CMHC just released data that puts a number on something buyers have felt for years. Development charges are making new homes expensive. Really expensive.

We're talking about fees ranging from $39,600 to $121,500 for a two-bedroom condo, depending on which city you're buying in. That adds somewhere between 8% and 16% to the price before you even get the keys.

For detached homes, the charges run from $125,000 to $180,600. Toronto hits the highest, with an average of $130,200 for condos and $180,600 for single-family homes.

And here's the thing. You're paying these charges whether you know it or not. They're baked into the purchase price.

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What Development Charges Actually Are

Development charges are municipal fees that developers pay when they build. The money goes toward infrastructure like roads, water systems, transit, parks, libraries, and emergency services. Basically, everything new development needs to function.

Cities charge these fees because growth costs money. New subdivisions need new water mains. New apartment buildings create demand for transit. More residents mean more parks and community centres.

The idea is that growth should pay for growth. New development funds the infrastructure it requires, rather than passing those costs to existing taxpayers.

That logic makes sense until you realize the charges have gotten so high that they're adding tens of thousands of dollars to homes in some markets. And developers don't eat those costs. They pass them on to buyers.

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The Numbers Are All Over the Map

CMHC looked at 30 municipalities across Ontario, BC, Alberta, and Quebec. What they found was massive variation.

In Ottawa, a two-bedroom condo faces about $39,600 in charges. In Markham, that same unit costs $121,500 in development fees. That's more than three times higher.

Single-family homes show similar gaps. Pickering charges around $125,000. Toronto charges $180,600.

Even within the same province, the differences are huge. In the Greater Toronto Area, highrise development charges are 15 to 16 times larger in Toronto than in Montreal. That's not a typo. Fifteen to sixteen times.

Part of this comes down to what cities prioritize. In Toronto and Ottawa, 50% of development charges go to transit and roads. In Langley, BC, and York Region in Ontario, water and sewage account for 45% of the charges.

But the variation also reflects different approaches to funding growth. Some cities lean heavily on development charges. Others rely more on property taxes or other revenue sources.

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Why This Matters More Than You Think

Development charges don't just add to the sticker price. They change what gets built and where.

High charges make smaller projects less viable. If you're a developer looking at a 10-unit multiplex, paying $50,000 per unit in development charges suddenly makes that project look a lot less attractive. You need bigger projects to absorb those fixed costs.

That's part of why we see so many highrise towers and so few mid-sized apartment buildings. The economics favor large developments over small ones.

Here's where it gets worse. Apartment buildings pay far more proportionally than single-family homes, according to Mike Moffat, founding director of the Missing Middle Initiative at the University of Ottawa.

"In general, apartment buildings pay far more in development charges than infrastructure that they use," Moffat told Global News. "For instance, a lot of apartments pay millions and millions of dollars in parks and library fees, but are put in neighbourhoods where parks and libraries already exist, no new ones are getting built. So a lot of those fees end up going to subsidize other parts of town."

This creates a weird situation where the most affordable housing type subsidizes infrastructure for less dense areas. It's backward.

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The Missing Middle Problem

In most of Canada, zoning laws create a stark choice. Single-family homes or highrise apartments. Not much in between.

Policy experts call this the "missing middle." Duplexes, triplexes, fourplexes, small apartment buildings. The kind of housing that would fit naturally into existing neighborhoods and provide more options at different price points.

Development charges make this worse. Building a fourplex in an established neighborhood might trigger charges for infrastructure that already exists. That same project might face the same per-unit fees as a larger building, making the economics tough.

Infrastructure costs scale with density, or at least they should. Spreading out housing across more land means longer water lines, more roads, more sewage pipes. Building denser housing in areas that already have infrastructure should cost less.

But development charges don't always reflect that. In some cases, they actively discourage the kind of gentle density that would help with affordability.

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What This Looks Like in Kelowna

Kelowna isn't immune to these issues. The city charges development cost charges that can reach $50,000 per home for certain projects, according to local developers.

Those charges, combined with high land costs, labor shortages, and rising interest rates, have contributed to a sharp drop in building permits. In 2023, Kelowna issued 242 residential building permits resulting in 1,379 homes. That's down 40% from the 2,253 homes permitted the year before.

Jonathan Friesen, CEO of Mission Group, one of Kelowna's major builders, told Kelowna Now that "development cost charges are too high and there's not enough labour and resources."

The city's Official Community Plan focuses on infill development rather than sprawling new subdivisions. That means highrises downtown, fourplexes and six-storey buildings in the core, carriage houses, and secondary suites. All good for density. But developers say it's still not enough, and the charges make even infill development challenging.

Kelowna collects development fees to offset infrastructure costs for roads, drainage, sewers, water mains, and parkland acquisition. The city's DCC program allocates costs between growth and the existing population, with the portion allocated to growth forming the basis of the rates.

The rationale is sound. Infrastructure costs should be paid by those who benefit. But when charges get high enough, they start choking off the very development they're meant to support.

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The Data Problem

One thing CMHC's report makes clear is how messy development charge data actually is. The agency set out to compare 55 municipalities but had to cut that down to 30 because some cities had fee structures so complicated they couldn't be analyzed.

Vancouver was one of them. The data was so messy it was unusable, according to CMHC chief economist Mathieu Laberge. Even with a team of 50 researchers working on the project, they couldn't make sense of Vancouver's system.

That's a problem. If researchers with full access to municipal data can't figure out what charges apply, how is anyone else supposed to compare costs between cities or understand what they're paying?

Laberge stressed the need for standardization. Without consistent ways to measure and report development charges, it's impossible to have informed discussions about what's reasonable.

"There's a common wisdom in the municipal world right now that growth pays for growth, but I think it's inequitable and it's building up a deficit and giving it to the next generation," Laberge told The Globe and Mail.

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The Equity Issue

Development charges create an interesting equity problem. New buyers pay for infrastructure that everyone uses. People who bought homes five years ago didn't pay those charges. People buying today do.

This puts an outsized burden on younger buyers and newcomers. They're funding parks, libraries, transit, and roads that benefit the entire city, not just new developments.

Laberge argues that cities have started relying on development charges for ongoing costs rather than specific projects. Things like wastewater systems, daycares, parks, and schools used to be funded differently. Now they're increasingly covered by charges on new development.

That shift means new buyers shoulder more of the municipal funding burden while existing residents pay less through property taxes. It's a transfer of costs from one group to another, disguised as user fees.

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Should Development Charges Be Cut?

Some experts say yes. Others caution against it.

Carolyn Whitzman, a housing researcher at the University of Toronto, told Global News that "development charges or development taxes need to be reduced, if not eliminated 100 per cent. But saying to municipalities, 'You can't do that anymore,' is probably not the most productive discussion."

The problem is that development charges have become a crucial part of how municipalities fund infrastructure. Cut them without replacing that revenue, and cities can't build the roads, water systems, and transit new development requires.

That's where federal and provincial governments come in. Programs like the Housing Accelerator Fund were designed to provide infrastructure funding to municipalities in exchange for zoning reforms and faster approvals.

The idea was to give cities alternative revenue sources so they could reduce reliance on development charges while still building the infrastructure growth demands.

Whether those programs work is another question. But the principle is sound. You can't just eliminate development charges without addressing the underlying funding gap.

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What Happens Next

CMHC's report doesn't offer solutions. It mostly highlights how big the problem is and how little data we've had until now.

But bringing attention to development charges matters. For years, these fees have operated in the background, quietly adding thousands to home prices without much scrutiny.

Now that the numbers are public, there's pressure to do something about it. Whether that's standardizing how charges are calculated, capping them, or finding alternative funding mechanisms remains to be seen.

For buyers in markets like Kelowna, the takeaway is simple. Development charges are a significant part of what you're paying for a new home. They're not going away anytime soon, and they vary wildly depending on where you buy.

Understanding that these charges exist and how much they add to the price helps you make better decisions. It also explains why some new developments seem expensive compared to resale homes. Part of that premium isn't the building itself. It's the municipal fees baked into the price.

If you're considering a new build in Kelowna or the surrounding area, knowing how development charges affect pricing gives you a clearer picture of what you're actually paying for and whether the premium is worth it compared to resale options. The team at Coldwell Banker Horizon Realty can help you navigate these differences and find the right property for your situation, whether that's a new build with all the latest features or an established home in a neighborhood you love.