“Don’t tax what you want more of” they say. Yet, three-bedroom units remain one of the most difficult home types to deliver in the best market conditions, let alone today.

They are slower to sell, generate less revenue per square foot, and are disproportionately affected by uniform development charges. For most developers, they simply don’t make financial sense.

Yet municipalities continue to call for more family-sized housing in apartment buildings.

If that’s the goal, policy must align with market realities. Targeted reductions in development charges — like those implemented in Mississauga and Vaughan — are practical steps toward making these units viable.

Mississauga, Vaughan introduce targeted incentives

Mississauga became one of the first municipalities in Ontario to eliminate development charges on three-bedroom, purpose-built rental units and reduce them by 50 per cent across the board for all other housing types. According to Coun. Alvin Tedjo, this move was deliberate and urgent:

“We eliminated development charges on three-bedroom purpose-built rental units to incentivize the kind of housing we need — family-sized homes. It’s about making the numbers work again.”

Since launching the changes, the city has seen a noticeable uptick in applications — about 7,000 new units filed in the first quarter of 2025. Tedjo notes that while the policy is currently time-limited to the end of this council term (November 2026), the results will likely inform future council decisions:

“Collecting development charges on zero new builds doesn’t help anyone. We’d rather see new housing — even at a discount — because that grows the tax base and keeps the city moving forward.”

In November 2024, the City of Vaughan implemented significant reductions in development charges to stimulate residential construction and address housing affordability.

Key measures included:

• Rate rollback: Development charge rates for all residential development applications were reverted to the levels in effect on Sept. 21, 2018, and will remain at these rates until Nov. 19, 2029.
• Interest suspension: The city ceased charging development charge interest on residential developments, reducing financial burdens on developers.
• Policy introduction: A new Development Charges Rate Reduction and Deferral for Residential Development Policy was approved to further support housing projects.

 Connecting policy to outcomes

Development charges (DCs) were designed under the principle that “growth pays for growth” — that new development should cover the cost of the infrastructure it requires. But in practice, this model has broken down.

Worse, high DCs don’t guarantee new infrastructure is delivered quickly or efficiently. Municipalities often use DCs to cover backlogs or fund projects only loosely tied to the developments paying for them.

When development slows — as it has recently — DC revenue drops, leaving cities without the funds they counted on. In the end, charging high fees on housing that isn’t being built doesn’t generate revenue — it just delays or cancels much-needed supply.

Toronto and other major cities continue to grapple with how to keep families in the urban cores. Without affordable three-bedroom units, many families are pushed to suburban homes — not always by choice.

The result is more sprawl, more cars, and more pressure on infrastructure.

Waiving development charges for family-sized units gives the market a choice: it nudges developers to rethink the mix of units and gives end-users more options beyond small one-bedrooms or moving out of the city.

The Coalition Against New Taxes (CANT), a group of developers including Republic Developments' Matt Young, has been vocal about how government-imposed fees — like development charges — drive up housing costs: “Taxes have gone up more than any other cost in the pro forma of a project, but also is the easiest to adjust" Young states.  

CANT has argued that these charges account for up to 30 per cent of a new home’s price, directly impacting affordability. The coalition supports targeted fee reductions, particularly on units that are harder to deliver, such as three bedrooms, and has pledged to pass any savings from such policies directly to consumers.

The legal framework: What the province allows

According to municipal lawyer Alex Lusty, the current provincial framework already includes a modest discount:

“The Development Charges Act provides a 25 per cent reduction for three-bedroom purpose-built rental units across Ontario. But anything beyond that — like what Mississauga has done — is at the discretion of municipalities.”

Lusty points out the challenge of this patchwork approach:

“It’s great to see municipalities revisiting and reducing their charges. But relying on local discretion creates a patchwork that’s hard to navigate. If incentivizing family-sized housing is a provincial priority, the Development Charges Act should reflect that—uniformly and predictably.”

A direction worth scaling

Mississauga and Vaughan have shown what’s possible when policy meets market reality.

Reducing or eliminating development charges on three-bedroom units — particularly purpose-built rentals — is not a giveaway; it’s a strategic correction to a system that’s been pricing out the very housing cities say they want.

Toronto and other municipalities are at a crossroads: they can either continue to talk about family housing or take action to make it feasible.

The tools exist. The need is clear.

What’s missing is the political will to use them.