Inclusionary zoning: How it works and what it means for housing providers
As we rapidly approach October’s municipal elections, local candidates are proposing solutions to the challenges facing their communities. One oftenproposed solution for creating affordable housing is “inclusionary zoning.”
Growing demand for affordable housing and limited opportunities to create additional units has led poverty and housing activists and municipal candidates alike to resurface discussions about inclusionary zoning policies and how they could be used by municipalities. The discussion is loudest in urban communities like Toronto and Ottawa which have seen rapid and significant increases in condo and townhouse construction, though the policy could be applied to any new residential development.
What is inclusionary zoning?
Inclusionary zoning is a type of planning policy that requires that new residential developments contain a certain number or percentage of affordable housing units. It is one type of inclusionary policy that is most common in the United States, where it has been used to create new home ownership and rental housing. There are other examples of inclusionary policy, including municipal zoning bylaws, ordinances or policies that require or encourage affordable housing as part of the development approval process.
Some inclusionary policies require the creation of affordable housing in all development (“mandatory policies”). Mandatory policies typically include a
benefit to developers to compensate them for the cost of providing units at below market rates. In contrast, other inclusionary policies are voluntary, where affordable housing can be created by the developer in order to access other benefits or incentives, such as fee reductions, property tax abatement or density bonuses.
Why are people keen on inclusionary policy?
The primary driver of inclusionary policy has been the rising cost of housing and diminishing government investment in the creation of new affordable housing. Municipalities are increasingly concerned about rising housing costs, not only for low-income households, but also moderate and middle-income households who may be strained by high ownership or rental costs. With little financial cost to local government, inclusionary zoning creates new housing by distributing the relatively low cost to land owners, developers and market rate buyers.
Inclusionary policies can also help created mixedincome communities in addition to creating new affordable housing units. Ensuring that a minimum number of affordable homes are created as neighbourhoods change helps to prevent concentrations of poverty or exclusion.
Sounds like a reasonable idea – what are the drawbacks?
There are limitations to implementing inclusionary policy in Ontario. First, there are legal barriers, including some case law related to past provincial planning legislation. Some legal experts feel that the Planning Act limits municipalities’ authority and prevents them from implementing inclusionary policies. However, Provincial amendments to the Planning Act could be introduced that would give municipalities the authority to implement such policies. MPP Cheri DiNovo (NDP, Parkdale- High Park) has a private members bill before the legislature that proposes allowing municipalities to implement inclusionary policies (http://bit.ly/1pejX3M).
Concerns about increasing the cost of market rate units have also stifled the adoption of inclusionary policies. While it is probable that market rate buyers would bear some cost, the amount would not be directly connected to the cost of the affordable units. A report commissioned for the Ministry of Housing in the early 1990s suggested that a modest affordable housing requirement (between 5 and 10 per cent) would have little appreciable impact on the housing market. It is also possible that offsets, such as increased density or lower fees would compensate developers for the costs associated with building affordable units.
Inclusionary policies are one tool to create more affordable housing. However, the impact that such policies could have depends heavily on local economies and housing markets. As such, they cannot be seen as a dependable source of new housing, as demand for new affordable housing grows. Creating inclusionary planning policies will require leadership by both the Province and municipalities. The Province would have to amend existing legislation to empower municipalities to implement such policies and local councils would have to choose to implement them.
Cities that use inclusionary zoning
Montreal: The City of Montreal has a voluntary inclusionary zoning policy that specifies that 15% of all developments of 200 units or more should be affordable social housing. Another 15% of housing should be market housing that is affordable to modest income households.
Canmore: The Town of Canmore, Alberta aadopted a Perpetually Affordable Housing (PAH) program aimed at increasing the supply of housing that is affordable to the work force in the resort-based municipality. The policy is based on a voluntary requirement that new development provide 25% of units that are affordable to buyers of entry-level housing. The Town requires price and resale or rental rate restrictions, as well as eligibility restrictions. Incentives, such a density bonuses, waiving of fees and property taxes are provided to developers who provide the PAH units.
Maryland: The first inclusionary zoning program was implemented in Montgomery County, Maryland in 1973. Since its inception it produced over 10,000 affordable housing units.
London, UK: In London, the Mayor has established a strategic target that 50% of all new housing, provided through any means, should be affordable (35% social housing and 15% moderate income housing). The general target is applied in a flexible basis, with a combination of on-site and payment-inlieu being permitted. The strategic target is meant to encourage, not restrain residential development.
To learn more about inclusionary policies, visit the following links:
“Implementing inclusionary policy to facilitate affordable housing development in Ontario” by John Gladki and Steve Pomeroy: bit.ly/ONPHAiz
“Can inclusionary zoning help address the shortage of affordable housing in Toronto?” by Julie Mah: bit.ly/CPRNiz