New federal-provincial initiative ties infrastructure funding to municipal reductions in development charges
OTTAWA — The Ontario government and the federal government have officially opened applications for a new multi-billion-dollar program aimed at reducing housing construction costs and accelerating homebuilding across the province.
The Development Charge Reduction Program (DCRP), announced Sunday, will provide up to $8.8 billion in federal and provincial infrastructure funding over the next decade to municipalities that significantly reduce development charges on residential construction projects.
The initiative forms part of the Canada-Ontario Partnership to Build, unveiled earlier this year, and is intended to lower upfront building costs while supporting municipalities with housing-enabling infrastructure investments.
Under the program, municipalities that reduce development charges by between 30 per cent and 50 per cent or more across all residential housing types — and maintain those reductions for at least three years — will be prioritized for funding.
Ontario Minister of Municipal Affairs and Housing Rob Flack said the program is designed to improve affordability and stimulate construction activity across the province.
“The Development Charge Reduction Program will make a life-changing difference for families in municipalities across Ontario by lowering the cost of new homes by tens of thousands of dollars,” said Rob Flack, Ontario’s Minister of Municipal Affairs and Housing. “Along with the HST relief announced in Ontario’s 2026 budget, this program will make homes across the province more affordable. I encourage municipal leaders across Ontario to work with us to reduce development charges so we can get more shovels in the ground and keep the dream of homeownership alive in Ontario.”
Infrastructure Funding Linked to Housing Growth
The DCRP will operate through a cost-matched funding structure between Ontario and the federal government. Ottawa’s share will flow through the federal Build Communities Strong Fund, a national infrastructure initiative launched earlier this year to accelerate major infrastructure projects and reduce development costs.
Applications opened June 1 and will close June 19, 2026.
Municipal applications will be assessed based on the scale of development charge reductions, the projected number of housing units expected to result from the relief measures, and the municipality’s own financial contribution toward projects.
The provincial government said municipalities will be required to contribute at least 10 per cent of project costs.
Housing-enabling infrastructure projects such as roads, water systems, wastewater facilities and transit upgrades will receive priority consideration, particularly where projects are expected to support significant residential development.
“Together, we’re building Ontario and Canada strong,” said the Honourable Gregor Robertson, Minister of Housing and Infrastructure and Minister responsible for Pacific Economic Development Canada. “This joint partnership with Ontario will speed up housing construction by lowering up front costs and investing in housing-enabling infrastructure projects – building strong, resilient communities that boost housing supply and drive economic opportunities.”
The announcement comes as governments across Canada continue to face mounting pressure to address housing affordability challenges, rising construction costs and supply shortages.
HST Relief and Housing Affordability Measures
The DCRP is being introduced alongside Ontario’s expanded HST relief measures for new homes, which provincial officials say could save homebuyers as much as $130,000 on the purchase price of a new home.
Ontario Finance Minister Peter Bethlenfalvy said the combined measures are intended to provide economic relief while encouraging new construction activity.
“With global economic and trade uncertainty continuing to put pressure on hardworking Ontarians, our government is delivering real relief by reducing the cost of building homes through the Development Charge Reduction Program” said Peter Bethlenfalvy, Ontario’s Minister of Finance. “With up to $8.8 billion in provincial and federal funding, this investment will speed up housing construction and improve affordability while also helping municipalities deliver critical housing-enabling infrastructure in our growing communities.”
The province also confirmed additional funding streams for rural, northern and smaller municipalities will be announced at a later date.
Municipal Leaders and Industry Groups Welcome Initiative
Municipal organizations and housing industry stakeholders broadly welcomed the program, though several emphasized the need for flexibility and continued collaboration between governments.
Robin Jones, President of the Association of Municipalities of Ontario, said municipalities view the funding as recognition of the critical role local governments play in managing growth and infrastructure demands.
“AMO welcomes infrastructure investments that support building more homes and creating more jobs. This significant funding recognizes the important role all levels of government play in achieving the growth that makes our communities, province and nation prosperous. Every community faces unique infrastructure and housing needs and municipalities look forward to partnering with the province on individualized funding agreements.”
Ottawa Mayor Mark Sutcliffe said the program would support the city’s efforts to accelerate residential construction.
“Ottawa is striving to be the most-housing friendly city in Canada. This new program from the Governments of Ontario and Canada will dramatically cut fees and make it easier to build thousands of new homes in our city.”
Housing developers and builders also praised the initiative, arguing that development charges have increasingly become a barrier to affordability and project viability.
Scott Andison, Chief Executive Officer of the Ontario Home Builders’ Association, said reducing development charges is critical to reviving stalled housing projects.
“OHBA strongly supports the Canada-Ontario commitment to reduce development charges and lower the cost of building new homes. We thank both levels of government for recognizing that reducing these charges is essential to improving new home affordability and restoring project viability.”
Focus on Long-Term Housing Supply
Ontario currently has more than 200 municipalities that levy development charges, according to provincial figures. Those fees are commonly used to fund infrastructure tied to growth, including roads, transit and utility services.
Industry groups said balancing infrastructure funding with affordability goals will be essential as Ontario attempts to increase housing supply in response to continued population growth and economic pressures.
The federal and provincial governments said the DCRP is intended to support both immediate construction activity and longer-term community growth while helping municipalities maintain essential infrastructure services.
Funding agreements under the program are expected to proceed through a bilateral arrangement between Ontario and the federal government under the Build Communities Strong Fund framework.