Carney and Ford Double Down on Ontario Housing Partnership

Prime Minister Mark Carney and Ontario Premier Doug Ford have put Canada's largest provincial housing market at the centre of the federal government's affordability agenda, committing a combined $8.8 billion over the next decade to cut municipal development charges in half and remove provincial sales tax from new homes priced under $1 million. The Carney-Ford partnership, announced late last month and detailed further in recent provincial and federal releases, represents one of the most ambitious intergovernmental housing packages in Canadian history.

The centrepiece of the package is a sharp temporary reduction in development charges, which Ontario municipalities levy on new residential construction to pay for growth-related infrastructure. The federal and provincial governments will together backfill municipal revenue losses so that local services are not cut as a result. Officials have said the reduced charges will take effect immediately in participating municipalities and will remain in place for three years, with a possible extension subject to further review.

The deal arrives at a critical moment for the Ontario housing market. Starts have been weak for much of 2025 despite strong demographic demand, and high development charges have been widely cited by builders as one of the primary cost drivers discouraging new construction. Ottawa and Queen's Park are betting that a temporary charge reduction, combined with harmonised tax relief for buyers, can unlock a construction surge in the window between now and the 2028 federal election.

What the deal includes

The development charge reduction applies to single-family, semi-detached, townhouse and low- and mid-rise condominium developments of specified unit sizes. Purpose-built rental apartments benefit from a separate and more generous federal tax rebate that was announced earlier in Carney's tenure. Municipalities must sign a participation agreement with the province to qualify for backfill funding, and all major Greater Toronto Area municipalities are expected to join.

The Harmonized Sales Tax is being removed entirely from new homes valued up to $1 million for purchases between April 1, 2026, and March 31, 2027. The measure is intended to help first-time buyers in the GTA and the Ottawa-Gatineau area, where price points regularly exceed the earlier federal tax rebate thresholds. Homes priced between $1 million and $1.5 million qualify for partial rebates on a sliding scale.

Each government will spend roughly $4.4 billion over ten years, with the federal share funded through Ottawa's national housing accord framework and the provincial share drawn from a combination of program spending and changes to the Municipal Land Transfer Tax rebate system. Final implementation details, including the formula for distributing backfill funds among municipalities, are being worked out through bilateral negotiations.

Ontario's land use and regulatory reforms

The deal is paired with provincial land use and regulatory reforms intended to accelerate project approvals. Queen's Park has committed to further standardising municipal zoning by-laws, expanding as-of-right approvals for missing middle housing types and narrowing the scope of site plan control for smaller developments. Ontario has also introduced new timelines for municipal decisions that tighten the window for approvals before applications are automatically deemed approved or escalated to the Ontario Land Tribunal.

Industry groups have broadly welcomed these changes, though some municipalities have raised concerns about their capacity to review plans within the new timelines. Toronto, Mississauga, Brampton and Ottawa are each hiring additional planning staff with provincial support, and the province is funding a centralised technical planning resource to assist smaller municipalities.

The reforms also include changes to the planning framework around transit stations, with higher permitted densities around major rapid transit and GO stations expected to produce tens of thousands of additional units in the Greater Toronto and Hamilton Area. Critics have raised concerns about neighbourhood character and infrastructure pressures, but provincial officials have argued that the changes align with urban planning best practice and will produce housing at scale.

Federal-provincial cooperation

The deal is notable politically because it represents an increasingly tight working relationship between Prime Minister Carney and Premier Ford, two leaders from different parties who have nonetheless found significant common ground on housing, trade and infrastructure. Ford has publicly endorsed Carney's hard line in trade negotiations with the United States and praised the federal government's response to the tariff dispute.

Carney, for his part, has leaned on Ontario partnerships to anchor his first-year housing agenda. The Ontario deal was preceded by a similar but smaller federal-provincial agreement with British Columbia, and follow-on deals with Quebec and Alberta are being negotiated, though the political dynamics in those provinces make the arithmetic more complicated. Federal officials have said that the framework developed in Ontario will be adapted to other provincial contexts rather than applied uniformly.

Ford's majority Progressive Conservative government at Queen's Park and Carney's federal Liberal majority have produced a moment of rare alignment between the two capitals. Political observers have noted that both governments have strong incentives to deliver measurable results on housing before their respective electoral calendars bring them back before voters.

Reaction from municipalities

Ontario mayors have responded cautiously to the deal. Toronto Mayor Olivia Chow praised the intergovernmental cooperation while emphasising that the backfill funding must be genuinely commensurate with lost municipal revenue. Chow has been among the most vocal critics of previous federal and provincial interventions in municipal housing finance, and her office has said it will watch the first year of implementation closely.

Mississauga Mayor Carolyn Parrish and Brampton Mayor Patrick Brown both welcomed the reduction in development charges, noting that high charges had been a sticking point in discussions with developers for some time. Both mayors emphasised that their municipalities need predictable infrastructure funding for water, transit and recreation to keep pace with accelerated population growth.

The Association of Municipalities of Ontario said it supports the general thrust of the agreement but is seeking clarity on how backfill payments will be calculated, what audit mechanisms will apply, and how the program will be evaluated. The association has also raised concerns about operating costs, which development charges do not cover but which will grow as housing completions accelerate.

What builders and buyers are saying

The Residential Construction Council of Ontario and the Greater Toronto Home Builders Association have welcomed the deal, calling it the most significant intervention on cost fundamentals in a decade. Builder representatives have said the combination of reduced development charges and HST rebates should be enough to restart several mid-rise projects that had been shelved as unaffordable in the current interest rate environment.

Affordable housing advocates have offered a more mixed response. Those focused on non-market supply have argued that the deal does not do enough to build the deeply affordable units that Ontario most needs, and have called for additional federal transfers earmarked for non-profit and cooperative housing providers. The Ontario Non-Profit Housing Association said it would continue to press for a complementary supply plan targeting households earning less than eighty per cent of area median income.

First-time buyers appear to be positioning for the HST window. Mortgage brokers report a noticeable uptick in pre-approval activity in April, and builders have begun to advertise the HST savings in sales centre marketing. Whether the deal produces a material shift in ownership affordability in the GTA will depend on how broader interest rate and job market conditions evolve.

What's next

The Canada Mortgage and Housing Corporation is expected to publish an updated starts forecast in late May that will reflect the impact of the Ontario deal. Early private-sector forecasts suggest a bounce in condominium and purpose-built rental starts in the Greater Toronto Area in the second half of 2026, though results in smaller cities may be slower to materialise.

Ottawa has signalled that it will pursue similar agreements with Alberta, Quebec and Saskatchewan, although political and fiscal differences make each negotiation distinct. The Quebec government under Premier Christine Frechette has expressed interest in a housing deal but has said any agreement must respect the province's existing tax and municipal framework.

For Ontarians, the test of the package will be whether it translates into measurable improvements in affordability. Ministers on both sides of the federal-provincial relationship have publicly committed to transparent reporting on starts, completions and affordability metrics over the next three years. The political and policy stakes are high, and the first data release in late spring will be closely watched by voters, builders and opposition parties alike.