Inclusionary Zoning and Affordable Housing

What is Ontario doing to respond to the surging prices for housing?

March 21, 2017

With prices rising rapidly in markets such as Toronto, affordable housing is becoming more and more of an issue.  The implementation of “Inclusionary Zoning”, a relatively new concept, is aimed at helping to increase the stock of affordable housing.

December 8, 2016 marked the day that Bill 7, the Promoting Affordable Housing Act 2016, was passed by the Ontario Legislature and received Royal Assent. The question now is how will the Bill 7 amendments to the Planning Act R.S.O. 1990 (the “Act”) affect not only developers, but municipalities, the housing market, and most importantly the consumers. Unfortunately without speculating, it is too early to tell. However, it is clear that the amendments will spark debate. The regulations, still to follow, will provide the necessary detail to better evaluate the impact of Bill 7.

Addressing the “Housing Crisis”

The intentions of Bill 7 were to address the all-too-familiar “housing crisis” by providing municipalities with an avenue to regulate affordable housing units (AHU) through the implementation of what is now termed Inclusionary Zoning (IZ).

IZ is a concept that will be addressed by Official Plan policies which are to be adopted by municipalities. The purpose of these new IZ policies is to authorize municipalities to include, and essentially mandate, the requirement of AHUs within development projects containing other residential units as well as to further ensure the affordability of these AHUs to be maintained over time. Any by-law giving effect to IZ can only be appealed by the Minister of Municipal Affairs and Housing (the “Minister”). It is also important to note that the Minister has the sole authority to pass regulations stating that an IZ by-law may not apply to a development, redevelopment, or class of developments. Furthermore, the amendments prohibit a committee of adjustment from approving any minor variances from provisions of a by-law that implement the IZ policies of an Official Plan.

The amendments to the Act now require the Official Plans adopted by the municipalities prescribed by regulation, to implement policies that impose IZ. In contrast, an Official Plan adopted by a municipality that is not prescribed by regulation to do so, has no such imposition but are still afforded an opportunity to impose IZ policies at their discretion. An assessment report must be conducted by the council of a municipality that wishes to adopt an Official Plan that contains an IZ policy. The Assessment Report must be updated every five years and must address any mandatory provisions prescribed by regulation. This report will be essential in ensuring that municipalities maintain a fluid and open policy regarding IZ as it is likely that consistent maintenance and updates will be necessary in order to continue to meet the goals and objectives set out by Bill 7.

What is IZ?

But what is an IZ policy? The amendments specify that an IZ policy must outline the goals and objectives of the policy, as well as how those goals and objectives will be achieved. At this time regulations of the Act relating to IZ have not been passed, and so it is still unclear what an IZ policy will actually look like. The amendments to the Act do however include subject matter that must be addressed in an IZ policy as well as subject matter that may be addressed in IZ policy. Not surprisingly, the subject matter includes provisions addressing:

  • the size of each AHU,
  • the standards of an AHU to be met, and
  • the time an AHU must remain affordable, among other things.

Other provisions to be included in IZ policies are incentives that may be provided to developers to support the policies. The amendments specifically prohibit the payment in-lieu of AHU, which is common practice for developers regarding parkland; however developers will still be able to consult and cooperate with municipalities in permitting AHUs to be located off-site at, for example, another development nearby.

As a result of the amendments, the Act now requires that land owners of development properties enter into an agreement with municipalities that will subsequently be registered against title of the subject lands. The purpose of the agreement is to provide for a form of security and accountability. The agreement is to deal with the subject matter previously discussed (i.e. size, cost, standards etc. of AHUs). The security arises from the registration of these agreements against the lands which allows for landowners and subsequent land owners to be accountable and continue to follow IZ policies and maintain AHU status. It is unclear how, and/or when, such an agreement would expire but it is likely to be coordinated with any updated assessment reports that are required to be conducted by municipalities.

While the Legislature is intent on regulating the provision of affordable housing it is still too early to determine if the amendments to the Act will actually make this feasible. One thing that is certain is that the housing crisis is not over yet and with the anticipation of new regulations to emerge in the near future, it will be interesting to watch the IZ policies roll out across municipalities.

For more information on this and other issues of interest in real estate law, please contact us today.