London faces budget bind as 2025 Development Charges fell well short of expectation

The city has seen a significant shortfall in development charge to cover infrastructure, as groundbreaking on new builds plummets. Daryl Newcombe explains.

Tough choices are coming at London city hall after Development Charge (DC) revenues fell well below the amount expected in 2025.

On Wednesday, the Infrastructure and Corporate Services Committee (ICSC) was told by the Deputy City Manager of Finance Supports that staff are working on a strategy to address a shortfall in fees that pay for growth-related infrastructure.

“We had more exemptions in 2025 than we had revenue from Development Charges that came in the door,” Anna Lisa Barbon explained to committee members.

Development Charges are fees paid to the municipality on new construction that covers growth-related infrastructure costs including new roads, sewers, firehalls, and library branches.

Total revenues in 2025 were roughly $40 million less than total disbursements from the city’s DC Reserve Funds.

Municipalities have few options to address deficits including dipping deeper into their reserve funds, delaying infrastructure projects, increasing debt, or turning to taxpayers.

The staff report warns, “While the use of DC supported debt is more prevalent than ever, the DC reserve funds are at a point where financial sustainability of the funds has become a significant concern.”

Former City Coun. Sandy Levin has been tracking the situation in recent years, “There’s a lot less revenue coming in for Development Charges compared to what was budgeted. There is a revenue shortfall for two reasons, the first is provincial exemptions, and the second is there’s been a lot less development activity.”

However, London’s development community is less concerned.

Mike Wallace, executive director of the London Development Institute (LDI), points to the city’s Growth Management Implementation Strategy (GMIS) that allows the city to delay projects when the pace of development slows or there are financial limitations.

“They put in the sewer, water, and roads just in time for a building permit,” Wallace explained. “So there is risk, but it’s manageable based on the GMIS program that the city has.”

But Levin warns about the longer-term consequences of delayed growth-related infrastructure investments.

“If you can’t put the pipes in the ground because you don’t have the money to pay for it, you don’t get the new housing,” he said.

Wallace says the development industry is already working with civic administration, “We’re at the table talking to staff about what projects we think are going to either move ahead or be delayed. And that can all be incorporated into when the infrastructure needs to be in place.”

Within London’s urban growth boundary, development charges on new construction range from $34,195 for row housing to $50,564 for single detached homes.

“We are supportive of the province looking at DCs as one of the affordability tools that need to be reduced so that people can actually afford to buy their first home,” said Wallace.

Levin is reminded of a commitment made to municipalities by Ontario’s previous Minister of Municipal Affairs and Housing that the cost of provincially-imposed exemptions to development charges would be fully reimbursed.

“You’ve got a provincial government that said a couple of years ago, don’t worry municipalities we’ll make you whole. Well, the hole has just gotten deeper and making cities whole has not happened!” said Levin.

In June, a staff report about the Growth Management Implementation Strategy will detail the impacts that the DC shortfall will have on upcoming infrastructure projects.