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Construction workers oversee the Time and Space condominium project in Toronto’s Front Street East and Sherbourne Street neighbourhood on Oct. 11.Fred Lum/The Globe and Mail

A provincial government proposal to cut the fees municipalities can charge developers who build affordable housing could cost Toronto hundreds of millions of dollars a year, Mayor John Tory warned.

The newly re-elected mayor said Wednesday that the Ontario government’s move to cut development charges on lower-priced housing could be a good idea to encourage construction, but that the city can’t be made to bear the financial shortfall.

“If you think about it, it’s just not fair to go out and change a piece of legislation and … sort of say, well, it’ll get paid for by somebody else’s money,” Mr. Tory told reporters.

“Help us. Be partners, good partners with us and put up the money, or work with the [federal government] to put it up together. Because we just don’t have the ability to raise that money. We don’t have the tools to raise it.”

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Toronto’s development charges amount to tens of thousands of dollars a unit and are set to rise to as much as $137,000 for a new detached home under changes council passed earlier this year.

Such charges are earmarked for building the infrastructure associated with new development, on the long-standing principle that new growth should pay for itself. That infrastructure can include roads, sewers and transit.

On Tuesday, the Ontario government tabled legislation that would exempt affordable housing and non-profit housing units from development charges, park levies, and what are known as community benefit charges, which are used to fund some public amenities.

Building a second or third unit in an existing detached, semi-detached or rowhouse would also be exempt from fees. Rental construction would get a discount on development charges, rising to as much as 25 per cent for “family-sized” units.

The Association of Municipalities of Ontario warned that changing how development charges are levied may be at odds with the goal of getting housing built.

“Unless fully offset by funding to support growth-related projects, reductions in these fees will shift the financial burden of growth-related infrastructure onto existing municipal taxpayers,” the group said in a statement.

Ontario cities have few ways to raise substantial funds. Toronto has a tax on the sale of land, but for most cities in the province their only big sources of revenue are property taxes and development charges.

“Building homes is important, but so is the proper infrastructure to support them,” Mississauga Mayor Bonnie Crombie said in a statement.

“We want to be part of the solution; however, cities do not have unlimited resources – we run on property tax dollars. That’s why it’s so important that we be immediately reimbursed for any incentives offered to developers,” she said.

According to Mr. Tory’s office, the cost to the city of the province’s proposed changes is estimated by city staff to be approximately $200-million a year. Toronto has already been unable to keep up with its capital investment plan and is budgeting for the shortfall to balloon by billions over the next decade.

Asked about the budget shortfall the measure would create for municipalities, Minister of Municipal Affairs and Housing Steve Clark said in the legislature Wednesday the province hoped the federal government could assist through its $4-billion Housing Accelerator Fund.

But he also said cities were sitting on $8-billion in funds from development charges already collected. Toronto’s reserve he said, was $2.25-billion.

Mr. Tory dismissed this, noting that development charge monies are held in reserve until the specific infrastructure for which they were collected is built.

“We collect the development charge but we’re not necessarily building the sewer pipe or building the road or building the transit project that day,” he said.