Incentives for building retrofits

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Municipalities can support energy efficiency and emissions reductions in existing buildings by facilitating retrofit financing through a Local Service Area. With homeowner approval, this mechanism allows the municipality to fund upgrades, such as heat pumps, insulation, or solar panels, using external grants or loans, and recover costs over time via parcel taxes on participating properties. This approach helps reduce upfront costs for homeowners and enables a structured, community-scale retrofit program aligned with climate goals.

Revitalization tax exemptions are a long‑standing tool that local governments can use to incentivise energy efficiency retrofits in existing buildings. Under section 226 of the Community Charter, municipalities may establish a revitalization tax exemption program by bylaw that temporarily reduces or exempts property taxes for eligible properties. When designed carefully, this tool can help offset retrofit costs for targeted building types—such as older rental buildings—while supporting local climate and housing objectives.

Regulatory pathways

Local Service Area or contract to incentivize residents to retrofit buildings

Last update: Jun. 2026

Municipalities can likely run a home retrofit program that lends money to homeowners using grants or loans from the Federation of Canadian Municipalities (FCM) or from the province through a local service area.

How it works

  • A local service area must be established based on the petitions of a majority of owners, an alternative approval process or assent/referendum. Once the local government receives approval in one of these three ways, it can adopt the local service area bylaw and provide the service.
  • Typically, the municipality or its agency would identify a body of approved contractors to do the retrofitting for the “members” of the local service area in accordance with retrofitting conditions set out in the bylaw (e.g., defining clean energy).
  • The municipality could pay for the work as “assistance” to owners using borrowed monies or loans from reserves and spreading the repayments by the lot owners over 10 or 15 years.
    • The municipality could collect these repayments as parcel taxes at the same time as utility charges for garbage, water, etc. Municipalities would need to use a grant or loan from FCM or the province to cover the costs of the retrofits.
    • The parcel taxes could be collected in the same manner as property taxes in the event of default by a taxpayer.

Revitalization tax exemption for energy retrofits

Last update: Jun. 2026

Under section 226 of the Community Charter, a municipality could likely establish a revitalization tax exemption program by bylaw that is designed to offset the costs of energy efficiency retrofits for clearly defined types of buildings. The municipal council would need to establish a revitalization tax exemption program bylaw, give notice, and consider the program in its financial plan. Once established, the program would allow council to offer tax exemptions to qualifying properties through individual agreements and exemption certificates.

How it works

  • Council adopts a revitalization tax exemption program by bylaw under section 226 of the Community Charter.
  • Council gives notice of the proposed bylaw under section 227 and considers the bylaw alongside its objectives and policies for permissive tax exemptions in its financial plan.
  • The bylaw must clearly describe:
    • The reasons for and objectives of the program.
    • A description of how the program is intended to accomplish the objectives.
    • A description of the types of buildings eligible for the exemption (for example, older multi‑unit rental buildings with defined characteristics).
    • The extent of the tax exemptions available. .
    • The amounts of tax exemptions that may be provided under the bylaw, by specifying amounts or by establishing formulas by which the amounts are to be determined, or both
    • The maximum term of a tax exemption that may be provided under the bylaw, which may not be longer than 10 years.
  • Once the bylaw is in place, council may enter into a revitalization tax exemption agreement with a property owner.
  • The agreement sets out the retrofit requirements and the conditions that must be met for the municipality to issue an  exemption certificate.
  • A property receives the exemption only if:
    • It qualifies under the revitalization tax exemption program in the bylaw;
    • It has a signed revitalization tax exemption agreement; and
    • It is issued a revitalization tax exemption certificate.

 

Glossary Entry

Local Service Area

A way for municipalities to fund specific local services—like infrastructure or beautification—through taxes paid by the property owners who benefit.

Under Section 210 of the Community Charter, municipalities can create Local Service Areas to provide services that benefit a defined area, such as street upgrades or business improvements. To create a local service, the municipality must adopt a bylaw that outlines the service, defines the boundaries of the service area, and specifies how costs will be recovered, including the local service tax.

The process can be initiated by property owners, council, or by voter approval. If council starts the process, affected owners are notified and given the opportunity to petition against it.

If the municipality uses the Local Service Area for energy efficiency upgrades, the municipality could pay for the energy upgrade as “assistance” to owners using borrowed monies or loans from reserves and spreading the repayments by the lot owners over 10 or 15 years. The municipality could collect these repayments as parcel taxes at the same time as utility charges for garbage, water, etc. Municipalities would need to use a grant or loan from the Federation of Canadian Municipalities (FCM) or the Province to cover the costs of the energy efficiency upgrades. The parcel taxes could be collected in the same manner as property taxes in the event of default by a taxpayer.

Glossary Entry

Bylaws Under the Community Charter

The Community Charter gives municipalities the authority to regulate specific local matters by bylaw.

Part 2 of the Community Charter outlines the powers municipalities have to pass bylaws in defined areas, following a “spheres of jurisdiction” model. This means local governments can regulate, require, or prohibit certain activities—such as animal control or public health—within specific policy areas, or “spheres.”

Some of these areas are classified as spheres of concurrent authority under Section 9 of the Charter. This includes:

  • Section 8(3)(i) – public health
  • Section 8(3)(j) – protection of the natural environment

In these cases, municipalities must receive approval from the relevant provincial minister before adopting a bylaw—even if the bylaw also addresses issues in non-concurrent areas.

Glossary Entry

Incentives for building retrofits

Municipalities can support energy efficiency and emissions reductions in existing buildings by facilitating retrofit financing through a Local Service Area. With homeowner approval, this mechanism allows the municipality to fund upgrades, such as heat pumps, insulation, or solar panels, using external grants or loans, and recover costs over time via parcel taxes on participating properties. This approach helps reduce upfront costs for homeowners and enables a structured, community-scale retrofit program aligned with climate goals.

Revitalization tax exemptions are a long‑standing tool that local governments can use to incentivise energy efficiency retrofits in existing buildings. Under section 226 of the Community Charter, municipalities may establish a revitalization tax exemption program by bylaw that temporarily reduces or exempts property taxes for eligible properties. When designed carefully, this tool can help offset retrofit costs for targeted building types—such as older rental buildings—while supporting local climate and housing objectives.