Housing development is increasingly running up against a basic blockage beneath the streets: water and sewer systems that can’t keep up with a city or town’s growth.

As a result, housing projects are delayed, fewer homes reach the market and the cost of new infrastructure construction is increasingly passed onto buyers and renters.

Economists, developers and municipal leaders say water and wastewater systems are increasingly limiting housing construction in parts of Canada as cities and towns struggle with aging infrastructure, rapid population growth and the cost of upgrades.

For example, Killam Apartment REIT, one of the country’s largest residential landlords, said it was pausing new developments in Halifax due in large part to water and wastewater infrastructure bottlenecks. The city is rolling out a multibillion-dollar infrastructure overhaul as it grapples with capacity constraints while working with the province to fast-track development approvals and address pressure on existing infrastructure.

The issue is not solely about zoning approvals or land availability. More than 11 per cent of Canada’s water and wastewater assets are in poor or very poor condition, according to Statistics Canada, with more than an estimated $100 billion in upgrades needed.

Housing economist Mike Moffatt said water and wastewater systems built decades ago are increasingly struggling to keep up with the level of growth now being planned — a challenge that is becoming a reality for more municipalities.

He said a few communities have reached hard limits on their infrastructure, but many more are approaching them as population growth accelerates.

“It is an issue,” he said, pointing to parts of eastern Ontario, the Kitchener-Waterloo, Ont., region and Greater Vancouver as areas where infrastructure pressures are emerging.

He said many municipalities could begin hitting capacity constraints within the next five to 15 years.

“When those limits are reached, governments will have very expensive, capital-intensive decisions to make,” he said.

The challenge can be especially stark in smaller communities.

Moffatt, founding director of the Missing Middle Initiative, said municipalities of roughly 10,000 people can face infrastructure upgrades costing $100 million to $200 million, an investment that can be difficult to justify without certainty that growth will actually materialize.

“That will be the tip of the iceberg,” he said. The most visible cases involve projects being delayed because servicing is not available, he said, but the larger issue may be less visible: communities simply don’t open land for development at all because they know infrastructure cannot support it.

Developers say the issue is already shaping decisions on the ground.

Justin Sherwood, chief operating officer of the Building Industry and Land Development Association, said water and wastewater infrastructure constraints are appearing “virtually everywhere” in some form, particularly in fast-growing parts of Ontario.

“You can’t build a house if you can’t flush the toilet,” he said.

He pointed to the York region north of Toronto, where wastewater capacity constraints have left large housing developments stalled as developers await major infrastructure expansions. For example, he said thousands of planned homes in East Gwillimbury are effectively waiting for sewer capacity before construction can proceed.

Sherwood said the issue affects both new suburban developments and denser city projects. In some cases, developers must fund costly upgrades to local pipes before higher-density projects can move forward. In others, entire subdivisions are effectively paused until regional infrastructure is expanded.

Even in established cities such as Toronto, he said aging infrastructure can create constraints depending on location and system capacity.

“It’s up there,” he said, referring to the importance of servicing capacity among housing constraints in some regions. “In York, sewer allocation is right up there — top three, top four issues.”

The issue is not always that projects are formally rejected, Sherwood said, but that infrastructure capacity shapes what can realistically happen in the first place.

“In the instance of infill, usually the developer and municipality partner find ways to get adequate piping put in the ground,” he said. “But that adds cost to the new project.”

Sherwood said development charges in parts of the Greater Toronto Area can reach $130,000 to $140,000 per unit, much of it tied to the cost of water and wastewater infrastructure needed to support new housing.

Municipal leaders say those pressures are becoming more difficult to manage as infrastructure ages and population growth accelerates.

The result, said Rebecca Bligh, president of the Federation of Canadian Municipalities and a Vancouver city councillor, is that municipalities are increasingly limited on how quickly they can move on housing approvals.

“When it comes to water and wastewater infrastructure, it’s all about planning and forecasting for both new and renewal of existing infrastructure,” she said. “It is holding up municipalities’ ability to move quickly in terms of approvals when it comes to housing.”

Bligh said the challenge varies across the country. Smaller municipalities, she said, face disproportionate pressure due to limited tax bases and smaller administrative capacity, while larger cities are dealing with aging systems and rising demand.

She pointed to Toronto, where she said sewer infrastructure constraints have contributed to delays of more than 60,000 homes, and to London, Ont., where multi-year upgrades are required before further housing expansion can proceed.

Bligh said existing federal funding tools, including the $51-billion Build Communities Strong Fund, are important, but will need to move faster and more directly to keep pace with housing and infrastructure demands.

She said municipalities largely rely on property taxes and user fees for revenue, which account for roughly one-tenth of total government revenues in Canada despite them being responsible for a majority of core local infrastructure.

“We know what we need to do,” she said. “The concern is we don’t have the fiscal capacity to do it at the speed and scale that housing targets require.”

The issue is prompting renewed attention from senior levels of government. An $8.8-billion housing-enabling infrastructure fund announced by Ottawa and Ontario earlier this year is aimed at expanding water, wastewater and related servicing capacity needed for new housing.

The program is intended to help municipalities finance major infrastructure upgrades while reducing some of the upfront costs passed onto developers. But municipal leaders say the impact will depend on how quickly funding flows and whether it keeps pace with rapidly growing demand.

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Even with new funding programs in place, Moffatt said the challenge is unlikely to disappear quickly. Many municipalities are approaching capacity limits, while the cost of expanding water and wastewater infrastructure continues to grow.

Sherwood said the issue goes beyond housing approvals and speaks to the broader role infrastructure plays in supporting municipalities.

“Why should people care about this issue?” he said. “It’s in everyone’s best interest that Canadian cities and towns have infrastructure that is modern and able to support the social and economic needs of a growing, vibrant country.”