A new era of affordable housing is on the horizon. In April 2018, the Ontario government enacted legislation (Regulation 232/18 under the Planning Act) that allows municipalities to implement inclusionary zoning. This blog post will explain the general concept of inclusionary zoning and how its use is permitted and restricted under the Planning Act. It will also discuss Protected Major Transit Station Areas; the key components of the City of Toronto’s draft inclusionary zoning framework; and the next steps in the implementation process.

Inclusionary zoning (IZ) is a provincial planning tool that enables municipalities to secure affordable housing in new development. This new-to-Ontario policy intends to increase the supply of affordable housing for low- and moderate-income households, particularly in transit-connected locations.

The use of IZ is restricted to areas within a Protected Major Transit Station Area (PMTSA), Development Permit System (DPS) area, or as ordered by the Minister. The Planning Act exempts IZ from developments which contain fewer than ten (10) residential units or are proposed by a non-profit housing provider.  The provincial Inclusionary Zoning regulation includes minimum transition provisions for the following applications made prior to the adoption of the IZ framework: an application(s) for an Official Plan amendment and/or a Zoning by-law amendment (provided that an application has also been made for approval of a plan of subdivision or condominium approval); or application(s) for site plan approval or a building permit.

The Planning Act requires that IZ frameworks be informed by assessment reports that analyze housing need and demand, as well as financial viability within a municipality, updated every five years. The Planning Act also stipulates that municipalities that wish to utilize this planning tool must update their Official Plans to include IZ policies that describe the following:

• The minimum size of development for which IZ would be required;
• Required number of units or gross floor area of affordable housing;
• Range of housing types and sizes that would be authorized as affordable housing units;
• Range of incomes for which units must be affordable;
• How the price/rent is determined; and
• The conditions under which permission would be granted for off-site IZ dedication.

Given the restrictive geographic use of IZ, PMTSAs are where most IZ activity will occur (few areas of the Province designated as a DPS area), so it is imperative to understand what a PMTSA is and where they may be located.

Major Transit Station Areas (MTSAs) vs. Protected Major Transit Station Areas (PMTSAs)

Major Transit Station Areas (MTSAs) are lands within an approximately 500-800 metre radius of a transit station or stop. They are intended for high density, mixed-use development with access to amenities, housing and jobs. PMTSAs are a subset of MTSAs, where the PMTSA designation must include Official Plan (OP) policies that cover the following:

1. minimum number of residents and jobs per hectare;
2. permitted land uses in the major transit station area and of buildings or structures on lands in the area; and
3. minimum densities with respect to buildings and structures on lands in the area.

The Growth Plan (2019) allows municipalities to delineate these PMTSAs in advance of the next MCR, provided that a very detailed implementation framework is brought into effect through an Official Plan Amendment (in accordance with Section 16(15) of the Planning Act). Municipalities may enact additional OP policies including maximum densities, minimum heights, and maximum heights.

Appeal rights are restricted in PMTSA’s. Appeals and requests for amendments to the required OP policies are not permitted in PMTSA’s. Appeals of the discretionary OP policies are not permitted either, although requests for amendments are permitted. Finally, there is no appeal of the parts of a zoning by-law within a PMTSA that establishes permitted uses, minimum or maximum densities, or minimum or maximum heights. The OP does not need to contain the discretionary policies for the zoning by-law to do so. In sum, there is limited opportunity to challenge PMTSA-related OP policies or zoning by-laws in establishing key intensification parameters, so it is important for property owners to understand how the new planning framework may impact their development aspirations in potential PMTSA areas. This is particularly true for the City of Toronto.

In the City of Toronto, the current MCR (check out our blog post) must delineate at least 180 Major Transit Station Areas (MTSAs) on or by July 1, 2022. It is likely that many of the City’s MTSAs will be delineated as PMTSAs, and these PMTSAs will potentially be subject to IZ (based on the City’s IZ framework). Given the large areas of the City that could require IZ as part of development approvals, it is imperative to understand the City of Toronto’s present approach to implementing IZ.

Inclusionary Zoning in the City of Toronto

In September 2020, the City introduced a draft inclusionary zoning policy framework that sets out how the planning tool will be applied throughout the municipality. The City released and is consulting on draft Official Plan Amendment (OPA) and Zoning By-law Amendment (ZBA) to implement IZ. Key components of this framework include:

• Geographic Application: IZ will only be required in PMTSAs within strong or moderate market areas, as determined by the City through an Assessment Report (see map below illustrating market areas)
• Affordability Period: 99 years from the first occupancy;
• Depth of Affordability: Coinciding with the introduction of its inclusionary zoning framework, the City of Toronto has proposed a new definition of affordable housing that would result in revisions to OP Section 3.2.1. Draft policy language would define affordable housing as 30% of household before-tax income capped at 100% Average Market Rent (AMR). The level of before-tax income is based upon income percentile bands related to unit type. Rents are to be determined annually, based on CMHC AMR for the City of Toronto and extrapolated incomes from the most recent Census. The definition of affordable ownership housing is similarly revised. In addition to this standard level of affordability, 10% of the affordable rental gross floor area must be secured at 80% of affordable rents;
• Unit Mix: same unit mix and size as the market component of the development;
• Units to be Set Aside:
  • Ownership: 10% of the total residential GFA of an ownership development in strong market areas and 5% in moderate market areas.
  • Rental: 5% of the total residential GFA of a rental development in strong market areas, 3% in moderate market areas.
  • Note: City Council has directed staff to explore options to increase the percentage secured as affordable housing, including targets of 10-30% of GFA for new condominium developments and 5-20% of GFA for purpose-built rental developments.
• Location: affordable units are required to be provided on-site; however, the City maintains discretion to consider off-site locations.

Exemptions

In line with the Planning Act, the draft framework includes exemptions for small-scale residential developments defined as those with less than 100 units and 8,000m² of residential GFA in the Downtown or Central Waterfront, or 140 units and 10,000m² of residential GFA in all other areas. It also proposes to exempt specific types of uses, including residential care homes, and institutional student residences, in addition to development specified in provincial regulation (e.g. non-profit developments). These uses are generally in line with uses exempt from CBCs (check out our blog post), with a few exceptions.

Transition

The City’s draft transition provisions would exempt complete applications for a zoning by-law amendment, minor variance, or site plan approval and building permit applications filed on or before January 1, 2022, from the inclusionary zoning framework. The provincial Inclusionary Zoning regulation includes minimum transition provisions, including exemptions for development:

• Application for an Official Plan amendment, if required, and a Zoning by-law amendment made prior to the date that City Council adopts the Inclusionary Zoning Official Plan amendment provided that with an application for either approval of a plan of subdivision under (section 51 of the Act), or approval or amendment of a description under section 9 of the Condominium Act.
• Applications for development or redevelopment for a building permit, a development permit, a community planning permit, or approval of a site plan under subsection 41 (4) of the Act made prior to the date that City Council adopts the Inclusionary Zoning Official Plan amendment.
• Development that meets the above criteria would not be subject to inclusionary zoning requirements provided the application(s) are made before January 1, 2022.

Provincial regulations for inclusionary zoning, including transitional regulations, are now final. The City of Toronto is currently conducting public consultation on the draft OPA, ZBA, and Implementation Guidelines, and staff are anticipated to report back to Planning and Housing Committee for consideration at a statutory public meeting by the end of Q2 2021.  At this time, we are not aware of any other municipalities that have publically released their proposed inclusionary zoning framework.

Next Steps

Only the Minister of Municipal Affairs and Housing may appeal Inclusionary Zoning Official Plan policies and implementing zoning to the LPAT. As such, it is crucial for all interested parties to participate in developing these policies with municipalities to ensure views are known, and input is considered and the key transition dates are well understood.

Once adopted, the inclusionary zoning framework will apply to most areas of the City of Toronto currently experiencing growth and development pressure. This will have long-term implications for development in Toronto and in other transit-supportive areas across the Greater Golden Horseshoe.

Stay tuned for the final blog post in this series!

Urban Strategies has a strong understanding of planning policy and the planning approvals process.  We would be pleased to explore any questions about land use planning and what these policy changes mean for you. Please get in touch with Ben Hoff with any inquiries.

By Matthew Kelling, Yasmin Afshar and Alex Heath