Unlocking the Local Levers: What Budget 2025 Really Means for Municipalities
Image Created by Ella Bilodeau (11 yo) representing the 2025 Federal Budget
Canada’s 2025 federal budget, branded Canada Strong, puts housing, infrastructure, and productivity at the centre of the national conversation. While most headlines focused on affordability and tax relief, the details tell a story that matters deeply to municipalities. Ottawa is beginning to reshape how housing, infrastructure, and industrial growth intersect, creating new delivery tools that depend on local governments to make projects happen.
Build Canada Homes: A New National Builder
One of the most significant structural changes is the creation of Build Canada Homes (BCH), a new federal agency with $13 billion over five years. Its goal is to double Canada’s housing construction rate (up to 430 000–480 000 units annually) by taking a more direct role in coordinating, financing, and enabling housing delivery.
BCH’s focus isn’t just private development. It’s designed to support:
Affordable, non-market, and mixed-income housing, including co-ops and supportive units.
Partnerships with municipalities, provinces, Indigenous governments, and the private and non-profit sectors.
Use of public lands for housing projects, including underutilized federal sites.
Modern construction methods such as modular and factory-built systems to speed up delivery and reduce costs.
Early initiatives include six federal sites that will deliver about 4,000 factory-built homes, with capacity for up to 45,000 units through the Canada Lands Company portfolio. BCH also launches two companion funds: a $1.5 billion Rental Protection Fund over five years to preserve existing affordable units, and $1 billion for transitional and supportive housing aimed at reducing homelessness.
A key element of BCH is streamlining regulatory approvals in partnership with municipalities. The federal government has been clear that housing delivery requires faster zoning amendments, quicker permitting, and integrated servicing approvals. Communities that already have pre-approved zoning, updated development charges, or delegated planning authority are likely to be prioritized for BCH partnerships.
For municipalities, “housing readiness” now includes both infrastructure and regulatory capacity; serviced land, transparent approval systems, and timelines that enable shovels in the ground.
Infrastructure Linking Housing and Servicing
Housing expansion depends on infrastructure, and the budget connects the two through the new Build Communities Strong Fund; a $51-billion program over ten years. This fund replaces several previous streams and consolidates them into three channels:
A Provincial/Territorial Stream for housing-enabling, health, and education infrastructure.
A Direct Delivery Stream, allowing municipalities to apply directly for regionally significant or retrofit projects.
A Community Stream, continuing the model of the Canada Community-Building Fund (formerly the Gas Tax Fund).
The intent is to align federal and municipal capital cycles so that housing projects and related servicing — roads, water, and wastewater — can advance together.
To reinforce this, Ottawa is adopting a capital budgeting framework similar to municipal practice, separating operating and capital spending and releasing budgets in the fall to match the spring construction season. This shift should improve predictability for local governments planning multi-year infrastructure pipelines.
The budget also signals support for digital permitting and approval systems, encouraging municipalities to adopt standardized, trackable processes for development approvals. Future funding calls are expected to reward communities with clear, transparent, and streamlined pathways to housing and infrastructure delivery.
Affordable and Non-Market Housing Measures
Budget 2025 adds a suite of complementary housing tools:
A GST elimination for first-time homebuyers, extending the national rebate to new homes up to $1 million, with a partial reduction up to $1.5 million.
An increase to the Canada Mortgage Bond issuance limit from $60 billion to $80 billion to expand financing for multi-unit projects.
Continued support for co-operative housing, with $423 million committed through 2028 to deliver thousands of new community-governed units.
Together, these measures strengthen the housing continuum, from supportive and transitional units to affordable rentals and first-time home ownership.
Indigenous and Northern Partnerships
Budget 2025 also directs significant investment toward Indigenous and northern communities, including $2.8 billion over seven years for Indigenous housing (urban, rural, and northern) and a $2.3 billion renewal of the First Nations Water and Wastewater Enhanced Program, which currently supports more than 800 active projects. The Canada Infrastructure Bank’s Indigenous infrastructure target has been raised to $3 billion.
For municipalities (particularly those with shared servicing agreements or growth pressures near First Nations) these measures highlight the importance of joint planning, infrastructure co-delivery, and intergovernmental partnerships.
Workforce and Skills Development
To support construction at scale, the budget adds $75 million over three years to the Union Training and Innovation Program, expanding apprenticeship and Red Seal trade training. This acknowledges that housing acceleration depends as much on workforce readiness as on land or financing.
Driving Local Growth and Industrial Productivity
Beyond housing, Budget 2025 introduces new incentives aimed at spurring private-sector investment and productivity, which could influence local economic and industrial activity.
The centre piece is the new Productivity Super-Deduction, allowing businesses to immediately deduct up to 100% of the cost of qualifying investments in machinery, equipment, and advanced technology. For municipalities, this could translate into increased demand for industrial land, servicing, and site plan activity, particularly in manufacturing, logistics, and clean-tech sectors.
These incentives are coupled with continued access to Clean Economy Investment Tax Credits, supporting renewable energy, hydrogen, nuclear, and grid modernization projects, all of which intersect with municipal planning and permitting.
Buy Canadian Policy & Procurement
Budget 2025 introduces a Buy Canadian Policy that directs federal procurement, and Crown corporations such as VIA Rail, to prioritize Canadian-made materials, products, and suppliers. Over $98 million is allocated to implement and monitor the policy, alongside a $79.9 million Small and Medium Business Procurement Program to help local companies access federal supply chains.
For municipalities, this may affect future infrastructure funding conditions where federal dollars are involved. Projects could be required to demonstrate domestic sourcing, union labour use, or compliance with Canadian content standards. Municipalities with strong local manufacturing and construction sectors stand to benefit most from these procurement preferences.
What This Means for Municipalities
For local governments, the 2025 budget reframes the federal-municipal relationship around several practical priorities:
Land readiness. Federal programs will favour communities that have identified and serviced sites for housing.
Streamlined approvals. Ottawa expects municipalities to modernize and expedite planning, zoning, and permitting systems.
Integrated planning. Housing and infrastructure are now formally linked — project pipelines should reflect both.
Delivery partnerships. Federal programs emphasize collaboration with Indigenous governments, housing providers, and non-profits.
Economic enablement. Tax incentives and procurement rules are designed to support domestic production and industrial investment, which could expand local job and assessment bases.
These changes don’t alter municipal authority but they do raise expectations for readiness and coordination. Municipalities that can combine regulatory efficiency, serviced land, and strong partnerships will be best positioned to leverage new federal programs.
The Takeaway
Budget 2025 connects housing, infrastructure, and productivity under one national framework. It introduces Build Canada Homes to coordinate housing delivery, aligns infrastructure funding with municipal capital cycles, encourages streamlined approvals, and links public investment to domestic supply chains.
For municipalities, the message is clear: success in this budget cycle will depend on speed, coordination, and local readiness, from zoning reform to procurement strategy. Federal programs are being built around those who can deliver quickly, transparently, and collaboratively.
