New Inclusionary Zoning regulations: What will they be, and how will they impact the industry?

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The shape, impact, and likely consequences of potential new Inclusive Zoning (IZ) regulations will depend on several variables, including the upcoming provincial election as well as local policies and decision-making, say Ontario Home Builders Association (OHBA) representatives.

OHBA president Pierre Dufresne, who works for Tartan Homes in Ottawa, says the legislation giving local governments the authority to require developers to include a mandatory percentage of affordable housing in their projects is a “made for Toronto” policy that likely won’t be implemented in Ottawa.

Draft regulations prepared by the Ministry of Municipal Affairs and Housing under the Promoting Affordable Housing Act, 2016 (Bill 7) suggest that government officials have accepted the home building industry’s perspective that IZ costs need to be shared between the public and private sector, says OHBA policy director Mike Collins-Williams.

The draft regulations indicate the mandatory affordable housing should be applied to projects with 20 units or more, and that no more than five per cent of units be set aside as “affordable” (10 per cent in transit corridor areas.) More importantly, they require the city to help with cost abatements or benefits to the developer equivalent to 40 per cent of the cost of providing the affordable housing,

These financial contributions could be provided through a waiver or reduction in planning application fees; a reduction in parking requirements; an exemption from the payment of all or part of the parkland cash-in-lieu; and an exemption from all or part of development charges.

Collins-Williams said this partnership approach reflects the development industry’s perspective of a viable inclusive zoning model, though the partnership should be more like 50/50 than 60/40. The actual cost would vary depending on what would be considered affordable in different markets.

However, while the industry doesn’t find the proposed regulations to be too onerous – especially since municipal governments can still elect not to introduce IZ in their communities – it isn’t clear that the government will go along with the bureaucrats’ recommendations.

Dufresne says the whole IZ idea started in Toronto, and politicians and advocacy groups there want the development industry to absorb all the costs, without the partnership/sharing outlined in the proposed regulations.

If the regulations are changed and the cost sharing provisions are removed, the resulting IZ provisions would be self-defeating, says Collins-Williams. Developers would not be able to make money on their projects unless they raise their prices to offset the mandatory lower-priced units, thus effectively shutting out many potential purchasers. More painfully, if the prices go too high, the projects become uneconomic and won’t even be started. “The result could be that parking lots will remain as parking lots,” he said.

Collins-Williams says the IZ regulations may be announced as the upcoming provincial election campaign starts, and of course their implementation may vary depending on the election results. (They will probably remain under a Liberal/NDP government but could be rescinded or revised if the Conservatives take power.)

The impact of the regulations, regardless of how they are finally defined, will likely vary by region.

Collins-Williams indicates that he expects most smaller and rural municipalities won’t bother with IZ because they will likely not have enough projects of size/unit volume to justifiy the effort and administrative costs.

Dufresne says in Ottawa, regardless of the provincial political climate; the issue won’t likely be serious. As it is, developers and the city often currently agree on offsetting benefits to allow for inclusionary zoning. In one project on Wellington St., Ottawa’s planning committee granted the applicant three extra stories of height “in exchange for a couple of (affordable) units” under Section 37 of the Planning Act, he said. Further, the City of Ottawa’s Official Plan already has policy that allows the city to provide land, relief of development charge payments and application fees, reduced standards and other tools to partner with developers to increase the supply of low-cost housing, similar to what an inclusionary zoning policy could look like.

Dufresne says the attitude in Ottawa will be “to look for opportunities where the partnership approach can increase the supply of affordable housing as opposed to cost escalations.”

In Ottawa, at least, the attitude reflects the industry’s perspective. If the community wants to mandate affordable housing, the costs should be to the “community at large to increase the supply as opposed to (setting) a penalty to the industry,” said Dufresne.

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