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A new multi-level funding agreement between the federal and provincial governments, with participation from the City of Toronto, is poised to change how housing and transit projects move forward across Ontario. Announced today, the Canada–Ontario Partnership to Build would commit $8.8 billion over 10 years toward housing-enabling infrastructure, tied to reductions in municipal development charges and complemented by a full HST rebate on qualifying new homes. Alongside measures aimed at lowering construction costs and accelerating new supply, the agreement also advances several major transit priorities, including a long-awaited three-way funding commitment for the Waterfront East LRT.
A central component of the agreement targets development charges, which have become a significant contributor to rising housing costs. The federal and provincial governments would jointly allocate $8.8 billion toward infrastructure that supports growth, with funding prioritized for municipalities across Ontario that commit to lowering residential development charges by between 30% and 50%. These reductions would be required to remain in place for a minimum of three years, with participating municipalities expected to identify ready-to-build infrastructure projects that align with housing delivery targets.
Alongside these measures, the agreement introduces a temporary HST rebate program intended to lower purchase prices for new homes. For eligible buyers, the full 13% HST would be removed on homes valued up to $1 million, translating to a maximum benefit of $130,000. That full rebate would extend to homes priced up to $1.5 million, before phasing down on a sliding scale to $1.85 million. The program would apply to purchase agreements signed between April 1, 2026 and March 31, 2027, subject to enabling legislation. The measure is expected to deliver approximately $2.2 billion in tax relief.
Within Toronto, the most concrete outcome of the agreement is a long-anticipated funding commitment for the Waterfront East LRT, which would extend across the East Bayfront and Port Lands. While plans for the corridor have been in circulation for years, this marks the first time that all three levels of government have aligned on a cost-sharing framework to advance both planning and construction. Current estimates place the project at roughly $3 billion, with each of the federal, provincial, and municipal governments expected to contribute approximately one-third.
The line is intended to serve a rapidly growing section of the city’s waterfront, supporting more than 150,000 residents and accommodating over 50,000 daily trips. The corridor is also positioned for development, with projections indicating capacity for approximately 75,000 new homes.
The project would also extend the existing streetcar network east from its current terminus near Bay Street, requiring new surface and underground connections as part of Toronto’s waterfront transit system. As a result, the line would play a role in unlocking large-scale residential growth across the eastern waterfront.
Although funding commitments are now in place, the project remains in the planning phase, with detailed design and implementation timelines still to be finalized. The City of Toronto has already advanced preliminary design work.
Beyond the waterfront, the agreement signals a renewed focus on expanding regional rail service through the emerging GO 2.0 framework, though details remain limited. The initiative centres on increasing passenger service along freight-owned corridors across the Greater Golden Horseshoe, which includes corridors such as the Milton line, where service expansion is constrained by its ownership by a third party. The materials specifically reference the potential for new bypass tracks within the Milton corridor, pointing to possible approaches that could separate passenger and freight movements to increase service levels.
The materials also suggest a potential new line such as the midtown rail corridor could play a role in future GO service expansion, while also suggesting that the Alto high-speed rail initiative linking Toronto to Ottawa, Montreal, and Quebec City could share portions of new or upgraded infrastructure. A link for Alto to Pearson Airport is also mentioned.
The agreement also confirms continued coordination on a slate of previously announced transit projects across the Greater Toronto and Hamilton Area, with both governments aiming to finalize contribution agreements in the near term. These include the Ontario Line 3, Eglinton Line 5 West Extension, Danforth Line 2 Scarborough Subway Extension, Yonge Line 1 North Subway Extension, and Hamilton LRT, all of which remain central to the region’s broader transit expansion program. No new scope or timelines were introduced, but the commitment reinforces alignment on advancing projects already in the pipeline.
At the municipal level, the agreement builds on a series of measures already introduced by the City of Toronto to reduce costs and stimulate housing construction. More than $760 million has been committed toward development charge and fee relief, including exemptions for over 6,000 purpose-built rental units, a 15% property tax reduction for new multi-residential buildings, and the freezing and deferral of development charges on select projects. Additional changes, such as removing development charges on smaller-scale housing and ending conditional permit policies tied to charge rates, have aimed to improve project viability.
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