Reassessing the Case for Development Charges in Canadian Municipalities

“Growth should pay for growth.” This slogan — the common justification for development charges — is rarely challenged in municipal circles. Development charges evolved from post-1945 subdivision agreements and were initially accepted by most developers as a mechanism for enhancing the likelihood that current residents in a municipality would agree to new development. They now add as much as $135,000 to the cost of a new house in some parts of the Greater Toronto Area. If we wish to lower the cost of housing in our prosperous cities, we must consider reverting to the past practice of having municipalities pay for new infrastructure associated with development. Such a policy — still largely in place in metropolitan Montreal — would lead to increased levels of municipal borrowing and modest increases in property taxes. This report explores the origins of development charges in the United States and Canada, and examines how they have been assessed in the academic literature.