Affordable homes in the city a responsibility we all share

Imagine you’re buying a new condominium unit in Toronto. You can see yourself living in an urban environment, close to transit, interesting neighbourhoods, trendy boutiques and restaurants. Next, imagine finding out that the suite you’re looking at will cost more than $65,000 more than you originally thought because the City of Toronto is requiring you to pay more to subsidize the cost of building “affordable” below-market units in the same building.

This scenario would be the likely consequence of the City’s proposed new Inclusionary Zoning (IZ) policy. It doesn’t sound right, does it? Our industry considers IZ part of the social responsibility that it shares with others in our society, but in the interest of fairness to all new-home buyers, we are asking that it be implemented using a partnership model.

Incentives or concessions

Inclusionary Zoning is a planning practice in place in a number of North American jurisdictions that allows municipalities to require that a certain percentage of new residential units within a given project be set aside as affordable. When an Inclusionary Zoning policy is structured properly – providing for a partnership between developers, builders and municipalities, with incentives or concessions that help offset the costs of building units to sell or rent for below-market rates – it helps create complete and inclusive communities and is supported by our industry.

Unfortunately, the City of Toronto’s current proposal has a number of flaws that will ultimately reduce supply, increase costs to new-home buyers or both. We outline these in our recent report, Affordable Housing in the City of Toronto – A Responsibility We All Share.

First, unlike IZ policies in other North American jurisdictions, Toronto’s proposed policy does not provide for offsets or density bonuses to compensate the industry for the cost of building the affordable units. It rushes to mandatory implementation, something that most jurisdictions phase in gradually to allow the market to adjust, and it does not provide a cash-in-lieu option.

The City already collects money for affordable housing from new development in the form of Development Charges, and soon also with the new community benefit charge. Its Inclusionary Zoning proposal does not compensate for the $6,000 per unit that would be collected through these combined fees, and adds an incremental (on average) $65,000 to a purchase unit and $116,000 to a rental unit over its lifespan.

Market distortions

Finally, the proposal will introduce market distortions that will cause many projects to become financially unviable. This will limit the supply and choice of homes available for new-home buyers and further affect affordability.

Government fees, taxes and charges already account for almost a quarter of the cost of a new home in the GTA. It’s time for municipalities to realize that layering added costs onto new homes is one of the root causes of our current housing crisis. It is the responsibility of our industry to build complete communities, and it is the responsibility of municipal government to provide the conditions and policies to enable this to happen.

The Building industry and Land Development Association (BILD) supports the use of Inclusionary Zoning as a planning tool to enable municipalities to secure affordable housing in new developments, as long as it provides for a partnership between builders, developers and municipalities that shares the risks and costs of building below-market units.