The City of Toronto will be considering a new inclusionary zoning by-law on October 28th, 2021 at the Planning and Housing Committee. Inclusionary zoning is a planning tool implemented by local governments that requires new residential developments to include a portion of units that are considered affordable. In the City of Toronto’s proposed policy, new condominiums with over 100 units will be required to dedicate a certain percentage of the total new residential gross floor area as affordable housing. The percentage depends on the location of the development and if the affordable units will be for rent or to own. All affordable units must be affordable for at least 99 years.
These percentages will increase in 2025 and then every year after until 2030. While purpose-built rentals will have no affordability requirements in the first phase of the policy, they will be expected to include affordable rental units in 2026.
The affordability level of the units will be based on paying no more than 30% of before-tax monthly income for households between the 30th and 60th percentile income, depending on the size of the unit and if it is a rental or ownership unit. Alternatively, rent may be set at the average rent in the City of Toronto if that yields a lower price.
In order for the policy to be adopted, the Planning and Housing Committee will first have to pass the Proposed Inclusionary Zoning Official Plan Amendment and Zoning By-law Amendment on October 28th followed by City Council in November.
History of inclusionary zoning
Inclusionary zoning policies were first implemented in American suburbs during the 1970s. The goals of the policies were to combat homeowner resistance to affordable housing, to pass the costs of affordable housing onto private developers, and to make the suburbs more inclusive for lower-income and racialized families. As of 2017, there were 886 jurisdictions in the United States with inclusionary housing programs in 25 states.
In Canada, there are only a handful of municipalities with Inclusionary Zoning policies. Montreal has the most comprehensive inclusionary zoning policy, first implemented in 2005. As of 2018, 2,700 affordable housing units and 3,600 social housing units were built through the policy. In previous versions of the policy, the City of Montreal noted that they did not see any negative effects on the real estate market. However, with the 2020 changes, they expect there will be reasonable impacts on the real estate market, with impact on prices estimated at 0.8-1.5% in most of the city and no more than 1.9% downtown. With the new regulations, the City estimates the policy will result in 600 social housing units per year and $13.7 million in financial contributions for social housing per year.
Benefits of an inclusionary zoning policy
Inclusionary zoning policies can help build affordable housing units in cities that are experiencing high volumes of development. In major urban centres, both the rental and real estate market are becoming increasingly unaffordable to low and middle-income earners. The policy helps redistribute the benefits developers gain from hot real estate markets to the groups that are being pushed out of cities.
Municipal governments prefer inclusionary zoning policies because they do not require substantial financial investments as compared to building public housing units. Since municipal governments often have limited resources and may not receive enough support from upper levels of government, inclusionary zoning policies allow them to build more affordable housing without putting increased pressure on taxpayers.
Concerns
There are some concerns that an inclusionary zoning policy will deter development and cause an increase in housing prices. However, research demonstrates that IZ policies have no substantial impact on the housing markets. For instance, Sturtevant (2016) did a comprehensive review of the literature and found inclusionary zoning “generally no impacts on supply and no or modest impacts on prices.”
There is also a concern that inclusionary zoning will not create enough units to meet the demand of affordable housing. It is true inclusionary zoning policies do not create a large number of affordable units. California, which has the largest state-wide inclusionary zoning program, produces 9,000 affordable units per year. In comparison, over 16,000 units are produced annually in California through the Low-Income Housing Tax Credit, which subsidizes the construction of affordable housing units. However, inclusionary zoning policies are still a necessary part of an affordable housing strategy. While it does not produce enough housing to alleviate the affordable housing crisis, it does provide some housing to families who have limited options in cities.
Adopting inclusionary zoning policy is an important step forward for City of Toronto in addressing the ever worsening affordable housing crisis. While it is not a magic bullet solution, it can help to provide some people access to safe, secure, and affordable homes.
The Planning & Housing Committee Meeting will be livestreamed at 9:30am on October 28th, with the Inclusionary Zoning motion being the first on the agenda. To express support for the motion, residents of Toronto are encourage to submit written comments to phc@toronto.ca, register to speak at the meeting by either emailing phc@toronto.ca or calling 416-397-4579, or email or call their City Councillor at any time before the November 10th City Council meeting.