Development Charges and Housing Affordability: A False Dichotomy?

Adam Found
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Adam Found: University of Toronto

No 56, IMFG Papers from University of Toronto, Institute on Municipal Finance and Governance

Abstract: With the release of More Homes, More Choice: Ontario’s Housing Supply Action Plan in 2019, the Province of Ontario embarked on a campaign to reduce barriers to housing supply in an effort to make housing in the province more affordable. Among the various barriers identified in the report are municipal development charges, which are one-time levies on property development. Over the past 30 years, Ontario’s municipalities have increasingly relied on development charges to recover growth-related capital costs as provincial grants for expansionary capital works have declined. At the same time, the development industry has strongly opposed development charges while academics and policymakers have focused considerable attention on these charges. Concern over development charges principally stems from their supposed negative impact on housing affordability. The literature, however, provides little in the way of sound theoretical foundations or robust empirical evidence for such an effect. The present study aims to address that gap by examining the connection between development charges and housing affordability in a municipal context. By considering the way in which municipal services are provided and financed, this paper shows that properly formulated development charges in fact improve housing affordability.

Keywords: development charges; housing; municipal finance; affordable housing; growth; impact fees (search for similar items in EconPapers)
JEL-codes: H21 H54 R11 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2021-11
New Economics Papers: this item is included in nep-ure
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