Inclusionary Zoning Policy: Overview
The City of Toronto is consulting on a proposed Official Plan policy that would require a certain percentage of affordable housing units in new residential developments, creating mixed-income housing. Inclusionary zoning is one policy solution to help address the housing needs of Toronto’s low-income and moderate-income households (earning roughly between $35,000 and $88,500 a year depending household size). Other City initiatives are being considered as part of the HousingTO 2020–2030 Action Plan to address the full spectrum of housing issues.
Of the over 230,000 units built or approved in the last five years, only about 2% were affordable (with rents at or below average market rents for the City). As our city grows, we want to ensure our neighbourhoods provide housing options for a full range of incomes and households. Creating mixed-income, inclusive communities is key to the City’s economic vitality and livability. Through inclusionary zoning, the City hopes to:
- increase the supply of affordable housing;
- continue to encourage market housing development by supporting a diverse range of housing supply; and,
- create more inclusive, complete and equitable communities.
The City has developed proposed policy directions for inclusionary zoning based on findings from an in-depth analysis of housing needs and demands over the past 10 years, current trends in market pricing for ownership and rental housing, and potential impacts of inclusionary zoning on the financial viability of market developments. Following public consultations in Spring and Summer 2019, staff will report back to the Planning and Housing Committee later in 2019.
The proposed policy directions for inclusionary zoning outline how inclusionary zoning would apply in the city, including:
- the percentage of affordable housing required, including different requirements for condominium ownership and purpose-built rental projects;
- the minimum size of development projects that inclusionary zoning would be applied to;
- how long the units must remain affordable for; and,
- a proposed new definition for affordable ownership housing
We know that residents across the city are struggling with housing affordability. Areas of the city that have seen the greatest amount of new housing supply are also experiencing significant price escalation and rent increases. These same areas also have the highest number of households paying over half of their income towards rent, with many also living in overcrowded conditions. Inclusionary zoning is a land use planning policy tool to create mixed-income developments in areas of the city where the market has not provided for a mix of housing prices and rents on its own.
In April 2018, the Province of Ontario enacted legislation that allows municipalities to implement inclusionary zoning and outlines the process that needs to be undertaken. Before the City can implement inclusionary zoning, City staff must complete required background work, including preparing an Assessment Report, undertaking public consultations, and drafting Official Plan policies.
The Provincial Regulation for Inclusionary Zoning (Regulation 232/18) outlines what the City needs to address in its Official Plan policies for inclusionary zoning and the information that must be included in the Assessment Report. The Assessment Report must include information related to housing need and demand and the potential impacts of inclusionary zoning on the housing market and on the financial viability of development. Provincial legislation requires that the City update this report every 5 years.
On May 2, 2019, the Province of Ontario introduced changes to the legislation for inclusionary zoning through Bill 108, More Homes, More Choice Act. The proposed changes would limit where inclusionary zoning requirements could be applied in the city. If passed, Bill 108 would limit the City’s use of inclusionary zoning to protected major transit station areas (generally areas within 500 to 800m of subway, light rail or bus stations on dedicated right-of-ways) or areas where a community planning permit system has been required by the Minister of Municipal Affairs and Housing.
What does ‘affordable’ mean?
Toronto’s Official Plan currently defines affordable rental housing as:
- Housing where the total monthly shelter cost (gross monthly rent including utilities – heat, hydro and hot water – but excluding parking and cable television charges) is at or below the average City of Toronto rent, by unit type, as reported annually by the Canada Mortgage and Housing Corporation.
- For 2019, the following affordable rent limits are used:
- Bachelor unit: $1,089
- One-bedroom unit: $1,270
- Two-bedroom unit: $1,492
- Three-bedroom unit: $1,657
The policy directions propose a new definition for affordable ownership housing as:
- Housing which is priced at or below an amount where the total monthly shelter cost does not exceed 30 percent of gross annual income for households within the moderate income range (defined as the 30th to 60th income percentiles) depending on unit size. More specifically:
- Bachelor units must be affordable to households with incomes no higher than the 30th percentile;
- One-bedroom units must be affordable to households with incomes no higher than the 40th percentile;
- Two-bedroom units must be affordable to households with incomes no higher than the 50th percentile; and
- Three-bedroom units must be affordable to households with incomes no higher than the 60th percentile.
Inclusionary zoning typically creates housing for households earning too much to be eligible for social housing but not enough to be able to afford market rents or prices. These “low- to moderate-income households” generally fall between the 30th and 60th percentile of the income distribution. In the City of Toronto, this includes households earning approximately $35,000 and $88,500 per year, depending on household size. As a policy tool, inclusionary zoning is challenged to create deeply affordable units without additional funding.
Housing Policy Landscape
Residents across Toronto are experiencing challenges at every stage of the housing spectrum, from homelessness and shelter use, to securing affordable rents, market ownership and everything in between.
Inclusionary zoning is one solution the City is pursuing to help low- and moderate-income households access affordably priced housing. The City is also developing a new HousingTO Action Plan to address the full spectrum of housing in Toronto from now to 2030.
Inclusionary zoning would add to the toolbox of land use planning tools that the City currently implements to maintain existing housing supply, encourage a diverse mix of housing types and sizes, and advance policies to support the creation of new affordable housing, including:
- Rental replacement policies – to protect the supply of existing rental housing from demolition and/or conversion.
- Section 37 and Large Sites Policy – to secure new affordable housing as part of site-specific applications and within Secondary Plan areas. For example, when a developer seeks an increase in height or density on a site larger than 5 hectares, the City’s Official Plan policies require the first priority community benefit (known as a Section 37 benefit) be that 20 percent of the additional residential units will be affordable housing. From 2013–2017, over $31.5 million and 500 affordable housing units were secured through site-specific agreements.
- Zoning changes to simplify and help facilitate the creation of secondary suites across the city and to increase the as-of-right zoning permissions for municipal shelters.
- Official Plan policies and Zoning By-law changes permitting laneway suites in the Toronto and East York District.
- Proposed Official Plan policies to address the loss of dwelling rooms across the city.
- Draft urban design guidelines for Planning for Children in New Vertical Communities to direct how new development can better support housing for families.
The City also has programs that support the development of new affordable rental and ownership homes through the provision of financial contributions and surplus public land:
Inclusionary Zoning in Other Cities
Inclusionary zoning is new to Toronto, but has been used in varying forms in over 800 programs across the United States, Australia and Canada.
Many North American cities, including Vancouver, New York, San Francisco, and Boston have implemented inclusionary zoning with positive results. For example, after New York City adopted Mandatory Inclusionary Zoning in 2016, over 1,500 permanently affordable homes were approved in the first nine months of the program.
Each inclusionary zoning policy approach is tailored to the jurisdiction’s local housing needs, market conditions and planning frameworks. While policy requirements vary across different jurisdictions, some key trends stand out:
- Affordability periods generally range from 30–99 years, with about a quarter of jurisdictions securing affordability in perpetuity;
- Most policies provide for options to provide units on-site, payment in-lieu, and/or the provision of off-site units; and,
- Geographic coverage of the policy ranges from the entire municipal boundary to applying in specific areas. However, it should be noted that for large cities such as New York and San Francisco, the policy applies only to specific areas of the city.
- The Staff Report being considered by the Planning and Housing Committee on May 28, 2019 includes a summary of how inclusionary zoning has been implemented in other cities across North America.