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Development Charges and Housing Affordability: A False Dichotomy?

Author

Listed:
  • Adam Found

    (University of Toronto)

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.

Suggested Citation

  • Adam Found, 2021. "Development Charges and Housing Affordability: A False Dichotomy?," IMFG Papers 56, University of Toronto, Institute on Municipal Finance and Governance.
    • Handle: RePEc:mfg:wpaper:56
    as

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    References listed on IDEAS

    as
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    More about this item

    Keywords

    development charges; housing; municipal finance; affordable housing; growth; impact fees;
    All these keywords.

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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