Hamilton Temporarily Cuts Development Charges by 20 Percent to Boost Residential Construction

Strategic Insights -

Hamilton city councillors have approved a temporary 20 percent cut to development charges (DCs), aiming to alleviate the struggling residential construction sector. Despite industry concerns that the reduction may not lead to lower housing prices, development charges will be reduced to help ease the financial burden on developers. However, there are concerns that the foregone revenue will be transferred to local taxpayers.

Key Takeaways:

  • The development charge for a single-detached home will decrease to $78,809 from $98,511, a 20 percent reduction.
  • The 20 percent reduction is expected to cost the city $9.6 million per year, an amount covered by funds set aside for exemptions in the 2025 budget.
  • The city collected an average of $102.8 million in development charges per year between 2019 and 2023, but this revenue has declined significantly due to flatlining residential construction.
  • Between 2019 and 2023, the city's residential construction sector had 3,347 housing starts in 2023, but this decreased to 1,481 in 2024, according to Canada Mortgage and Housing Corporation (CMHC) data.
  • Experts, including Steve Pomeroy from the Canadian Housing Evidence Collaborative, attribute the market slump to a "mismatch" in supply and demand, as well as cost and prices.
  • The residential construction industry has pushed for a 50 percent temporary cut in development charges, but city councillors voted 9-3 to approve a 20 percent reduction.

Statistics:

  • Development charge for a single-detached home: $78,809 (reduced from $98,511)
  • Expected annual cost of the 20 percent reduction: $9.6 million
  • Average annual development charge revenue (2019-2023): $102.8 million
  • Residential starts in Hamilton (2024): 1,481
  • Residential starts in Hamilton (2023): 3,347
  • Total development charge revenue in 2024: $57 million
  • Forecast total development charge revenue in 2025: $48 million

Sources:

  • "Hamilton will temporarily cut development charges by 20 per cent" by Teviah Moro, The Hamilton Spectator
  • Canada Mortgage and Housing Corporation (CMHC)
  • Canadian Housing Evidence Collaborative
  • Council report: "Development Charges - Temporary 20% Reduction"