On March 14, 2016 the Ministry of Municipal Affairs and Housing (MMAH) announced that, as part of Ontario’s Long-Term Affordable Housing Strategy, it is proposing to introduce a “suite of legislative and policy measures, investing $178 million over three years to ensure that the people of Ontario have access to affordable and adequate housing and to help them secure employment, raise a family and build strong communities” .

Yesterday, on May 18, 2016, the Province introduced the Promoting Affordable Housing Act that tabled amendments to four provincial acts to increase the supply of affordable housing. Among the strategies to increase the supply of affordable housing the Province is proposing to allow municipalities to implement inclusionary zoning, which mandates that affordable units be included in new residential projects in willing municipalities.

 

What is Inclusionary Zoning?

There is no agreed upon definition of inclusionary zoning. Generally, inclusionary zoning refers to a zoning regulation or land use regulation that requires residential developments of a certain size to include a set amount of affordable housing as a condition of development approval. Over 500 jurisdictions in the United States, including Chicago and New York, use inclusionary zoning in some format. In most of these jurisdictions, the cost of the affordable units is often offset by tax relief or other incentives and the provision of the units can either be mandatory or voluntary. The objective of these policies is to create a stock of affordable housing across communities through private sector development. For cities that struggle with economic integration and/or displacement of low-income residents due to rising housing costs, inclusionary zoning offers a very palatable solution.

 

Why do municipalities need/want this legislation? 

In Ontario, the majority of new affordable housing (typically servicing low and moderate-income households) built is through the Federal/ Provincial Affordable Housing Program. Unfortunately, these programs are not well funded and are highly unpredictable. For decades, municipalities have requested that the Province give them the authority to require developers to provide affordable housing as part of their developments. Many larger municipalities in the GTA are frustrated the existing system does not give them the needed legislative authority – especially given the significant amount of development that is occurring in these areas. Some municipalities (like Toronto) have implemented policies that require a certain percentage of the new units in developments of a certain scale to be affordable. However, these policies are not rooted in legislation and often do not hold up at the Ontario Municipal Board (OMB). Affordable units have also been secured through negotiations with developers in exchange for additional height and/or density as part of their development (as per permitted under Section 37 of the Planning Act). However, these current practices are highly unpredictable, politically driven, location specific and time- consuming (and fraught with other issues that won’t be covered in this blog), and unsurprisingly, have resulted in few new affordable housing units being built along with new development.

It is important to note that not all municipalities have a strong development industry. For municipalities trying hard to attract developers, the implementation of inclusionary zoning may be seen as a disincentive because the additional cost of development may lead developers to go elsewhere. Other municipalities may not see the benefits of providing additional affordable housing.  It must be restated that the legislation released yesterday does not require that a municipality implement inclusionary zoning but rather would allow its use in willing municipalities.

Overview of the proposed legislative changes

Inclusionary zoning policies can only be implemented through legislative changes to the Planning Act. The proposed legislation released yesterday would permit willing municipalities to incorporate inclusionary zoning policies in their Official Plans and Zoning By-laws. The legislation, as proposed, would not permit appeals of inclusionary zoning official plan policies and zoning by-laws to the OMB, except by the Minister of Municipal Affairs and Housing. Under the proposed changes, municipalities could not accept cash-in-lieu of affordable units, and developers could not provide affordable units on another site.

 

Inclusionary Zoning: Pros and Cons

The pros and cons of inclusionary zoning that must be weighed before a municipality decides to implement it include:

Pros

Reduce waiting lists for affordable housing in municipalities across the Province. If in the past five years Toronto had had the necessary policies in place to require 10 percent affordable units in developments of over 300 units, the city could have secured 12,000 affordable housing units. Read extensive interview with Toronto’s Chief Planner in the Toronto Star.

Create a permanent stock of affordable housing located in every new housing development, and thereby create integrated and mixed income communities where affordable units are physically indistinguishable, reducing stigma.

Developers typically pursue development opportunities that are well served by rapid transit. The Province recently announced that one of the proposed changes to the four provincial land use plans is to further direct increased densities around transit areas. There may be an opportunity to acquire a significant stock of new affordable units close to transit areas.

Required resale controls would ensure the long-term affordability of these units.

Cons

Developers argue that the cost of building any required affordable units would likely be passed on to the other units in the development and inclusionary zoning is thus a tax on new home buyers. Developers argue that there must be a suite of permitted offsets and incentives (e.g. fast track approvals, reduced requirements for parking, reduction in permit fees and/or some form of tax relief) to decrease the cost to developers and home buyers.

It is arguable that one market sector should not bear the social burden created by a broad range of economic factors and that society as a whole should share the responsibility.

These units would only be built in areas where development pressure is strong – thus some neighbourhoods (and potentially neighbourhoods most in need) would not see new affordable units being built.

 

Final thoughts

This is obviously a very complex topic with widely differing opinions and interests. The Province is taking its first of many steps to determine if, when, how and where inclusionary zoning programs could be applied. It is an encouraging step for municipalities, developers and other interested parties to think about how to address the affordable housing shortages in many cities across Ontario. As the Province moves forward with its consultation on the proposed new legislation, it will be important to consider some important questions:

1 – What are the basic characteristics that any inclusionary zoning program should adhere to?

2 – Who carries the true cost of inclusionary zoning? Should it be a ‘cost of development’?

3 – Should inclusionary zoning programs be excluded from density bonusing through Section 37 of the Planning Act?

4 – What are the wider housing market implications? How will this affect the affordability of market units?

5 – Who will manage these units once built?

6 – Should the development industry be paying “its fair share” of affordable housing to meet the rising housing needs in our communities? Should existing property owners also be required to contribute to the provision of affordable housing (outside of the existing tax system) instead of it being solely a “tax” on new development?

7 – What are the potential negative implications of implementing Inclusionary Zoning policies?

 

Urban Strategies Inc. will continue to keep this community informed on the provincial consultation in support of Ontario’s updated Long-Term Affordable Housing Strategy to make affordable housing a part of the land use planning process.

 

By: Emily Reisman and Inger Squires