical infrastructure.
