Tax Cuts, Development Charges, and the Illusion of Housing Affordability
By Editorial Board
Richmond Hill Mayor David West is trying to walk a political tightrope.
In a recent statement, he voiced support for new homebuyer tax cuts—while also warning that development charges (DCs) remain essential to how cities fund infrastructure. It’s a careful balance, especially in an election year. On one hand, there is enormous public pressure to “do something” about housing affordability. On the other, municipal finances depend heavily on the very tools now under threat.
That tension captures the deeper problem: many of today’s housing policies are designed to look helpful, not to actually solve the issue.
The Politics of Demand-Side “Solutions”
There is no denying the frustration—especially among younger Canadians. Housing feels out of reach, and resentment is growing toward older homeowners whose property values have multiplied over decades.
Into that environment comes a familiar policy response: tax relief for buyers.
At first glance, a sales tax exemption—particularly for first-time buyers—sounds helpful. But if broadly applied, it quickly loses its effect. Increasing purchasing power without increasing supply simply pushes prices higher. This isn’t ideological; it’s basic economics. Add fuel to demand, and prices rise.
The uncomfortable question is whether policymakers misunderstand this—or whether they understand it perfectly well, but opt for visible, politically rewarding gestures instead of harder structural reforms.
Federal and Provincial Half-Measures
At the federal level, the creation of new housing bureaucracy and targeted tax exemptions has done little to fundamentally shift affordability. One notable exception is the Housing Accelerator Fund, which ties funding to municipal zoning reforms that allow more density. That is a step in the right direction.
But even that approach has limits.
Focusing on zoning alone assumes that if you legalize density, it will naturally follow. In reality, many upzoned areas remain unchanged because large developers don’t find the projects financially viable. As they often put it: “the math doesn’t work.”
At the provincial level, the record is no stronger. The Government of Ontario has faced criticism in recent years for policies seen as favouring large-scale developers, including attempts to open parts of the Greenbelt to development. Now, its focus appears to be shifting toward limiting or eliminating municipal development charges.
The Development Charge Dilemma
Mayor West is correct in principle: growth should pay for growth.
But in practice, it doesn’t.
Development charges help municipalities cover the upfront cost of infrastructure—roads, pipes, and services needed for new subdivisions. Without them, cities like Richmond Hill would face immediate fiscal strain. Council recently heard from an accounting consultant outlining just how severe that strain could become.
Yet even with DCs, the long-term math still fails.
Low-density, edge-of-town development creates infrastructure that is expensive to maintain and eventually replace. Property tax revenues from these areas rarely cover those lifecycle costs. When the bills come due decades later, municipalities are forced to approve more outward growth just to generate new revenue.
This is the growth Ponzi scheme: using new development to pay for the liabilities of past development.
It is not a sustainable system. And removing development charges does not fix it—it accelerates the underlying problem. Even if development charges are eliminated, it will almost certainly improve developer margins in today’s cooler housing market. But there is no guarantee those savings will be passed on to buyers—prices are set by what the market will bear, not by the cost savings developers receive.
A Different Path Forward
If both demand-side subsidies and growth-driven financing fall short, what works?
The Strong Towns approach starts with a simple principle: build where infrastructure already exists.
Instead of pushing growth outward, cities should focus inward—on incremental, small-scale intensification. But this requires shifting who gets to build.
Large developers are not interested in adding a duplex on a single lot or converting a home into a triplex. The margins are too small.
Local builders, however—homeowners, small contractors, “mom-and-pop” developers—are well positioned to do exactly this kind of work. The problem is that current systems make it too slow, too uncertain, and too expensive.
If municipalities want real change, they should:
- Make permitting fast and predictable for small projects
- Reduce regulatory friction for incremental density
- Explore financing tools beyond traditional long-term mortgages
Without these changes, even well-intentioned zoning reforms will produce little on-the-ground impact.
No Quick Fix
The housing crisis was not created overnight. It is the result of decades of policy choices around land use, transportation, financing, and taxation.
There is no single solution—and certainly no quick one.
But there is a clear distinction between policies that feel effective and those that are effective.
Tax cuts that inflate demand, or growth models that rely on ever-expanding suburbs, may offer short-term political wins. But they deepen the long-term problem.
If we want more affordable, resilient communities, we need to start making decisions that align with financial reality—even when they are less politically convenient.