Quick answer: Development charges (DCs) are fees municipalities charge builders to pay for roads, water, transit and other services. On a new home in Ontario they can run to tens of thousands of dollars, and many builder agreements pass part of them, plus any increases, on to the buyer at closing.
The protection is a hard dollar cap on development charges, levies and education charges, written into your agreement before your cooling-off period ends. In 2026, governments are cutting DCs. Ottawa and Ontario announced an $8.8 billion deal to cut them in half for three years, and Toronto committed to 40–60% reductions between 2026 and 2029. Builders aren't required to pass those savings on, though, so ask.
Most pre-construction buyers have never heard of development charges until they see them on their statement of adjustments at closing. By then it's too late to negotiate. This guide explains what DCs are, how they reach you, what changed in 2026, and the exact clause to ask for.
What are development charges?
Development charges are one-time fees that Ontario municipalities, and sometimes regions and school boards, charge on new construction. They pay for the infrastructure new homes need: roads, water and sewer lines, transit, parks, libraries and fire stations. Each municipality sets its own rates in a DC bylaw, and the charge is usually set per unit, with different rates for detached homes, townhomes and apartments.
Builders pay DCs to the municipality. The question for you is how much of that cost the builder passes on, and whether it's already in your price.
How development charges reach the buyer
| How the agreement treats DCs | What it means for you |
|---|---|
| Included in the price, no pass-through | Best case. The builder absorbs the charges. |
| Included, but increases after signing are charged to the buyer | Common. Any rate increase between signing and closing lands on you. |
| Some levies charged separately (education, parkland, transit) | You pay these as adjustments at closing. |
| Capped at a fixed dollar amount | You know your maximum exposure on day one. |
| Uncapped pass-through | Highest risk. The amount is unknown until closing. |
Look for wording like "any increases in development charges, levies or education development charges after the date of this agreement shall be paid by the purchaser" in the schedules. That's a pass-through clause.
What changed in 2026?
- The $8.8 billion Canada–Ontario deal (March 30, 2026). The federal and Ontario governments announced $8.8 billion over ten years to help municipalities cut development charges roughly in half for three years. Municipalities opt in and receive funding to replace the lost revenue.
- Toronto signed on (June 23, 2026). The City of Toronto secured $1.5 billion and committed to reduce DCs by 40–60%, depending on unit type, between 2026 and 2029.
- Other municipalities. Many GTA and Ontario municipalities are signing similar agreements, but timing and amounts differ. Check your municipality's DC bylaw or ask the builder.
What it means for buyers: lower DCs reduce the builder's costs, and they can also reduce or eliminate DC increases passed through at closing. However, no rule requires builders to lower prices or pass savings on. If DCs have dropped in your municipality since a project launched, use that in negotiation.
The cap clause to ask for
Before your cooling-off period ends, ask your lawyer to confirm, or negotiate, a clause like this:
"Notwithstanding any other provision of this agreement, the total amount payable by the purchaser for development charges, education development charges, levies, and any increases thereto shall not exceed $X."
Make sure the cap:
- ☐ Is a fixed dollar amount, not a percentage or "reasonable" amount
- ☐ Covers all municipal, regional and education charges and levies, plus increases
- ☐ Is stated in the main agreement or a signed amendment, and overrides the schedules
- ☐ Applies through to final closing, including any delays
In a slow 2026 market, many builders offer capped or fully waived levies as an incentive. Ask for $0 first.
Example: capped vs uncapped
Illustrative only, for a freehold townhome.
| Capped at $10,000 | Uncapped pass-through | |
|---|---|---|
| Levies and increases passed on at closing | $10,000 maximum | Unknown until closing |
| Budget certainty | High | Low |
| Risk if rates rise during a 3-year build | None above the cap | All of it |
See every other cost to plan for in our pre-construction closing costs checklist.
Related reading: Ultimate Guide to Investing in Pre-Construction · Pre-Construction Legal FAQ · Ontario HST Rebate on New Homes
Frequently asked questions
Do buyers pay development charges on new homes in Ontario?
Builders pay them to the municipality, but many agreements pass part of the cost, or any increases, to the buyer at closing. Your agreement's schedules decide how much you pay.
What is a development charge cap?
A clause setting the maximum dollar amount of development charges, levies and education charges the builder can charge you at closing. Without one, the amount can be unlimited.
Are development charges being cut in 2026?
Yes. A March 2026 Canada–Ontario deal funds municipalities to cut DCs roughly in half for three years, and Toronto committed to 40–60% reductions between 2026 and 2029. Rates and timing vary by municipality.
Will DC cuts lower pre-construction prices?
Not automatically. Builders aren't required to pass the savings on. Use the cuts as leverage to negotiate a lower price, a lower cap or waived levies.
When should I negotiate the development charge cap?
Before you sign, or at the latest during your 10-day cooling-off period, with your lawyer. After that, the agreement is binding.
Do resale buyers pay development charges?
No. Development charges apply to new construction only.
About the author: Ola Otubu is a REALTOR® with Realty ONE Group Reveal, Real Estate Brokerage, and the founder of Buyprecon.ca. He represents buyers of new construction homes and condos across Ontario, from the first deposit through PDI, closing and warranty claims.
This article is general information, not legal advice. Development charge rates and reductions vary by municipality and can change. Have a real estate lawyer review your agreement. Sources: City of Toronto (June 23, 2026); Government of Canada and Government of Ontario announcement (March 30, 2026); Development Charges Act, 1997.
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