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Executive Summary
This report dives into how surging development charges, taxes, and related fees are reshaping Canada’s residential real estate landscape and eroding developer profit margins. Comparing fee structures across regions—such as Toronto’s steep levies and Calgary’s more balanced approach—shows that these rising costs are also contributing to Canada’s housing affordability crisis.
The impact on project viability, coupled with thin margins, means developers must be proactive: adopt innovative construction methods, explore emerging markets, and use advanced technologies like RYZ Solutions for operational efficiency.
Key Takeaways:1. Escalating Development Charges and TaxesDevelopment charges now account for up to 36% of new home costs in Ontario, significantly squeezing profit margins and undermining housing affordability—particularly in high-cost regions like the Greater Toronto Area and Vancouver. 2. Regional Disparities in Fee StructuresDevelopment charges vary widely across Canada, with cities like Vancouver, Toronto, and Markham imposing especially high per-unit costs. Meanwhile, locations such as Calgary, Edmonton, and select East Coast municipalities offer more developer-friendly fee schedules. 3. Threats to Project Viability and AffordabilityEven small market fluctuations (like a 5% drop in housing prices) can slash profit margins by nearly half, discouraging investment in mid-range and affordable housing. 4. Innovative Approaches to Offset CostsDevelopers are turning to phased payment structures, public-private partnerships, and advanced construction methods (e.g., off-site prefabrication) to mitigate skyrocketing DCs and other government fees. 5. Embracing Technology for EfficiencyPropTech solutions—including integrated platforms like RYZ—streamline sales, automate administrative tasks, and support real-time decision-making, offering a crucial edge in a high-cost, competitive market. |
Canada’s residential real estate sector faces unprecedented challenges as mounting development charges (DCs), taxes, and living costs reshape market dynamics. For instance, in Ontario, government taxes now make up as much as 36% of the price of a new home. Understanding these cost burdens is no longer optional for developers—it’s essential for survival and growth.
In this report, we’ll examine how a key cost factor—real estate DCs—has contributed to the lack of affordable housing for Canadians, particularly in Ontario. From municipal fees that vary by tens of thousands of dollars between cities to tax structures that disproportionately impact affordable housing initiatives, these cost pressures are forcing developers to rethink their approaches to project planning and execution.
We’ll also look at regional variations in DCs, tax impacts on affordable housing initiatives, and implications for project viability. Our goal is to help real estate developers understand how the situation became so dire and provide actionable insights for navigating these challenges while maintaining profitability and meeting market demands.
In the first part of this report, we’ll discuss how DCs contribute to the current housing crisis in Canada and look at the specific impact across regions before considering the impact on homeowners and developers. Then, we’ll look at strategies that developers can use going forward.
The Evolution of Real Estate Development Charges in Canada
The cost of building new homes across Canada varies significantly due to regional disparities in regulations, demographics, and market saturation. DCs are one of the largest contributors to increasing building costs and home prices in areas like Ontario and British Columbia.
Before we take a look at exactly how these fees are impacting Canadian developers and home buyers alike, we need to understand what DCs are and how they came to play such a big role in our real estate market.
Historical Context
DCs emerged from the challenges of post-World War II North America when, according to Urban Policy expert Andrew Sancton, housing demand surged, but municipal finances were still recovering from the Great Depression. Initially, municipalities used subdivision agreements as a practical solution, requiring developers to build and then transfer infrastructure within new subdivisions to municipal ownership. In other words, “growth should pay for growth.”
Ontario enshrined this approach with the Development Charges Act of 1997, which mandates fees on new developments to cover the cost of associated infrastructure like roads, sewers, and schools.
But as Sancton points out, the “growth pays for growth” mindset became a rarely challenged mantra in municipal circles, fundamentally shaping how cities have approached development financing.
The Current Crisis
Sancton argues that this mindset has contributed to Ontario’s unaffordability crisis, particularly in the Greater Toronto Area (GTA), in a number of ways:
Increased Housing Costs: DCs are typically passed on to buyers in the form of higher home prices, exacerbating affordability challenges.
Regressive Impact on Renters: As new home prices rise, so do rents, disproportionately affecting those who do not benefit from homeownership.
Misaligned Burden: The charges are often inequitable because they do not distinguish between the specific infrastructure needs of different developments, leading to a general increase in housing costs across the board.
Limited Alternatives: While reducing or eliminating DCs could alleviate housing costs, it might create financial strain for municipalities that rely on these charges to fund infrastructure.
So, while other metropolitan areas have largely maintained the traditional approach of municipal infrastructure funding, the DCs in Ontario and British Columbia have continued to skyrocket to this day.
DCs have seen exponential growth over the past decade, with Canada’s most populous city being a striking example. In Toronto, DCs have risen by 993% since 2010, far outpacing both inflation and housing price appreciation during the same period.
This dramatic escalation reflects a fundamental shift in how municipalities fund infrastructure and growth-related investments, moving far beyond the original intent of simply funding necessary infrastructure for new development.
Understanding the Total Cost Impact for Developers
To fully understand how much of a burden these charges put on developers and homeowners, let’s look at how construction costs, various government taxes, and developer charges impact the price of new builds.
Infrastructure Costs
The cost of constructing condominiums and apartments in Canada varies significantly across regions, driven by differences in materials markets, infrastructure needs, and construction conditions. As municipalities face increasing pressure to fund critical infrastructure projects, these costs are often passed on to developers through escalating DCs, compounding the financial burden on housing projects.
Altus Group’s 2024 Canadian Cost Guide provides a detailed breakdown of residential construction costs across the country.
The impact of infrastructure costs extends beyond construction. Developers in high-cost cities often prioritize high-margin luxury developments to offset significant up-front fees, reducing the availability of mid-range and affordable housing. Municipalities are left with fewer housing options to address diverse population needs, further exacerbating affordability challenges.
Developer Charges and Government Taxes
The total tax burden on new homes in Ontario now averages 36% of the final purchase price, making it a significant contributor to housing unaffordability. This burden includes various municipal fees, including DCs, permit fees, and other levies imposed on developers.
A 2024 report by the Canadian Centre for Economic Analysis (CANCEA) reveals how these components have escalated over time, with sharp increases in certain regions further intensifying the affordability crisis.
The rising burden of taxes and fees has significantly eroded developer margins, threatening the feasibility of new residential projects. The CANCEA report also revealed that average developer margins have declined from 14% to 10.7% in Ontario after accounting for all taxes and fees. This reduction highlights the growing financial strain on developers, particularly as fixed government fees and levies account for an increasing share of project costs.
Compounding this issue is the layering of fees and charges. Developers face not only municipal DCs but also land transfer and harmonized sales taxes, which are calculated as percentages of the final property value. This “tax-on-a-tax” structure significantly inflates the cost of new housing, as these fees are ultimately passed on to buyers.
Here is the current distribution of the government taxes on new Ontario homes according to CANCEA:
Income Tax: 8.1%
Corporate Taxes: 2.5%
Sales Taxes: 10.8%
Production Taxes: 12.3%
Transfer Taxes: 1.8%
To make matters worse, the cascading impact of these taxes alongside the uniform application of DCs—based on unit type rather than value or affordability—places a disproportionate burden on lower-cost developments.
Impact on Project Viability
A closer look at market dynamics reveals the fragility of these margins. A mere 5% drop in housing prices would slash developer margins by 40%, while a 10% price decline could almost eliminate them entirely. These thin margins heighten the risk for developers, particularly in volatile market conditions.
The consequences are especially severe for affordable housing development. For example, a $450,000 “affordable” unit in Toronto may face a tax burden approaching 45% of its price, leaving limited financial flexibility for developers to pursue such projects.
With profit margins already constrained, developers often find it financially unviable to invest in lower-cost housing units, which carry smaller returns. Instead, many developers pivot toward high-end properties that promise better profitability. This trend not only exacerbates housing affordability challenges but also skews the market away from diverse housing options that meet broader community needs.
To address these challenges, CANCEA urges policymakers to explore alternatives to the current fee structures, like:
Means-tested DC rates
Incentives for affordable housing projects
Intergovernmental partnerships to fund large-scale infrastructure projects
Without such measures, the layering of fees will continue to compound the cost burden on new developments, further intensifying Canada’s housing affordability crisis.
Regional Market Analysis—How Municipal Developer Charges Vary Across the Country
According to a 2022 Municipal Benchmarking Study from the Canadian Home Builder’s Association (CHBA) and the Altus Group, these developer charges vary not only in terms of absolute cost but also in how they are applied to different housing types, from single houses and subdivisions to low-rise and high-rise buildings.
Unsurprisingly, Vancouver ($125,542), Markham ($110,892), and Toronto ($99,894) led the country in terms of per-unit charges for high-rise buildings, while the GTA led the way for low-rises.
These regional differences have created distinct market dynamics across the country. In high-fee jurisdictions like the GTA, developers face mounting pressure on project viability, particularly for affordable housing initiatives. The impact is especially significant in Toronto’s suburbs, where DCs now make up a large portion of new home costs, affecting both market-rate and affordable housing projects.
Metropolitan Variations as of 2024
The CHBA report we looked at earlier revealed that metropolitan areas like the GTA and Vancouver—the two most populous areas of Canada—suffered the steepest developer charges. At the other end of the spectrum, cities in the Prairies and the East Coast had more developer-friendly fees. Now, a few years removed from that research, let’s explore the current state of developer charges in Canadian cities.
Toronto
As of 2024, DCs in Toronto continue to represent a significant cost component in residential construction. According to the rates introduced by the City of Toronto in June of 2024, developers need to pay the following for non-rental residential units:
Singles and Semi-Detached: $137,846
Multiples (2+ Bedrooms): $113,938
Multiples (1 Bedroom/Bachelor): $57,153
Apartments (2+ Bedrooms): $80,690
Apartments (1 Bedroom/Bachelor): $52,676
Dwelling Room: $37,356
The city has also implemented a different rate structure for rental developments, recognizing the distinct economics of purpose-built rental housing and the need to make these projects more affordable to incentivize developers. But despite these steps, these DCs contribute to an overall government tax and fee burden of 35.1% for Toronto, according to CANCEA.
Vancouver
Vancouver uses floor space ratio (FSR) as the foundation of its DCs system. FSR measures development density by calculating the ratio of a building’s total floor area to its lot size—for example, an FSR of 1.5 means the building’s total floor area is 1.5 times larger than the lot it sits on. This metric helps the city implement a progressive fee structure where denser developments, which typically place greater demands on city infrastructure and services, pay proportionally higher DCs.
As of September 30, 2024, the city has implemented a Development Cost Levies (DCLs) system with three distinct tiers:
City-wide Vancouver DCL: Applies to most of the city and funds affordable housing, parks, transportation, and childcare projects. Rates increase with density:
Lower density (below 1.2 FSR): $59.01/m² ($5.48/ft²)
Medium density (1.2–1.5 FSR): $126.98/m² ($11.80/ft²)
Higher density (above 1.5 FSR): $254.21/m² ($23.62/ft²)
City-wide Utilities DCL: Applied in addition to the Vancouver DCL, this levy specifically funds utilities infrastructure. Following the same FSR-based structure, rates range from $36.97/m² ($3.43/ft²) for low-density residential to $159.29/m² ($14.80/ft²) for higher-density developments.
Layered (Area-Specific) DCLs: Certain districts like False Creek Flats and Southeast False Creek have additional area-specific charges on top of the city-wide levies.
This situation is further complicated by regulatory burdens, lengthy approval processes, and excessive consultations. The region’s overreliance on taxing new development is leading to a “doom-loop,” where high taxes suppress economic activity, reducing revenue streams and necessitating further tax increases.
However, there is potential for reform. Vancouver’s global desirability as a place to live remains a key strength. Encouraging collaboration between developers and municipal governments could unlock solutions that support both housing affordability and long-term infrastructure sustainability, securing Vancouver’s future as a vibrant, livable city.
Calgary
Calgary has emerged as a notable example of a city that maintains a more balanced approach to real estate development costs than other major Canadian cities. While fees and charges have increased in recent years, Calgary’s cost structure remains relatively moderate, providing an environment conducive to growth while avoiding the extreme financial pressures seen in cities like Toronto and Vancouver.
According to the city’s 2025 fee schedule, new developments will be charged according to project scale and type:
Single Family/Small-Scale Development:
Basic additions under 10m² to manufactured homes: $182
Additions over 10m² to single/semi-detached/duplex dwellings: $1,247 (includes base fee, grades fee, DCP fee, and advertising fee)
New single detached, semi-detached, and duplex dwellings: $1,859 (complete fee package)
Multi-Residential Development:
Base fee of $795 plus $47 per unit for developments of three or more dwelling units
Additional fees may apply depending on whether the use is discretionary or requires relaxations
Development Completion Permit (DCP) fee of $233 applies
Calgary’s relatively affordable cost structure extends to infrastructure funding. Unlike cities that rely heavily on up-front DCs, Calgary has implemented a mix of funding strategies, including property taxes and targeted fees, which help mitigate the financial burden on developers. This model encourages investment in diverse housing types, including multi-residential developments and affordable housing projects, ensuring a steady supply of new units to meet demand.
Edmonton
Like Calgary, Edmonton’s real estate market is relatively friendly, with a fee structure designed to balance municipal revenue needs with affordability for developers. As outlined in the 2025 Planning and Development Fee Schedule, the city employs a comprehensive three-part fee structure for planning and development:
Land Development Applications | |
Rezoning Type | Fee |
Small-scale residential rezoning | $1,790 + $240 per hectare |
Medium-scale residential rezoning | $2,590 + $240 per hectare |
Large-scale commercial/mixed-use rezoning | $4,780 + $665 per hectare |
Development Permits | |
Development Type | Fee |
Residential | |
Basic home improvements (e.g., solar panels) | $100–$145 |
Single detached house | $615 base + $160 lot grading ($775 total) |
Multi-unit housing (up to 4 units) | $1,020 base + $490 inspection ($1,510 total) |
Additional units above 4 | $83 per unit + $64 for each ground-level unit |
Non-Residential & Mixed Use | |
Up to 500 m² gross floor area | $1,195 base + $490 lot grading ($1,685 total) |
Above 500 m² gross floor area | Additional $1.17 per m² of extra floor area |
Change-of-use permits | $410 for permitted uses; $535 for discretionary uses |
Building & Trade Permits | |
Building Type | Fee Calculation |
New residential (up to 6 storeys) | $185 per square foot |
High-rise residential (40+ storeys) | $235 per square foot |
Commercial/mixed-use projects | $11.45 per $1,000 (first $1M), then $10.27 per $1,000 thereafter |
Edmonton’s structure emphasizes graduated fees based on project scale and complexity, with higher charges for larger developments that place greater demands on city infrastructure and services.
Ottawa
The real estate market in Canada’s capital benefits from lower DCs than those in the GTA. According to the 2022 CHBA report, Ottawa historically sits in the middle of the road in terms of low- and high-rise DCs ($42,800 and $35,709).
Here are the DCs for the city of Ottawa as of the November 27, 2024, fee schedule:
Alongside the release of the fee schedule, the city has committed to trying to “balance financial incentives with the commensurate negative impact” that DCs have on the infrastructure projects Ottawa needs to accommodate growth.
Halifax
Halifax takes a “growth pays for growth” approach to infrastructure funding, using Regional Development Charges (RDCs) to ensure that the costs associated with urban growth are borne by new developments rather than existing ratepayers. The charges are structured to achieve a break-even outcome, ensuring no surplus or deficit at the end of the period.
As of April 1, 2024, the RDC rates are as follows:
Wastewater RDC:
Single-unit dwellings/townhouses: $6,126.84 per unit
Multiple-unit dwellings: $4,115.04 per unit
Industrial/commercial/institutional buildings: $30.24 per square meter
Water RDC:
Single-unit dwellings/townhouses: $1,921.82 per unit
Multiple-unit dwellings: $1,290.77 per unit
Industrial/commercial/institutional buildings: $9.49 per square meter
Typically, RDCs are adjusted annually based on changes to Halifax’s Consumer Price Index (CPI). However, following amendments to the HRM Charter by the Province of Nova Scotia in late 2023, fees and rates related to development, including RDCs, have been frozen until late 2025. Consequently, the RDCs will remain at their current levels during this period.
Suburban vs. Urban Impacts
DCs vary significantly between urban cores and suburban areas, even within the same metropolitan regions, reflecting differences in infrastructure requirements and municipal revenue strategies. These disparities not only influence the cost of housing but also shape where developers choose to invest, impacting the overall growth patterns of cities.
For instance, in the GTA, suburban Markham imposes DCs of $110,892 per unit—substantially higher than Toronto’s $99,894, despite their proximity. This difference stems from Markham’s focus on funding new infrastructure for greenfield developments, which often require extensive road networks, utilities, and community services to accommodate growth.
Conversely, Toronto’s charges are slightly lower, partly due to its emphasis on urban intensification, where existing infrastructure can often be upgraded rather than built from scratch.
These cost differentials create a complex dynamic for developers. While Toronto’s relatively lower charges might attract urban projects, high land costs and intensification challenges often limit affordability.
In contrast, developers in Markham face higher up-front fees but benefit from lower land costs, making suburban developments more financially viable. This trade-off can drive development toward suburban municipalities despite strong market demand for housing in urban centers.
Pickering, another suburban municipality in the GTA, illustrates the rising pressures in suburban markets. According to the CHBA’s 2022 report, DCs in the Ontario suburbs have increased by 47% from 2020 to 2022, driven by escalating infrastructure costs and population growth. These higher charges have reduced Pickering’s competitive position relative to other suburban areas, as developers weigh the financial implications of these fees against potential returns.
The implications of these disparities are far-reaching. High DCs in suburban areas can discourage developers from pursuing projects, exacerbating housing supply shortages and affordability challenges. Conversely, lower charges in urban areas may attract investment but strain existing infrastructure if upgrades are underfunded.
To address these issues, municipalities need to consider more balanced approaches, such as phased DC schedules or targeted incentives for specific types of development, to align infrastructure funding with housing needs across urban and suburban areas.
Market-Specific Challenges
Developers across Canada encounter a range of challenges that vary by municipality, influenced by factors such as approval timelines, land availability, and infrastructure capacity. Understanding these market-specific obstacles is crucial for assessing project viability and managing risks effectively.
Approval Timelines and Processes
Approval timelines and processes vary significantly across municipalities, directly impacting project viability. The CHBA report found that Ontario municipalities collected over $4 billion in annual DCs by 2022—a fourfold increase over 2010. But despite that windfall, cities had only completed about $2 billion worth of infrastructure projects funded by these charges.
Among all cities in Canada, Toronto has the longest estimated average approval timelines, with an average length of 32 months as of 2022. According to the Fraser Institute, the stacked municipal and provincial development fees, in addition to zoning bylaws, building codes, official plans, and design guidelines, are major drivers of the GTA backlog.
Land Availability and Local Opposition
Land availability and local opposition further complicate development efforts. Despite the availability of approved but unbuilt housing units in the Greater Toronto Area—6,000 in the Halton Region and 118,610 in Toronto—developers often face resistance from local communities and regulatory hurdles that delay construction.
Municipal restrictions on building infill and a lack of greenfield land contribute to speculation and hoarding of residential development land, driving up costs and limiting supply.
Development Charge Calculations and Financial Implications
The methods that municipalities use to calculate and collect DCs are also likely to fluctuate over time. For instance, public policy expert and Assistant Professor at Ivey Business School, Mike Moffatt, recently highlighted how Hamilton has changed its rate schedules 10 times since July 2020.
These escalating fees can strain developers’ financial resources, particularly in markets with high land costs and stringent regulatory requirements. The variability in fee structures across municipalities requires careful financial planning to ensure project feasibility.
While the current picture for developers in Ontario and cities like Vancouver is grim, some other areas of the country represent real growth opportunities for developers.
Growth Area Opportunities
A study from David Gundrum of Western University looking at 57 municipalities around Ontario found that 68% of them experienced population growth above the provincial average from 2016 to 2021. This is one potential explanation as to why fees in the province are among the highest in the country, and why it’s a more challenging environment for developers.
Emerging markets with relatively low DCs offer compelling opportunities for developers to invest in diverse housing projects while managing costs effectively. Cities like Edmonton ($6,599 per unit) and Regina ($3,959 per unit) provide attractive conditions for development, but the affordability of East Coast cities such as Moncton ($2,300 per unit) and St. John’s ($1,463 per unit) further amplifies the potential of these regions.
These lower fees enable developers to allocate resources toward a broader range of projects, including affordable housing and market-rate developments, while keeping costs manageable for homebuyers.
Low DCs as a Competitive Advantage: According to the CMHC, Calgary and Edmonton—two major cities on the lower end of the development fee spectrum—led the nation in housing and condominium starts in 2024.
Population Growth as a Driver of Demand: Edmonton and Regina have experienced steady growth driven by migration, economic diversification, and affordability compared with larger cities.
Opportunities for Affordable Housing and Market-Rate Projects: East Coast municipalities like St. John’s and Moncton make it financially viable for developers to build units priced within reach of middle- and lower-income households.
Cities with competitive development charge rates, coupled with rising demand and supportive municipal policies, are becoming more attractive alternatives to higher-cost metropolitan centers to Canadian buyers. Real estate developers have an opportunity to capitalize on these trends by investing in projects outside the traditional “hot spots.”
Cost Impact on Housing Affordability
So far, we’ve looked at how the rising cost of real estate construction has impacted developers. However, as experts like Andrew Sancton highlight, these charges are often passed down to the eventual homeowner. This is devastating for consumers who are already feeling the squeeze of inflation.
In 2024, 45% of Canadians reported that rising prices were greatly affecting their ability to meet day-to-day expenses, let alone consider purchasing real estate. Considering how the Canadian housing crisis is coinciding with this inflation-driven cost-of-living crisis, it’s worth taking a closer look at the cumulative impact of taxes and fees on buyers.
The Reality for First-Time Homebuyers
For first-time homebuyers in Canada’s major cities, the burden of DCs comes amid an already challenging financial landscape. Consider a dual-income family in Toronto interested in buying a $1 million home. The family's collective income is $140,000, giving it nearly twice the purchasing power of the median Canadian household. After federal and provincial taxes, this family brings home $9,071 monthly.
With a minimum 5% down payment and a 30-year amortization at current interest rates of 5.5%, the monthly mortgage payment alone is $5,394. Of that mortgage payment, $1,895 each month goes towards paying government taxes and fees, which make up 35.1% of the purchase price, according to CANCEA. Add in property taxes ($596), home insurance ($250), and utilities ($400), and basic housing costs total $6,640 monthly—73% of their monthly take-home pay.
The financial pressure becomes even more apparent when considering how other essential expenses, from grocery and transportation to healthcare, are also driven up by inflation. Even excluding any entertainment, dining out, or savings, their basic necessities total approximately $3,905—exceeding their remaining disposable income by $1,474 each month.
This mathematical reality illustrates how, even with a combined income well above the national median, ownership of an average-priced Toronto home remains out of reach. It also helps bring the impact that inflated DCs pass down to buyers.
The Shift to Condos and Regional Markets
The mounting costs are forcing many young families to make difficult choices about where and how to live. According to a 2024 National Bank Study, a typical Toronto house requires a household income of $243,078 to qualify for a mortgage—well out of the range of our example family and countless others.
A condominium in the city, on the other hand, requires an annual income of $164,860, a difference of nearly $80,000. This explains why the condominium segment shows a significantly lower mortgage payment burden (46.7% of income) compared with non-condo properties (80.6%).
However, even the “affordable” condo option remains challenging. In Toronto, the median condo price of $698,208 requires saving for 54 months (4.5 years) to accumulate a down payment, assuming a 10% savings rate. This extends to 91 months (7.6 years) in Hamilton and 66 months (5.5 years) in Vancouver for their respective condo markets.
As a result, many families are looking to more affordable markets. Cities like Edmonton, Calgary, and Winnipeg offer significantly better affordability. In these markets, a family with our example income of $140,000 could much more comfortably afford a home, with mortgage payments consuming roughly a third of their income rather than over half.
The trade-off becomes clear: Families can either opt for smaller living spaces in urban centers through condominiums, requiring long-term saving for down payments, or consider relocating to more affordable markets—potentially sacrificing proximity to employment centers and extended family networks.
When DCs raise costs in major urban centers, they affect the type of housing families can afford and influence fundamental decisions about where Canadians can build their lives.
Long-Term Implications
As DCs and other fees continue to rise, developers may retreat from high-cost areas, leading to reduced housing supply. This contraction could exacerbate existing shortages, driving prices up even further.
The focus on smaller, high-margin units driven by current tax and fee structures limits the availability of family-oriented housing. Over time, this trend could lead to a housing market dominated by units unsuitable for larger households, impacting community demographics and development patterns.
We’re already starting to see this play out—according to the CHBA’s Housing Marketing Index for Q3 2024, builders are nearing a record low in terms of sentiment toward building single-family homes.
Municipalities relying heavily on DCs for revenue face additional challenges. Overburdened infrastructure systems, coupled with stagnant or declining housing supply, create a negative feedback loop where high taxes discourage development, reducing revenue for infrastructure improvements.
Strategies and Solutions: How Developers Can Maintain Profitability
As DCs reach unprecedented levels, developers are looking for new strategies to navigate these financial pressures. By combining cost management, project optimization, technology integration, and innovative market positioning, developers are finding ways to sustain project viability and profitability while addressing housing affordability challenges.
Cost Management Approaches
The sharp increase in DCs in major cities means developers need to implement new financial strategies to mitigate risk without scaring away buyers. Here are some of the cost management approaches that developers are looking into to reduce the impact of DCs:
Phased payment structures: Aligning DC payments with key project milestones such as unit sales or occupancy. These deferrals reduce up-front financial burdens and improve cash flow, ensuring projects remain feasible even in high-cost markets.
Innovative financing methods: Developers increasingly rely on private equity, joint investment ventures, and alternative funding models to distribute financial risk. Additionally, some firms restructure development timelines to prioritize early revenue generation, phasing projects to build liquidity before significant fees come due.
Collaborative efforts with municipalities: Successful partnerships, like those in the GTA, demonstrate how fee reductions and tailored payment schedules can align municipal revenue needs with developer profitability.
Agreements that include commitments to affordable housing or sustainable infrastructure investments often result in mutually beneficial outcomes. Rather than waiting on elected officials to solve the issue, developers can actively participate.
For example, Toronto-based Segal Construction recently met with councillors from the Town of Greater Napanee, Ontario, to propose a partnership across municipal, provincial, and federal levels of government for funding more affordable residential housing. Although the matter was ultimately passed on to another level of government, owner Daniel Segal has stated his intent to “every municipality in Ontario” with his proposal.
Innovative Design and Construction Methods
With profit margins shrinking due to rising DCs, developers are rethinking project design and construction methodologies.
Advancements in construction technology, such as prefabricated housing, are reducing costs and timelines. By assembling units in controlled environments and transporting them to job sites, developers reduce construction times and material waste, with the potential for up to 20% cost savings. These methods streamline on-site labour and minimize waste, allowing developers to offset financial pressures without sacrificing construction quality.
Other adjustments developers can make during the construction processes to increase their margins include:
Investing in adaptive reuse projects that preserve and repurpose sections of existing structures
Selecting cost-effective building materials like cross-laminated timber and recycled concrete and steel
Adopting lean construction techniques like just-in-time delivery and integrated project delivery
Automated systems also help manage the intricate array of fees and charges, ensuring compliance across multiple jurisdictions and reducing the risk of costly delays.
Developers’ design strategies also reflect a shift toward affordability and efficiency. They are opting for smaller unit sizes with functional layouts that maximize livable space, while amenities are carefully curated to meet market demands. Cost-effective features like coworking spaces are prioritized over high-maintenance luxuries such as swimming pools, balancing buyer preferences with cost constraints.
Technology Integration
The current state of the Canadian real estate industry means builders can’t afford to stay stuck in the past. A new category of IT platforms designed to improve outcomes in the real estate industry, known as proptech, is particularly important for developers. These include:
Building information modelling (BIM) software that creates detailed 3D models that improve the efficiency of design and construction planning
Construction management platforms that centralize project scheduling, budgeting, and resource allocation
Drones and aerial imaging that provide high-resolution images for monitoring sites and tracking construction progress
Regulatory compliance tracking that helps developers stay in line with building and warranty regulations like Tarion
Aside from the construction itself, it’s also crucial that builders in high DC markets drive sales throughout the development process, including before shovels even hit the dirt.
Integrated management systems and platforms like RYZ Solutions provide end-to-end capabilities, from sales solutions to customer care and warranty. This helps developers centralize operations and automate repetitive tasks. These tools also offer real-time analytics that help developers make informed decisions about project timing, pricing, and phasing.
While marketing and sales enablement platforms may not immediately jump out as the top solutions for developers caught between a down market and ever-increasing DCs, these tools are having a major impact on top Canadian developers.
For instance, Madison Group, which recently announced a new project in Toronto with a world-renowned architect, uses Salesforce and RYZ Solutions to eliminate wasteful administrative processes while elevating the buyer experience.
Future Outlook and Developer Recommendations
As Canada grapples with significant development hurdles, the housing landscape faces both immediate challenges and long-term structural issues. These will shape development patterns over the next 10 to 15 years. This section examines emerging trends and offers actionable recommendations for navigating the evolving landscape.
Policy Trends and Regulatory Environment
A comprehensive transformation is underway in Canada’s housing policy landscape, combining provincial planning reforms with federal financing initiatives. The federal government has introduced several major initiatives to address housing supply challenges, including:
Financial Incentives for Builders |
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Construction Support Programs |
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Land and Infrastructure Programs |
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The provincial government with the most problematic housing market is also taking steps to reduce the red tape surrounding construction and increase approval times for much-needed housing.
In April 2024, Ontario introduced the Cutting Red Tape to Build More Homes Act to accelerate housing development. The act aims to remove key barriers to construction while maintaining essential oversight protections, including:
Development Charge Reform: Elimination of five-year phase-in periods for DCs and reduction of rate freeze periods from 24 to 18 months
“Use it or Lose it” Provisions: New mechanisms to address the approximately 70,000 approved but inactive housing units
Standardized Design Pathways: Introduction of standardized housing design exemptions from certain Planning Act requirements
At the local level, the Association of Municipalities of Ontario has also called for a closer relationship with the provincial government across the province to improve investment in infrastructure that can help Ontario meet the target of 1.5 million new homes by 2031.
Strategic Recommendations for Developers
Based on this comprehensive report on the factors contributing to the cost-of-development crisis in Canada, here are five key recommendations for real estate developers seeking a framework for maintaining profitability while contributing to housing supply in the coming years:
Collaborate with Municipal Governments: Establish strategic partnerships with local governments to negotiate fee deferrals, phase payments, and secure incentives for affordable housing components. This proactive approach can help streamline approvals and improve project economics.
Integrate Technology: Implement comprehensive proptech solutions, including BIM and automated Lead-to-Warranty systems, to optimize operations and reduce costs. Data-driven insights can identify inefficiencies and accelerate project delivery timelines.
Diversify Target Markets: Balance portfolio risk by targeting both established urban centers and emerging secondary markets with lower DCs. Adapt product offerings to local market conditions and demographic demands.
Use Innovative Construction Methods: Utilize prefabricated components and efficient design principles to reduce construction costs by up to 20%. Focus on functional layouts and targeted amenities that meet market demands while controlling expenses.
Embrace Financial Planning: Structure funding through diverse sources, including joint ventures and private equity partnerships. Maintain higher contingencies to protect against market volatility, especially in regions like Ontario, with higher DCs.
When implemented cohesively, these strategies can help developers maintain competitive advantage while building resilience against market fluctuations. Success in today’s market requires balancing innovation with risk management while remaining responsive to evolving policy landscapes and market conditions.
Improve Margins and Overcome Developer Charges with RYZ Solutions
Maintaining margins in the face of Canada’s rising cost-of-living crisis calls for adaptability, innovation, and strong partnerships. DCs, municipal taxes, and other fees may threaten profitability, but there are proven ways to navigate these challenges.
By leveraging cost-saving construction strategies, forging collaborative agreements with local governments, and using advanced technologies like RYZ to automate sales, marketing, and customer care, developers can safeguard margins and stay competitive.
Embrace new avenues, such as more affordable regions with lower DCs, or pivot to advanced financing methods that spread risk and maintain project momentum. These moves will help you manage the risk of fluctuating demand and keep operations lean while ensuring a high-quality experience for your buyers.
With the right approach, you can protect profits, meet market needs, and build homes that shape communities. Book a demo with RYZ and secure your future in Canadian real estate development.
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