What does inclusionary zoning really mean for Toronto? | RENX
On October 28, the City of Toronto’s Planning and Housing Committee recommended approval of the controversial Inclusion Zoning Policy, which many planners and developers have challenged in the past.
What is inclusionary zoning?
To fully understand why this will be a key change in affordability in Toronto, we first need to understand what inclusive zoning is.
The approved Inclusion Zoning (IZ) policy is a planning tool that other major cities in North America have begun to adopt and will be the latest addition to affordable housing efforts in Toronto. To achieve a higher affordable housing stock, the IZ requires specific housing projects to include a percentage of affordable units.
The recommended IZ policy in Toronto would apply specifically to new developments that meet these criteria:
– are located in strong and / or moderate market areas;
– are built within a radius of 500 to 800 meters of any protected large transit station area;
– and have more than 100 units.
It sounds simple, but what does it really mean for Toronto?
Explore Toronto’s Inclusion Zoning By-law
Being located in strong and / or moderate market areas is the first criterion that will demand affordable units. The IA is proposed for these areas because it is expected that the developers of these developments will have more capital to build new affordable housing, as the demand for units at market price will be high enough.
The next criterion for the ZI is when a development is within 500 to 800 meters of a Large Protected Transit Station (PMTSA) area.
The city of Toronto has more than 180 major transit station areas as of fall 2021, but is expected to move them to PMTSA in the coming years, which will increase the number of developments that must comply with the new policy. IZ if adopted.
Earlier this year, a staff report suggested 16 different PMTSAs in downtown Toronto. Further information on these proposed PMTSAs has not yet been shared with the public.
The IA can be mandated according to the number of units offered for a building.
One provision of this mandate is an exception for small developments. Developers do not include affordable housing in low and mid-rise buildings because the ratio of affordable and market-priced units is much lower.
One of the concerns that already surrounds planners and developers is that this policy will generate an outcome where many new buildings are constructed with 99 units or less. A scenario like this would be counterproductive for the initiative as it could reduce the supply of housing and increase demand and prices.
To avoid this potential problem, ZI’s adopted policy included a minimum development size of 100 units at many sites within PMTSAs.
In response to developers who have called for a phased approach to implementing ZI’s policies, the city will roll out the affordable housing requirements in two phases.
Implementation in two phases
For the first phase, all residential developments built from 2022 to 2029 will need to have five to 10 percent of their total units in affordable units. The second phase will require eight to 22% of total units to be affordable and will be effective from 2030.
The developments required to include these units must also maintain their affordability for 99 years. In addition, development should reach the upper or lower end of these percentages depending on the market in the area (high or moderate).
A concern raised about the IZ relates to the definition of “affordable housing” as it is not clear just how affordable “affordable” is.
The main objective of the IZ is to help those who belong to the low to moderate income brackets to have housing, especially those who are not eligible for social housing based on their income and who cannot afford housing at market value.
This population which does not have the means to afford housing at market price but which is also considered to be too high an income for social housing, that is what IZ is aiming for.
Nonetheless, the definition of affordability depends on whether you are discussing the percentage of individual income or the percentage of average market cost.
The city’s definition of affordable rental housing under this policy is consistent with the Provincial Policy Statement, which is to set affordable rates by applying what is less expensive.
Thus, residents of these units will have to pay the cheapest option between the average market rent, by room type. for the city of Toronto, or what is affordable for low and moderate income households.
The income brackets would be used to determine the rent annually. Those wishing to rent these units would have to be within the qualifying income range, based on a maximum of 4 times the annual rent, to be eligible. It is important to note that the rent is not specifically adapted to the income of the tenant.
In the current draft of the city’s IZ policy, there are many options for property developers to fulfill their new obligations.
The new IZ regulation allows for the delivery of affordable housing through on-site units, off-site units, cash payment or even transferring an existing affordable rental property to the city for it. is owned and operated by a non-profit organization. .
How could inclusionary zoning affect Toronto?
Now that we know what inclusive zoning is, we can explore the effect it could actually have on housing and future developments in the city. As mentioned earlier, the answer depends on who you ask. . . he has no obvious answer.
If asked for their opinion on IZ, most developers will recognize the importance and the positive outcomes that can arise for residents of Toronto, but as always, they care about the bottom line. A quick lead time, coupled with a lack of economic incentives, can lead to unachievable projects for the developer.
This could lead to a decrease in the number of housing units in what Toronto has considered the best places to develop, around major transit stations.
Currently, the city is aiming for the implementation of the IZ policy in January 2022, and to combat developer concerns, it has set out a two-phase approach that would increase the percentage of affordable housing required after a decade.
Economically, developers want to see financial incentives for building these affordable units. Examples of incentives for other types of development in Toronto include the new Community Benefits Charge, which charges up to four percent of the land’s value for capital costs for any utility associated with a new growth, including parks.
According to the developers, this is not enough, however. They would like additional incentives specifically for developments regulated by the IZ policy. Currently, the OPA stresses that the city will not provide financial or regulatory incentives to meet ZI requirements, so it doesn’t seem too likely to change.
Thanks to internal modeling, the city measured the perceived impacts of this policy and concluded that in most scenarios, the IZ will not have significant financial impacts on the profit margins of developers.
An interesting finding from the city’s modeling is that land values could decrease due to developers attempting to buy land for less, as they may try to recoup the expense of providing affordable units.
While there is the potential for negative outcomes, this policy is likely to cause an increase in the affordable housing stock in Toronto, albeit minimal. It is essential and it is a step in the right direction, but it alone will not solve the housing crisis in the city.
Now that the city’s inclusionary zoning policy is due to be implemented in the near future, the city and industry as a whole should look to adjust some of the current guidelines that hurt affordability.
One example is removing requirements such as buildings that must apply a minimum 45 degree angular plane from sensitive uses (eg backyards).
This requirement hurts affordability as it forces developers and architects to make design decisions that protect backyards rather than allowing additional units to be built.
Parking is another example of zoning by-laws that unnecessarily reduce affordability. Almost all large residential developments are forced to have huge underground parking lots that cost hundreds of thousands of dollars per space, costs which are passed on to the price of condos.