How City of Toronto Development Charges Are Calculated
1. Introduction
Development charges are fees imposed by municipalities on new development projects to help pay for the infrastructure required to support growth.
In the City of Toronto, these charges are governed primarily by Ontario’s Development Charges Act, 1997, and are collected from developers during the building permit process.
The purpose of development charges is simple: growth should help pay for growth.
When new residential, commercial, industrial, or mixed-use developments are constructed, they increase demand for roads, transit, water systems, parks, fire services, libraries, and other municipal infrastructure.
Development charges help ensure existing taxpayers are not solely responsible for funding those expansions.
In Toronto, development charges can represent a significant portion of overall development costs and are carefully calculated using legislated formulas, long-term capital planning, and detailed population and employment growth forecasts.
2. Legislative Framework
The City of Toronto calculates development charges under the authority of the Ontario Development Charges Act.
This legislation establishes the rules municipalities must follow when determining eligible infrastructure costs and allocating those costs to future development.
Under the legislation, municipalities are required to complete a Development Charges Background Study before passing or updating a development charge by-law.
Toronto typically updates its by-law every five years.
The background study identifies:
- Anticipated population and employment growth
- Infrastructure required to service that growth
- The estimated cost of growth-related infrastructure
- The share of costs attributable to new development versus existing residents
- The calculated charge per unit or per square foot
The process is highly technical and includes public consultation, financial analysis, engineering studies, and legal review.
3. Growth Forecasting
The first major step in calculating development charges is forecasting future growth.
Toronto estimates how many new residents and jobs will be added over a specified planning horizon, usually 10 to 20 years.
The City analyzes factors such as:
- Population projections
- Immigration trends
- Housing demand
- Employment forecasts
- Official Plan growth targets
- Transit-oriented development areas
- Intensification policies
For example, if Toronto projects an increase of 250,000 residents and 150,000 jobs over the next decade, the City must determine what additional infrastructure will be required to accommodate that growth.
Growth forecasts are important because development charges can only recover costs associated with future growth, not existing deficiencies in infrastructure.
4. Identifying Eligible Capital Costs
After forecasting growth, Toronto identifies the infrastructure projects needed to service that growth.
Only certain types of infrastructure are eligible under provincial legislation.
Eligible services may include:
- Roads and bridges
- Transit infrastructure
- Water supply systems
- Wastewater and stormwater systems
- Fire protection services
- Police services
- Parks and recreation facilities
- Libraries
- Paramedic services
- Child care facilities in some cases
The City prepares a capital program outlining future infrastructure projects and their estimated costs.
For example, if a new community is expected to generate increased traffic, the City may identify road widening projects, traffic signal upgrades, and transit expansions as growth-related capital expenses.
Each project is reviewed to determine what percentage benefits future growth versus existing residents.
5. Allocating Growth-Related Costs
One of the most important steps in the calculation is determining the “growth-related share” of each infrastructure project.
Municipal infrastructure often benefits both current and future residents.
Under the legislation, Toronto can only recover the portion directly related to future development.
For example:
A road widening project costing $100 million may only be 40% attributable to future growth.
In that case, only $40 million could potentially be funded through development charges.
The remaining $60 million would need to be funded through taxes, utility rates, grants, or other municipal revenues.
This allocation process involves engineering analysis, traffic studies, service capacity reviews, and population modeling.
Toronto also applies mandatory statutory deductions where required under provincial law.
6. Service Standards and Historical Levels
The Development Charges Act requires municipalities to consider historical service levels when calculating certain development charges.
Toronto examines historical averages for services such as:
- Parkland
- Recreation facilities
- Libraries
- Fire stations
The City cannot simply overbuild infrastructure and charge all costs to developers.
Instead, the legislation limits charges to levels that are consistent with historic service standards over a prescribed period.
For example, if Toronto historically provided 2 hectares of parkland per 1,000 residents, development charge calculations for future parks must generally align with that benchmark.
This prevents municipalities from using development charges to fund excessive or unrelated infrastructure expansion.
7. Calculating the Charge Per Unit
Once eligible growth-related costs are identified, Toronto divides those costs across projected future development.
Residential charges are typically calculated by housing type, including:
- Apartments
- Condominiums
- Townhouses
- Semi-detached homes
- Single detached homes
Commercial and industrial charges are usually calculated on a per-square-foot basis.
For example:
If total recoverable residential infrastructure costs equal $10 billion and the City projects 200,000 new residential units. The average infrastructure cost allocation may equal $50,000 per unit
Different unit types pay different amounts because they generate different levels of service demand. Larger homes typically carry higher development charges than smaller apartment units.
Toronto may also apply geographic distinctions where infrastructure costs vary between areas.
8. Timing of Payment
Development charges are generally payable when a building permit is issued.
However, certain developments may qualify for deferred payment programs or exemptions under provincial legislation.
Common exemptions or discounts may apply to:
- Affordable housing projects
- Non-profit housing developments
- Industrial expansions
- Institutional developments
- Certain rental housing projects
Toronto may also provide incentives for transit-oriented development or purpose-built rental construction.
Interest may apply to deferred charges depending on the type of development and applicable legislation.
9. Additional Charges Beyond Development Charges
Development charges are only one component of total municipal development costs in Toronto.
Developers may also be required to pay:
- Parkland dedication fees
- Community benefits charges
- Application and planning fees
- Building permit fees
- Engineering review fees
- Education development charges in some areas
These additional costs can substantially increase the overall cost of development projects.
As a result, development charges are often discussed in relation to housing affordability because they form part of the total cost passed on to purchasers or tenants.
10. Conclusion
The City of Toronto calculates development charges through a detailed and legislated process designed to allocate growth-related infrastructure costs fairly among new developments.
The calculation involves forecasting future growth, identifying necessary infrastructure projects, determining which costs are growth-related, and distributing those costs across projected development.
The process balances several competing objectives: supporting municipal infrastructure expansion, protecting existing taxpayers, encouraging responsible growth, and complying with provincial legislation.
Because Toronto continues to experience strong population growth and intensification, development charges remain one of the most important funding tools used by the City to finance roads, transit, utilities, emergency services, parks, and community infrastructure needed for future residents and businesses.
