Federal-Provincial Infrastructure Funding for DC Reduction Model

Last week, the federal and provincial governments announced a new housing partnership that will directly affect how infrastructure is funded across Ontario. The agreement aims to encourage municipalities to reduce development charges (DCs) by 50% over the next three years in exchange for access to infrastructure funding from a shared $8.8 billion federal-provincial fund dedicated to housing-enabling projects.

Development charges have become a significant upfront cost for new land development. Lowering them is intended to unlock stalled projects, improve builder cash flow, and accelerate construction timelines. If successful, this approach should lead to more privately funded projects moving forward, increasing demand for municipal infrastructure construction.

However, this strategy carries some risk. DCs are a primary source of municipal funding for the infrastructure our members build. Federal and provincial governments are betting that increased private-sector activity will offset this reduction. The $8.8 billion fund is designed to help bridge the gap by supporting infrastructure expansion while compensating for some lost upfront revenue, though it will not fully replace it.

This represents a structural shift rather than a clearly positive or negative change for the municipal infrastructure sector. In the short term, it could stimulate construction activity and help restart much-needed housing development. Over the longer term, however, questions remain about how to sustainably fund the infrastructure required to support growth.

As this policy is implemented, the Association will focus on ensuring stable, predictable investment in infrastructure.

If you have any questions, please contact Patrick McManus (905-629-7766 or patrick.mcmanus@oswca.org)