How a builder decides what to pay for your Toronto lot
This guide explains, from the owner's side, how a builder works out what to pay for a Toronto house lot. A builder starts with the homes the zoning would allow, then subtracts what it costs to get them built, and the amount left over is what it can pay for the land. The guide lists the public costs a builder counts, with their 2026 figures, shows why two builders can offer different prices for the same lot, and suggests how to compare offers. Each figure comes from a City of Toronto or Ontario source read on November 1, 2026.
Written by Anthony Palleschi · Updated November 1, 2026 · 7 min read
Key takeaways
- A builder works backward: the value of the finished homes, minus every cost, leaves what it can pay for your land.
- The zoning sets the starting number. Four-unit multiplexes are allowed city-wide, and more homes on some lots.
- In 2026 the building permit fee for new homes is $18.56 per square metre plus $56.33 for each new unit.
- The second to fourth unit of a multiplex pays no City development charge, and the fifth and sixth are reduced to $0.
- Approvals, tenants and timing all add cost or risk, and builders price them differently.
- Ask each builder what the offer assumes, so you can compare offers on the same terms.
Why a builder prices land differently
When a family makes an offer, they compare your house with other houses for sale. A builder is buying the right to put new homes on your land, and it works out a price from those homes. Knowing how that sum works helps you read an offer, ask better questions and compare one builder with another.
This guide stays with the method and the public costs. It gives no land values, because each lot is different and the figures change with the market. For a value on your own property, ask an appraiser. For the tax effects of a sale, ask your accountant. Every rule and fee below comes from a City of Toronto or Ontario source that I read on November 1, 2026.
How does a builder work backward to a land price?
A builder starts at the end of the project and works back to today. The steps are the same for a fourplex or a small apartment building.
- Count the homes the lot could hold under the zoning, and the floor area of each.
- Estimate what those homes would sell for, or what they would earn as rentals.
- Subtract the cost to design and build them.
- Subtract the City and provincial charges, permits and fees.
- Subtract the cost of borrowing money during the months of approvals and building.
- Subtract the sales, legal and other project costs.
- Subtract the profit the builder needs to take the risk.
- What is left is the most the builder can pay for the land.
The amount left at step 8 is called the residual land value. "Residual" means what remains. An offer often arrives as one number with no workings shown, and this sum is how a builder reaches it. The feasibility guide for builders shows the same test from the builder's side.
Three points follow from the method. First, the land price moves with every other number: higher building costs or a longer approval mean a lower offer, and more homes allowed means a higher one. Second, the builder's profit sits in the sum as a cost, so every builder needs a margin to proceed. Third, two builders using the same method can still end with different prices, because their inputs differ.
What does a builder count first?
The first input is the number of homes, and that comes from the zoning. The City's Multiplex Housing page, modified August 26, 2026, says four-unit multiplexes are permitted city-wide and that six-unit permissions vary by location. The multiplex zoning guide sets out where six are allowed. Your zone label can carry a "u" number, which clause 10.5.1.10(3) of By-law 569-2013 says is the most homes allowed on the lot.
A lot that abuts a Major Street can hold more. By-law 1062-2025, which the Ontario Land Tribunal ordered on September 11, 2025, allows an apartment building on such a lot to hold the greater of 60 homes or the lot's "u" number. It allows a height of the greater of 19.0 metres or the Height Overlay figure, and the greater of six storeys or the overlay figure. A builder planning a building that size starts from a larger count than one planning a fourplex, although many of those sites need more than one lot. The guide to selling with your neighbours covers that case.
Frontage and depth come next, because they decide whether the homes the zoning allows will fit. The lot check guide explains how the by-law measures both.
Which public costs does a builder subtract?
Some costs are fixed by public rules, so you can read them yourself. The table lists the ones a builder counts on a small project in Toronto, with the date of each figure.
| Cost | What the rule says | Source and date |
|---|---|---|
| Building permit fee | $18.56 per square metre of floor area, plus $56.33 for each new unit | Toronto Building, fees effective January 1, 2026 |
| City development charges on a multiplex | Units 2 to 4 exempt; units 5 and 6 reduced to $0, where the parcel holds no more than 6 units | Municipal Code section 415-6, consolidated to July 30, 2026 |
| When development charges are paid | Before occupancy, on non-rental homes, since November 3, 2025 | City development charges page, modified November 14, 2025 |
| Lot split at the Committee of Adjustment | $8,080.65 to sever one lot into two, plus $6,561.48 for each added lot | City fee schedule, effective January 1, 2026 |
| Minor variance | $5,011.08 for a new home with three units or less | City fee schedule, effective January 1, 2026 |
| Ontario land transfer tax | 0.5% to 2.0% by bracket; 2.5% above $2,000,000 where the land holds one or two single family homes | Ontario page updated April 22, 2026 |
The development charge rules matter on a multiplex. Section 415-6 of the Municipal Code exempts the second, third and fourth unit from City development charges, and reduces the fifth and sixth to $0, where the parcel holds no more than six units. The first unit can still pay. The development charges guide gives the rate sheet and the credit for a house that is torn down.
Land transfer tax is a cost of buying, and the builder pays it. Ontario's tax runs from 0.5% to 2.0% by bracket, with 2.5% on the amount over $2,000,000 where the land holds one or two single family homes. Toronto charges its own Municipal Land Transfer Tax, at rates in force since April 1, 2026, that rise to 4.40% and more above $3,000,000 for land with one or two single family homes. A builder counts both before it decides what to offer you.
Design, construction, borrowing and sales costs are the builder's own. They change from builder to builder and from month to month, so this guide does not put numbers on them.
Why do two builders offer different prices?
Offers on one lot can differ. The method above shows why. Each builder fills in the steps with its own plan and its own costs.
- One builder plans a fourplex, another a sixplex in an area that allows it, and a third a garden suite behind a renovated house.
- Some builders sell the homes when they are finished. Others keep them as rentals. The two plans put different values at step 2.
- Builders pay different prices for materials and trades, and borrow money at different rates.
- A builder that already owns the lot next door may plan a larger project than one that does not.
- Some builders accept the risk of a City approval and pay for it in the price. Others make the approval a condition and pay more only if it is granted.
- Some builders need a quick closing. Others want a long one, so they can finish approvals before they pay.
Each of these choices changes the price, the conditions and the closing date together, so the price alone tells you little.
How time and risk enter the price
Time costs a builder money, because borrowed money charges interest every month. A project that needs a lot split or a minor variance waits for a Committee of Adjustment hearing, and a builder adds that wait to its costs. A severance is a split of one lot into two legal lots, and a minor variance is a small exception to the zoning rules; the Committee of Adjustment guide explains both. A builder counts both the fees and the months of waiting.
Tenants add time too. If the house is rented and the builder wants it empty to demolish, subsection 50(2) of Ontario's Residential Tenancies Act requires a notice of at least 120 days. Section 52 requires compensation of one month's rent, or another unit the tenant accepts, in a building of fewer than five units. Who gives the notice, and when, is a question for your lawyer and the purchase agreement.
A builder also prices the chance that the City says no, or approves a smaller building. Some builders lower the price to cover that risk. Others make the offer depend on the approval, which moves the risk to the timeline. The guide to builder offers covers how those conditions work.
How to compare offers on the same terms
Builders work from what they know about your lot. If one builder has a survey and another does not, their offers start from different facts. Give every builder the same information: the survey, the zone label, any exception, and the facts about any tenants. Then ask each one the same questions.
| Ask about | Why it matters |
|---|---|
| How many homes the offer assumes | Shows whether the builders are pricing the same project |
| Which approvals the plan needs | A plan that needs approvals carries more time and risk |
| Whether the price depends on those approvals | Decides who carries the risk of a refusal |
| The deposit and when it is paid | Shows what you keep if the deal ends |
| The closing date | A later date can mean a higher price with a longer wait |
| Whether the builder can assign the agreement | Decides who you may end up dealing with |
RECO's Information Guide says a seller's agent can vet offers and buyers to make sure they can afford to buy your property. When I present a lot, I give each builder the same facts and compare the offers with the owner line by line. The final review of the terms belongs to your lawyer and your accountant.
Questions to ask before you accept a price
- How many homes does this builder think my lot can hold, and why?
- Which costs and approvals did the builder count?
- Would the price change if the City approved a smaller building?
- What would an appraiser say the land is worth?
- What do my lawyer and accountant say about the terms and the timing?
The For Sellers page shows how I present a lot to builders, and my post on Missing Middle Housing explains the home types builders plan. If you want a review of your lot before you talk price, use the contact page. What could your lot hold, and what would a builder have to spend to get there?
Frequently asked questions
Can a builder pay more for my lot than a family would?
A builder can pay more for your lot than a family would when the lot can hold several homes, because the builder prices the homes it could build there. The City of Toronto's Multiplex Housing page says four-unit multiplexes are permitted city-wide. On a lot that suits one, a builder may pay for four homes' worth of land. On a lot that does not, it may pay less.
How does a builder work out what to pay for a Toronto lot?
A builder works out what to pay for a Toronto lot by starting with what the finished homes would be worth and subtracting every cost of building them, including its own profit. What is left is the most it can pay for the land. Public costs are part of that sum, such as Toronto's 2026 building permit fee of $18.56 per square metre plus $56.33 per new unit.
What does residual land value mean when selling to a builder?
Residual land value means the amount left for the land after a builder takes the value of the finished homes and subtracts the costs and profit of the project. When selling to a builder, it is the sum behind the offer you receive. One input is fixed by the City: Municipal Code section 415-6 exempts the second to fourth unit of a multiplex from development charges.
Why did two builders offer different prices for my lot?
Two builders can offer different prices for your lot because they plan different buildings, carry different costs and take different risks on approvals and timing. On a lot that abuts a Major Street, By-law 1062-2025 allows an apartment building of the greater of 60 homes or the lot's u number. A builder planning that pays from a different starting number than one planning a fourplex.
Does the u number in my zone label change what a builder pays?
The u number in your zone label can change what a builder pays, because it sets the most homes allowed on the lot. Clause 10.5.1.10(3) of Toronto Zoning By-law 569-2013 says the letter u with a number gives the permitted maximum number of dwelling units on a lot. More homes allowed usually means more land value, if the other rules let them fit.
Do City development charges lower what a builder pays for my lot?
City development charges can lower what a builder pays for your lot, because the builder counts them as a cost. On a multiplex, Toronto Municipal Code section 415-6, consolidated to July 30, 2026, exempts the second, third and fourth unit and reduces the fifth and sixth to $0, where the parcel holds no more than six units. The first unit can still pay.
Does land transfer tax change what a builder offers for my lot?
Land transfer tax can change what a builder offers for your lot, because the builder pays it and counts it as a cost of buying. Ontario's rates, updated April 22, 2026, run from 0.5% to 2.0% by bracket, with 2.5% on the amount over $2,000,000 where the land holds one or two single family homes. Toronto adds its own Municipal Land Transfer Tax.
Do Committee of Adjustment fees affect a builder's offer on my lot?
Committee of Adjustment fees can affect a builder's offer on your lot when the project needs a lot split or an exception to the zoning. From January 1, 2026, the City's fee to sever one lot into two is $8,080.65, and a minor variance for a new home of three units or less is $5,011.08. A builder adds those fees and the waiting time to its costs.
Does a tenant in my house affect what a builder will pay?
A tenant in your house can affect what a builder will pay, because ending a tenancy for demolition takes time and money. Ontario's Residential Tenancies Act requires at least 120 days' notice in subsection 50(2), and section 52 requires one month's rent, or another unit the tenant accepts, in a building of fewer than five units. Ask your lawyer who gives the notice.
Should I get an appraisal before I sell my lot to a builder?
An appraisal before you sell your lot to a builder gives you an independent opinion of value from someone outside the sale. RECO's Information Guide lists arranging and attending appraisals among the services an agent can provide to a seller. Ask the appraiser to look at the land as a building site as well as the house, since a builder prices both.
How do I compare offers from builders for my Toronto lot?
You compare offers from builders for your Toronto lot by setting the price beside the conditions, the deposit, the closing date and what each offer assumes about the homes it will build. RECO's Information Guide says a seller's agent can vet offers and buyers to make sure they can afford to buy. Your lawyer then reads each set of terms.
Sources
- Multiplex Housing. City of Toronto. Modified August 26, 2026. Accessed November 1, 2026.
- Toronto Municipal Code Chapter 415, Development of Land. City of Toronto. Consolidated to July 30, 2026. Accessed November 1, 2026.
- Non-rental Residential Development Charges. City of Toronto. Modified November 14, 2025. Accessed November 1, 2026.
- Building Permit Fees. City of Toronto, Toronto Building. Modified June 19, 2026. Accessed November 1, 2026.
- Committee of Adjustment Forms, Submission Guidelines and Fees. City of Toronto. Modified October 8, 2026. Accessed November 1, 2026.
- Land Transfer Tax: Calculating land transfer tax. Government of Ontario, Ministry of Finance. Updated April 22, 2026. Accessed November 1, 2026.
- Municipal Land Transfer Tax (MLTT) Rates and Fees. City of Toronto. Modified April 7, 2026. Accessed November 1, 2026.
- By-law 1062-2025(OLT), low-rise residential intensification on major streets. City of Toronto, under Ontario Land Tribunal order. Order issued September 11, 2025. Accessed November 1, 2026.
- Zoning By-law 569-2013, Chapter 10 Residential (office consolidation). City of Toronto. Version date July 31, 2024, with city-wide amendments up to April 30, 2026. Accessed November 1, 2026.
- Residential Tenancies Act, 2006, S.O. 2006, c. 17. Government of Ontario, e-Laws. Current version from September 21, 2026. Accessed November 1, 2026.
- Working with a real estate agent: Things you need to know (RECO Information Guide, Residential). Real Estate Council of Ontario. Content December 1, 2023, graphics April 2025. Accessed November 1, 2026.
Planning and development potential is property-specific and subject to zoning, approvals, site conditions, municipal review and other due diligence. This guide gives general information. For legal, tax or financial advice, ask your own lawyer and accountant.