$1B fund formed to help Ontario municipalities build infrastructure

Key Takeaways:

• The $1-billion fund ($500 million each from federal and provincial governments) specifically helps smaller, rural, and northern municipalities that don’t collect development charges from builders.
• Funding is designated to clear backlogs and build foundational public works—such as roads, bridges, and water/wastewater systems—that are required before new home construction can begin.
• The initiative falls under the $8.8-billion Canada-Ontario Partnership to Build, which combines infrastructure grants, development charge reductions, and HST relief to lower buyer costs by up to $200,000 in certain areas.

The Whole Story:

The federal and Ontario governments are launching a joint $1-billion fund to help smaller, rural, and northern municipalities build essential infrastructure like roads, bridges, and water systems to unlock new housing development.

The new Non-Development Charge Municipalities Stream (Non-DC Stream) targets towns and townships that do not levy development charges on builders. Because these local governments lack access to developer fees, they frequently face steep construction costs, aging infrastructure, and severe backlogs that stall new residential construction.

The funding split sees $500 million coming from Ontario through its provincial Municipal Housing Infrastructure Program (MHIP), and $500 million from the federal government via its Build Communities Strong Fund (BCSF), pending a final bilateral agreement.

“Across rural Ontario, building homes starts with reliable infrastructure, from sturdy bridges to roads built for tough Canadian winters,” said provincial Rural Affairs Minister Lisa Thompson in a statement. “For communities that do not collect development charges, this $1 billion stream delivers the targeted funding needed to clear backlogs, upgrade water systems and expand critical roads.”

Applications for eligible municipalities will open on Oct. 29, 2026.

The initiative falls under the broader $8.8-billion Canada-Ontario Partnership to Build announced earlier this year. Program officials note that when combined with existing development charge reductions and provincial HST relief on new homes, these combined policy measures aim to trim up to $200,000 off home purchases in certain regions.

Local government and industry advocates widely praised the funding. Municipal groups representing northern, rural, and small urban towns—including the Association of Municipalities of Ontario (AMO) and the Rural Ontario Municipal Association (ROMA)—noted that small communities often bear the burden of growth without the financial levers available to larger urban centers.

“This $1 billion investment is a significant win… None of NOMA’s 37 member municipalities collect development charges, yet they still face significant costs to build and renew roads, bridges, water systems, and other critical infrastructure,” said Rick Dumas, president of the Northwestern Ontario Municipal Association.

The home building and heavy construction sectors also welcomed the cash injection. Scott Andison, CEO of the Ontario Home Builders’ Association, said dedicated funding for non-DC municipalities recognizes “there is no one-size-fits-all approach to funding growth,” while road and sewer construction associations noted the funds are crucial to expanding capacity outside major urban cores.

Ontario previously expanded its Municipal Housing Infrastructure Program to $4 billion in August 2025. According to provincial figures, the program has supported approximately 800,000 new homes and protected 375,000 existing homes since its inception in 2024.