City of Toronto Calls for an Increase in Development Charges

By Ridhima Pathak

Development Charges, Community Benefit Charges and Parkland Dedication Levies are some of the common adjustments that are associated with purchasing pre-construction homes. These charges represent fees collected by the city to recover the cost of growth and new infrastructure.[1]

Development Charges are calculated as of the date that a building permit is issued. The calculation takes into account the number of major growth projects in a city and divides this by the projected growth i.e. type of development, units, and space[2]. They are governed by the Development Charges Act 1997, which “requires that rates be established on a cost recovery basis to ensure that growth pays for growth”[3].

The builder is responsible for paying this fee to the city and will often pass on the fee to the purchaser as an adjustment on closing. During the negotiation stage of a pre-construction Agreement of Purchase and Sale, we recommend that all development charges be capped as these charges often amount to thousands of dollars.

By-Law 515-2018 is assessed every 5 years, and the proposed changes could come into effect as soon as next year. The City of Toronto is assessing their funding tools, and we can anticipate a new community benefit charges by-law as early as September 2022.

The City of Toronto has recently announced a 49% increase in development charges. To put this into perspective, a single and semi-detached home rises to $139,830 from $93,978. This means that developers will need to increase the purchase price as the recovery of costs will be become critical to build.[4]

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With the rise in construction costs, development charges and increasing mortgage rates, it seems that buying a pre-construction home will be harder than ever for first time home buyers.

For more information on pre-constructions purchases, please contact Ridhima Pathak at 365-509-2029 Ext. 103 or ridhima@sorbaralaw.com.