The City of Toronto’s Planning and Housing Committee has approved a controversial Inclusionary Zoning policy intended to get more affordable housing built – despite strong opposition from the homebuilding industry.

The committee, including Mayor John Tory, last week approved a staff report proposing an Inclusionary Zoning Official Plan amendment, Zoning Bylaw amendment and draft Implementation Guidelines. The proposed policy is one of the steps the City is taking to facilitate the creation of affordable rental and ownership housing in Toronto.

On Nov. 8, council approved an IZ Official Plan amendment, a Zoning Bylaw amendment and draft Implementation Guidelines, making it mandatory for certain new developments around Protected Major Transit Stations Areas to include affordable rental and ownership housing units beginning in 2022.

Inclusionary Zoning will secure five to 10 per cent of condominium developments (over minimum unit thresholds) as affordable housing, increasing gradually to between eight to 22 per cent by 2030. The amount of affordable housing required will vary depending on where in the city the development is located and whether the units are intended for rental or ownership, with the highest requirements in the downtown area, followed by Midtown and Scarborough Centre.

Income-based definitions

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Builders and developers – the parties that would be responsible for delivering this housing – on the other hand, are less than impressed.

“We are disappointed with the approach being taken by the Cityon Inclusionary Zoning,” Dave Wilkes, president and CEO of the Building Industry and Land Development Association (BILD), told NextHome. “The industry supports IZ when it is structured properly to protect new-home buyers from additional costs, however, the City of Toronto is unique in the jurisdictions in North America that use IZ in that it is not providing financial offsets to cover the incremental cost of building these affordable units.

Bad plan

“The City of Toronto’s current approach will transfer approximately $67,000 to cost of a new condominium apartment, meaning that market purchasers will be subsidizing the cost of below market units, or will make some projects economically non-viable, further reducing housing supply in a very tight market. More affordable housing is a good idea; the City of Toronto’s approach is a bad plan.”

The Residential Construction Council of Ontario (RESCON) is even more blunt in its criticism of the policy.

“Toronto has a serious housing supply crisis,” RESCON President Richard Lyall told NextHome. “The IZ program as contemplated at best will likely be a zero-sum game. It is not going to add to the aggregate supply of housing overall. Rather, it will force developers and builders to apportion a percentage of units to be ‘affordable.’ (It is) a nice idea, were it not for the fact the cost will be borne by other buyers/renters in any particular project. Those other buyer costs will go up. It will have a chilling effect on future projects and make some untenable. So, while some might pay less, others that may have barely qualified could be then be shut out. And the need for additional housing will not be achieved. The irony here is they may then simply move many from the list of qualified buyers to the list of ‘affordable’ home seekers.

No material impact

“The net result is this will not have materially impact the housing supply problem,” Lyall says.

The City says Inclusionary Zoning is already used in more than 800 jurisdictions in the U.S., Australia and Canada. While no two cities have the same Inclusionary Zoning policy, each one is tailored to the municipality's local housing market and needs. Toronto's proposed policy was developed based on detailed financial impact analysis, including a peer review, and input received through extensive consultation.

If passed, the policy would be closely monitored and reviewed after one year to allow for adjustments based on evolving market conditions and opportunities to expand its implementation to broader areas of the city.

The introduction of this policy tool represents a shift in how the City treats new developments. It will ensure affordable housing is incorporated in new developments on a consistent basis rather than being negotiated on a site-by-site basis, providing clarity for all parties from the very beginning. The policy proposes a balanced, forward-looking and equitable framework that will help the City achieve the HousingTO Action Plan target of approving 40,000 affordable rental homes and 4,000 new affordable ownership homes by 2030.

“Implementing the Inclusionary Zoning policy in Toronto will keep us on the road to our goal of creating 40,000 affordable homes by 2030,” says Deputy Mayor Ana Bailão, chair of the Planning and Housing Committee. “Having a consistent approach to affordable housing development will ensure that building inclusive, balanced communities that support our residents are top of mind in all new development plans.”