Hamilton Councillors Approve 20% Cut in Development Charges to Stimulate Stalled Construction Sector

Strategic Insights -

Hamilton's city councillors have agreed to a 20% reduction in development charges to help revitalize the city's troubled housing construction sector, which has been severely impacted by high construction costs, higher interest rates, and the ongoing tariff war. The decision was met with mixed reactions from local builders, with the West End Home Builders' Association calling for a 50% reduction and warning that measures from all three levels of government are needed to stimulate the industry.

Key Takeaways:

  • The 20% reduction in development charges is expected to cost the city $9.6 million per year, an amount that staff believe can be covered by funds set aside for exemptions in the city's 2025 budget.
  • The measure is expected to reduce the charge for a single-detached home to $78,809 from $98,511, but critics argue that it may not be enough to stimulate construction.
  • Local builders are calling for a 50% reduction in development charges, arguing that the 20% reduction will not cover the delta between what it costs to build and market prices.
  • The city will not know how the discount is used, including whether it goes toward lower prices for purchasers, raising concerns among some councillors.
  • Experts from the Canadian Housing Evidence Collaborative point to a supply/demand mismatch, a price and cost mismatch, and weak demand due to unaffordable new home prices as key factors contributing to the housing crisis.
  • Rental construction has picked up, but much of what's being built is not affordable, highlighting the need for more government intervention to expand Canada's nonmarket sector, which represents about four per cent of all housing.

Statistics:

  • Hamilton collected an average of $102.8 million in development charges per year between 2019 and 2023.
  • Revenue from development charges plummeted last year, with $57,207,234 collected in 2024 and a forecast of $48,061,176 for 2025.
  • The city has seen a sharp decline in housing starts, from 3,347 in 2023 to 1,481 in 2024, according to Canada Mortgage and Housing Corporation (CMHC) data.
  • The 20% reduction in development charges is expected to reduce the charge for a single-detached home to $78,809 from $98,511.

Sources:

  • The article cites the following sources:

+ An initial 5-2 vote in Hamilton city council

+ A presentation by Steve Pomeroy and Jim Dunn of the Canadian Housing Evidence Collaborative

+ Data from Canada Mortgage and Housing Corporation (CMHC)

+ The West End Home Builders' Association

+ The Canadian Housing Evidence Collaborative

+ The Hamilton Community Foundation

+ The Hamilton Spectator