A building is demolished on Ontario St. in Toronto last week, on a site that will become two residential towers. The federal and Ontario governments plan to spend $8.8-billion to reduce development charges in a bid to revive the market.Fred Lum/The Globe and Mail
The federal government and Ontario are planning to spend $8.8-billion to reduce the province’s municipal real estate development charges by up to 50 per cent, offering another boost to home builders at a time when new home sales across the country have plunged.
The taxpayer funding is designed to allow municipalities to cut up to $200,000 in taxes and fees for a new home in Ontario, the governments said in a joint press release, marking the latest incentive designed to revive the homebuilding market.
Developers have long complained about the steady increase in development charges, which are fees municipalities require developers to pay to help cover the cost of providing infrastructure such as roads and sewage.
The development charges, along with higher borrowing and construction costs, have made it difficult for home builders to launch projects.
“Our government’s key investments in infrastructure and housing will help remove barriers to homebuilding and home ownership,” federal housing and infrastructure minister Gregor Robertson said in a press release.
This is the latest announcement to help save the home builders, who faced a drop in new construction home sales of more than 70 per cent in major municipalities like Toronto and Vancouver.
Last week, Ontario and the federal government said they would rebate the harmonized sales tax (HST) for most buyers of new-construction homes, creating a 13-per-cent discount for purchasers. That rebate would help individuals and corporations buy up thousands of new condo units that have been completed but remain unsold.
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The governments said the $8.8-billion in funding would support the reduction of municipal development charges by up to 50 per cent, and would remain in place for three years. The governments also said the funding would target municipalities covering 80 per cent of the population.
“This new infrastructure funding will offset much of the financial impact of development charge reductions on municipalities,” the governments said in the joint press release.
They said municipalities would also have to support development charge reductions. “Lowering these upfront costs will help accelerate construction and build more homes,” the press release said.