Ontario Enacts Inclusionary Zoning Legislation to Promote Affordable Housing

On December 6, 2016, the Ontario legislature enacted new legislation that expands Ontario municipalities’ powers to require the provision of affordable housing in new residential developments.

The legislation, known as the Promoting Affordable Housing Act, 2016, amends the Planning Act to permit some municipalities, while affirmatively requiring others, to introduce official plan policies and zoning by-laws to implement “inclusionary zoning,” a form of zoning that requires the inclusion of affordable housing units as part of developments containing market-rate units. Many of the details of the legislative scheme are still unknown as provincial regulations have not yet been released. Nevertheless, the amendments to the Planning Act indicate that new developments across the province may soon be subject to greater affordable housing obligations.

The Legislative Framework for Inclusionary Zoning

The amendments to the Planning Act establish an enabling framework for inclusionary zoning in the province. The key elements of these amendments include the following:

• Certain municipalities identified in the regulations will be required to adopt official plan policies and enact zoning by-laws to implement inclusionary zoning, whereas it will be optional for others.
• Before adopting inclusionary zoning official plan policies, municipalities must prepare and make public an “assessment report.” While the precise content of these reports has not yet been specified, assessment reports will likely outline the municipality’s affordable housing needs and how inclusionary zoning could address them. 
• Official plan policies, zoning by-laws and conditions of subdivision approval that implement inclusionary zoning are not subject to appeal to the Ontario Municipal Board by anyone other than the Minister of Municipal Affairs and Housing. Further, the Committee of Adjustment cannot authorize  minor variances from an inclusionary zoning by-law.
• While the general intent of inclusionary zoning is to require the provision of affordable housing units within the same building as market-rate units, municipalities may permit the affordable units to be provided off-site in certain circumstances.
• Unlike the existing system for parkland dedication, municipalities cannot accept the payment of cash as a substitute for the provision of affordable housing units.
• Municipalities with inclusionary zoning by-laws must establish a procedure for monitoring the units and ensuring they are maintained as affordable for the period of time specified in the municipality’s by-law.
• Municipalities may obtain community benefits under section 37 of the Planning Act even in respect of developments that are required to provide affordable housing units through inclusionary zoning.

Many Questions Remain Unanswered

While the amendments to the Planning Act establish a high-level framework for inclusionary zoning in the province, they leave many questions unanswered. The associated regulations, expected to be released early in 2017, should fill in some of the details of the legislative scheme and thus provide more insight into how it will function. Among other things, the regulations may specify the amount of affordable housing to be provided in new residential developments, how long the units must be maintained as affordable, the standards to which they must be built, and the prices at which they must be sold or leased (and re-sold/re-leased). The regulations may also impose constraints on the extent to which municipalities can use section 37 to obtain community benefits when inclusionary zoning requirements apply to the development.

Other matters are likely to be left to municipalities to specify in their zoning by-laws. For example, through their zoning by-laws, municipalities may specify that inclusionary zoning only applies to certain geographic areas or types of applications (e.g., zoning by-law amendment applications but not as-of-right building permit applications). In addition, while the regulations may provide some guidance on this issue, municipalities will have to grapple with questions of transition, and how to address applications that are in process or approved but not yet constructed.

Crucially, municipalities may need to consider what measures and incentives they will provide to offset the costs associated with providing affordable housing units. Studies of inclusionary zoning programs in other jurisdictions have concluded that such incentives are essential to an effective inclusionary zoning regime. Common incentives include density bonuses, reduced parking requirements, fast-tracked approvals and fee waivers. The type and extent of incentives Ontario municipalities choose to provide will likely have a significant impact on the success of inclusionary zoning across the province.

Next Steps

The next step toward implementation of inclusionary zoning is the release of the province’s regulations. As noted, these are expected early in the new year.

Those municipalities implementing inclusionary zoning may then begin preparing their assessment reports, adopting official plan policies, and drafting zoning by-laws to implement those policies. While the timeline for taking these steps is not yet known, at least some municipalities, including the City of Toronto, have indicated an intention to move quickly.